Free stories left to read

Airline Weekly subscribers get unlimited access to daily news and weekly issues.

Latin America

Viva Air Liquidation Leaves Opening in Colombia for Avianca, Other Airlines

Kristin Majcher

June 28th, 2023

A Viva Air Airbus A320neo

Colombian low-cost-carrier Viva Air has reached its end after nearly 14 years in operation and a months-long attempt to merge with Avianca.

The final nail in the coffin came June 20, when the company notified Colombia’s corporate regulator, Superintendencia de Sociedades, that it intended to start the liquidation process. 

According to a decree issued by the regulator, evidence showed that the airline was not in good enough shape to move forward with its reorganization process and must be liquidated. A liquidator will be appointed to oversee the process and receive creditors’ claims. 

Since Avianca chose to not move forward with acquiring Viva in May, the latter “has received numerous notifications about imposing precautionary measures on its assets and the enforceability of guarantees granted,” the decree stated. 

The document also referenced several conclusions reached during a May 26 shareholders’ meeting to show why Viva could not emerge from its reorganization process. Among them were that the airline had no current assets available to operate, its cash position was damaged beyond repair, and aircraft lessors had canceled their contracts and were demanding the immediate return of Viva’s Airbus A320neo fleet.

The regulator announced on June 22 that Viva would begin the liquidation process.

“We will continue to provide spaces and [guidance] so that companies can overcome the difficulties they are going through,” the corporate regulator’s superintendent Billy Escobar Pérez said in that statement. “However, when these are not viable, it is our duty to intervene to seek the prompt and orderly liquidation of assets so that they recirculate in the economy, protecting social rights and creditors.”

Merger Attempt

Medellin-based Viva’s liquidation marks an administrative end to the rollercoaster ride that were the airline’s final days after it failed to reach a crucial merger deal with legacy airline Avianca. The airline shut down four months ago.

Although Colombia’s civil aviation regulator Aerocivil objected to the merger in November 2022, the process was dramatically revived on January 18. That’s when the regulator said it would revisit the deal after finding a “substantial irregularity” in the process of making its previous decision. 

But with the merger deal still not done a month later, Viva suspended operations on February 27 after filing for Colombia’s equivalent to bankruptcy. The third-largest airline in Colombia left thousands of passengers stranded, but at that time still had hope it could resume operations. Looking to save Viva, JetSmart and Latam Airlines also expressed interest in acquiring the discounter. 

Aerocivil did finally sign off on the Avianca-Viva merger on April 25, but with several conditions. It would have required Avianca to divest slots at Bogotá’s El Dorado airport, keep the Viva brand, and refund passengers for Viva flights that they could not use after the low-cost carrier shut down. 

Despite the green light, Avianca announced on May 13 that it had withdrawn from the proposed merger. It said Aerocivil’s conditions would make Viva’s recovery “impossible” and could affect the stability of its own airline. 

Viva Air is not the only carrier that has left the market in recent months after facing financial issues. Ultra Air, a newer ultra-low cost airline also based in Medellín, was approved to start its own bankruptcy process on June 14 after shutting down on March 30. Ultra started operations in 2020 as Colombia was looking to expand its aviation sector and recover financially from the Covid-19 pandemic. 

Viva Comes Undone 

Now that Viva is in liquidation, processes are in motion to fill the gap left in the Colombian market. Avianca and Latam, the country’s largest and second largest airlines, will offer 7% and 15% more seats, respectively, in July than they did a year ago when both Viva and Ultra were still flying, according to data from Cirium Diio schedules. Seats on Wingo, the low-cost arm of Panama’s Copa Airlines, will be up nearly 92% but off a very low base. Overall seats in the Colombian domestic market, however, will be down 15% compared to last year, or flat compared to 2019.

Aerocivil is evaluating how to redistribute the slots Viva and Ultra were using, a spokesperson for the regulator said. A process is underway to understand the terms for the public bid to distribute the slots. A date for when this will happen has not been confirmed. 

A technical evaluation is underway to determine the number of slots that will be distributed, the Aerocivil spokesperson added. For now, the slots are suspended along with those carriers’ operations. JetSmart, Latam, and Wingo previously showed interest in acquiring slots divested by Avianca and Viva through their merger.

Lessors are also taking back Viva’s aircraft as the carrier goes into liquidation. The airline had 16 A320 family planes in service the day before it ceased operations, according to data from aviation analytics company Cirium. 

Of those, eight aircraft belonged to Newport Beach, California-based lessor Aviation Capital Group (ACG), five were managed by Hong Kong-based China Aircraft Leasing Company, two managed by Minsheng Financial Leasing, and one managed by DAE Capital. The airline also had five aircraft leased from AerCap in storage. 

An AerCap spokesperson confirmed that the five aircraft it previously leased to Viva were returned, and had been re-leased to other airlines.

Separately, Aviation Capital Group announced Monday that it had signed leases with Avianca for eight A320neos — the same amount and type of aircraft that it leased to Viva. Avianca confirmed that Viva previously operated the planes.

“We are excited about expanding our relationship with Avianca and seeing these aircraft continue to serve passengers in Colombia as well as across the Avianca network,” Aviation Capital Group CEO Tom Baker said in a statement. The aircraft will raise Avianca’s total passenger and freighter fleet to 150 planes upon their delivery later this year.

Neither Aviation Capital Group nor China Aircraft Leasing Company responded to a request for comment by press time.

Avianca’s CEO Adrian Neuhauser recently told CAPA TV that the airline was working with lessors and recruiting staff as it worked to add capacity in light of Colombia losing two major carriers. 

“What we’re looking to do given the unfortunate situation around Viva is replace some of that capacity, add capacity into the cities that lost a lot of connectivity there — Medellín, San Andrés, where there has been the most damage done by the fact that Viva and Ultra stopped flying,” Neuhauser told CAPA on the sidelines of the IATA Annual General Meeting in Istanbul earlier in June.

Kristin Majcher

June 28th, 2023

Tags: Latin America

Photo credit: A Viva Air Airbus A320neo Viva Air

Special Offer: Choose From Quarterly or Annual Subscription Plans

2 of 3 free stories left to read