Bogotá — Colombia’s civil aviation authority (Aerocivil) has approved the merger of Avianca and Viva Air, but subject to certain conditions, Bloomberg Línea has learned first-hand.
The decision, which will be announced Tuesday by Aerocivil, comes after the regulatory body carried out a new evaluation of the transaction, and under the parameters of the free competition regime.
During the first analysis of the proposed merger, Aerocivil objected to the alliance, but the ruling was declared to have been made with a procedural error.
This new decision by Aerocivil will be announced amid an ongoing investigation by the Superintendency of Industry and Commerce against Avianca and Viva Air for allegedly having merged without prior authorization.
The acquisition of the commercial rights of Viva Air and Viva Perú by Investment Vehicle 1 Limited, the holding that controls Avianca, would have been sufficient to constitute a business integration, or at least the beginning of the execution of a business integration between the aforementioned airlines, according to the Superintendency of Companies.
Since the operation in question was neither informed of nor authorized prior to its execution by the competent authority, the airlines allegedly incurred in practices that restricted free competition, for which they could be sanctioned with a fine of up to 100,000 legal minimum wages currently in force, or up to 20% of their operating income, or up to 20% of their equity.
In April last year, the majority shareholders of both airlines jointly announced that Viva would become part of the same holding company as Avianca Group International Limited (Avianca Group). This resulted in the acquisition of 100% of the economic rights of Viva in Colombia and Peru, without this implying, as the companies stated at the time, neither control nor management of the two airlines.
Subsequently, in August last year, Avianca and Viva Air requested permission to merge from Aerocivil, arguing the need for the low-cost airline to remain in the market for the benefit of passengers and the jobs generated by the company amid the critical financial situation it was going through.
In February, Viva Air ceased operations, affecting thousands of users in Colombia and abroad who had scheduled trips.
Colombia’s Superintendenye of Transportation then took control of the low-cost airline, which means that Viva Air is prevented from selling assets without the prior authorization of the superintendency, amid the process to merge with Avianca.
The Ministry of Transportation filed before a complaint before the Attorney General’s Office alleging that the directors of Viva Air engaged in fraud by offering products and services it could not provide by continuing to sell tickets with the knowledge that it was about to suspend operations.