Did Avianca Lose After Cancelling The Viva Merger? |

On Saturday, Avianca formally announced it would not proceed with its merger plans with Viva Air, the ultra-low-cost carrier with branches in Colombia and Peru. This ended the history of Viva Air, which will officially cease operations after 11 years. But did Avianca really lose because of this? Maybe not. Why didn’t Avianca lose after canceling the merger with Viva? In February and March, Colombia lost two carriers. First, Viva Air halted all operations on February 28, and a couple of weeks later, Ultra Air –another ULCC– announced its imminent bankruptcy. For two and a half months, Viva Air remained hopeful that it could be saved through a merger process with Avianca. Nonetheless, Avianca announced on Saturday that this would not happen, following a review of the conditions under which Colombia’s Aerocivil approved the said merger. In a statement, Avianca said, “The conditions require Avianca to assume obligations, routes, and commitments of service levels and prices that do not coincide with the remaining capacities of Viva after two months of suspension of operations.” Así hoy Viva deje de pintar los cielos de Colombia y se despida del país, el modelo que trajimos a la región por primera vez sigue más vivo que nunca. Nos sentimos orgullosos de lo que hicimos. Ese es y será siempre nuestro legado? pic.twitter.com/VTn93FNHoB — Viva ¡Vuela Más! (@VivaAirCol) May 13, 2023 This put an end to Viva’s history. Avianca will move on in a less crowded market –arguably more concentrated. Other airlines, including LATAM, Wingo, and newcomer JetSMART Colombia, will also benefit from Viva and Ultra's collapse. We believe Avianca didn’t lose after canceling its merger with Viva. Indeed, the airline may have overall strengthened its presence in the country. These are our arguments for it. Increasing the market share Reviewing the market share in Colombia using Cirium’s database, we see Avianca has increased its international and domestic market shares. Domestically, the airline went from operating 34.5% in May 2022 of all weekly departures in the country to 42.2%, meaning a 7.7 percentage points growth. Looking at the other Colombian airlines (LATAM, SATENA, Wingo, and EasyFly), their increases ranged from 0.5% (EasyFly) to 3% (LATAM). Internationally, Avianca’s market share in departures grew from 32% to 36%. Regarding domestic seats, Avianca currently offers 53% of all seats. Last year, that percentage was 41.7%. The share variation for other airlines was LATAM 29% versus 26% last year; SATENA 2.9% versus 2.5%; Wingo 4.2% versus 1.9%, and EasyFly 6.5 versus 6.3%. It is clear Avianca now has a stronger position in the Colombian market. Improving its public image Throughout the failed merger process with Viva Air, Avianca kept a clear communication channel with the broader audience, the travelers. The airline clearly stated that it wanted to save Viva Air and, following its cease of operations, helped over 150,000 stranded Viva passengers reach their destinations. Additionally, Avianca said the process was taking too long and often urged the authorities to speed it up, to no avail. Overall, Avianca’s public image may have strengthened following the very public Viva’s collapse. Avianca moves on to the new Abra Group. This is not an end to Avianca’s consolidation trend. The Colombian company is moving forward with its integration plans with GOL Linhas Aéreas to create the Abra Holding Group. Last year, on May 11, 2022, the principal shareholders of Avianca and GOL signed a landmark agreement to create “a leading air transportation group across Latin America under a holding company structure named Abra Group Limited.” This group also owns a convertible debt representing a minority interest investment in Chile’s Sky Airline.

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