Colombian Carrier Viva Suspends Operations Amid Slow Avianca Takeover Progress

May 18th, 2023
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Viva Air, a low-cost carrier based in Colombia, has suspended its operations due to ongoing issues related to the takeover of Avianca Holdings, the country’s largest airline. Here’s what you need to know about this situation.

The Background

Avianca Holdings filed for Chapter 11 bankruptcy in May 2020, citing the impact of the COVID-19 pandemic on the aviation industry. As part of its restructuring efforts, Avianca announced in December 2020 that it had agreed to sell a majority stake in its ownership to a group of investors led by U.S. private equity firm Advent International. However, the deal has been delayed due to regulatory issues and disagreements between Avianca and its largest creditor, the hedge fund Elliott Management.

The Situation

Viva Air, which operates flights in Colombia, Peru, and other Latin American countries, has been impacted by the slow progress of the Avianca takeover. According to Viva Air CEO Felix Antelo, the ongoing uncertainty surrounding Avianca’s future has made it difficult for Viva Air to secure financing and plan its operations.

As a result, Viva Air announced on March 3, 2021, that it would suspend its operations in Colombia until at least March 20. The airline stated that it would refund customers affected by the suspension or allow them to reschedule their flights for a later date.

The Implications

Viva Air’s decision to suspend its operations is a blow to the Colombian aviation industry, which has already been hit hard by the pandemic. The airline is one of the largest low-cost carriers in the country, and its absence will leave a significant gap in the market. This could result in higher fares for passengers and reduced competition for other airlines.

The suspension of Viva Air’s operations also highlights the impact that Avianca’s bankruptcy and takeover process are having on the wider aviation industry in Colombia. As the country’s largest airline, Avianca plays a crucial role in the market, and its uncertain future is causing ripples throughout the industry.

The Future

It remains to be seen how the Avianca takeover will progress and when Viva Air will be able to resume its operations. While Avianca has stated that it is making progress in its negotiations with the Advent-led group of investors, there are still significant obstacles to overcome. Elliott Management, Avianca’s largest creditor, has expressed concerns about the proposed deal and is pushing for changes to the terms.

As for Viva Air, the airline has stated that it is working to secure financing and prepare for a potential resumption of its operations. However, the situation remains uncertain, and it is unclear when the airline will be able to return to full service.

Final Thoughts

Viva Air’s suspension of operations is a stark reminder of the challenges facing the aviation industry in the wake of the pandemic. With ongoing uncertainty surrounding Avianca’s future and the slow progress of its takeover process, other airlines in Colombia and beyond may also face difficulties in securing financing and planning their operations. As the industry continues to navigate these challenges, it will be important for all stakeholders to work together to find solutions that support the long-term sustainability of the industry.