This year has been challenging for the Colombian ultra-low-cost carrier Viva Air and the Mexican business-oriented airline Aeromar. Both companies are at serious risk of bankruptcy and cessation of operations. Let’s take a look at Viva Air & Aeromar: two Latin American airlines at risk of failing.
The Mexican regional carrier has officially halted operations as of February 15, 2023. Images on social media show the airline advising the passengers arriving at Mexico City International Airport (MEX) that there will be no flights due to a “suspension in the fuel supply.” This is definitely a stretch. Aeromar owes millions in fuel payments, taxes, and more, so the Mexican government has decided to take the matter into its own hands.
Aeromar owes over five billion pesos (US$268 million) to different creditors, including the Mexican authorities. The airline has a standing debt of 120 million pesos (US$6.5 million) with its employees; the pilots and cabin crew members are set to strike as soon as tomorrow.
Last week, Aeromar appeared to have a last-minute savior, the Saudi-backed US-Brazilian company Nella Airlines. This company has bought carriers in South America, including Amaszonas in Bolivia, and turned them around. Nonetheless, there has been no official announcement from either company besides Aeromar renewing its logo on its website.
The airline could become the second Mexican carrier to fold in the last three years. In December 2020, the Airbus and Sukhoi-based airline Interjet ceased operations after years of financial troubles.
Viva’s bankruptcy process and bidding war
In Colombia, Viva Air seems to be running out of space to move. The airline was forced to start a reorganization process under Colombian law this month. This process will allow Viva to reorganize its debt and renegotiate with creditors in 90 days, allowing the company to keep flying.
Viva began this process to earn time while the Colombian authorities reviewed its merger process with Avianca. Nonetheless, Colombia’s civil aviation authority requested several adjustments to Viva and Avianca’s merger proposal this week. Avianca presented the Colombian authority with a five-step plan to address any issue:
- Decrease of participation in El Dorado International Airport (BOG): If Avianca and Viva are part of the same business group, they would give up to 105 slots. With these slots including some highly valuable with the highest passenger traffic, any other airline with aircraft and investment capacity could operate up to 15 additional aircraft at El Dorado, the only airport in Colombia that currently has restrictions limiting free entry to airlines that want to compete.
- Survival of Viva: The brand and its low-cost business model, jobs, aircraft, and routes that Viva operates exclusively would be maintained.
- Protection of fares and/or frequencies: On routes in which Avianca and Viva together have high participation as a result of the transaction, fares and/or frequencies would be protected.
- Boosting Satena’s social role in regional connectivity: Offering Satena (Colombia’s State carrier) codesharing or interline agreements on routes where it is the sole operator, allowing passengers from the most isolated territories to connect with all destinations in Avianca’s network and strengthening its undeniable regional prominence.
- Maintenance of Viva’s interline agreements: Foreign airlines that distribute their passengers through Viva will be guaranteed access to the Colombian market.
While both companies await the government’s final response, two South American airlines have become interested in acquiring Viva Air. This month, JetSMART (backed by Indigo Partners and American Airlines) and LATAM Airlines Colombia have submitted proposals to acquire 100% of Viva Air’s shares. Avianca has disregarded both offers saying they are malicious; Castlesouth, Viva’s owner of voting rights, has added that it will remain focused on the merger with Avianca.
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.