The Chilean ultra-low-cost carrier JetSMART (backed by Indigo Partners and American Airlines) announced on Tuesday its intentions to acquire 100% of the shares of the Colombian airline Viva Air.
Today, JetSMART notified Viva Air of its interest in submitting an offer to acquire 100% of the shares of the airline and its subsidiaries (Viva operates two branches, one in Colombia and one in Peru). Currently, Viva is in the middle of a merger process with Colombia’s flag carrier Avianca.
According to JetSMART, its proposal to acquire Viva would “strengthen free competition, would keep the ultra-low-cost model and generate important benefits for the consumers, the employment and tourism.”
Last year JetSMART requested Colombia’s authority’s permission to open a new subsidiary in that South American country but had its first request denied. JetSMART’s management did not say what would happen to JetSMART Colombia’s plans if Viva accepts the acquisition bid.
Estuardo Ortiz, Chief Executive Officer of JetSMART, said:
“We believe that a transaction between JetSMART and Viva Air will allow us to maintain the ultra-low-cost model in Colombia and thus continue offering more routes at lower prices. We have a long-term vision to expand in South America and are in a position to continue to invest in our growth. We believe in the potential of the Colombian market, and our alternative will benefit users, strengthening free competition in the sector and promoting tourism and connectivity in the country.”
Neither Viva nor Avianca has released statements regarding JetSMART’s announcement on Tuesday.
The Viva and Avianca merger
Viva and Avianca announced last year their intention to merge under one holding. Viva, facing financial pressure which has led to route cancelations and aircraft leasing terminations, would keep its identity and brand but would be under the scope of the larger Avianca Group.
The process is currently being reviewed by Colombia’s civil aviation authority. Viva and Avianca have urged Colombia’s government to accelerate the process since the ultra-low-cost carrier is at default risk. If approved, Viva would also be a part of the larger project called the Abra Group Limited, a holding announced last year by Avianca and Brazil’s GOL Linhas Aéreas. If not approved, Abra Group Limited would go on without Viva, Avianca, and GOL have said in the past. This holding is also interested in acquiring minority ownership of Chile’s Sky Airline.
How would Viva fit into JetSMART’s plans?
JetSMART has ambitious growth plans in Latin America. The airline has opened branches in Chile, Argentina, and Peru in the last few years. It has a sizeable Airbus narrowbody Airbus (including 14 Airbus A321XLRs), and it is backed by two powerful names in the industry. Indigo Partners has JetSMART in its airline portfolio alongside Frontier, WizzAir, Volaris, Lynx, and Cebu Pacific. Moreover, American Airlines is looking to invest, become a minority owner in JetSMART and launch a comprehensive partnership with the Chilean company.
Viva would give JetSMART access to the Colombian market. The ultra-low-cost carrier is a well-established brand across Colombia, carrying around 6.57 million passengers in 2022, only behind Avianca and LATAM Colombia.
When American announced it had signed a letter of intent with JetSMART, the US carrier added,
“Under the proposed transaction, American would invest in JetSMART to facilitate this growth and give American a minority ownership stake in the short-haul South American carrier. Additionally, American and Indigo Partners would jointly commit to providing additional capital to fund potential future opportunities in the region. American can strengthen and grow its South American network through this proposed partnership to attract more travelers in more markets.”
Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.