Viva Air partner denied receiving an offer from JetSmart and sees better integration with Avianca

Castlesouth Limitedholder of the voting rights on Rapid Colombia SASthe operator of Long live Colombiaclarified the position of its council following certain announcements made in the media by Jet-Smartthe Chilean airline which, presumably, is interested in acquiring 100% of the shares of Viva, a Colombian company seeking to exit the economic crisis in which it must not disappear.

Agree with Castlesouth Limited, to date, JetSmart has not submitted any offers. Additionally, he said the company had requested information for the due diligence process on Viva.

“Any negotiation with JetSmart or any other third party would take a considerable time without it being yet certain that a transaction could be agreed and, even if it could be, it would be subject to an additional waiting period to obtain the applicable regulatory authorizations.” Castlesouth Limited.

He noted that, “given the current critical financial situation of Viva, the immediate authorization of the national government regarding the integration of Viva with Avianca is in the best interest of Viva and its passengers, creditors, employees and interested third parties. , including the public. Colombian”.

The holder of the voting rights on Rapid Colombia SASthe operator of Long live Colombia, refers exactly to what was reported on February 7, 2023 by different media, when it was clarified that JetSmart, Chilean low-cost airline, has announced that it wishes to acquire 100% of the shares of live air.

Initially, a statement from the Executive Director of JetSmart, Stuart Ortizin which he asserted that a transaction between JetSmart and Viva Air will allow the maintenance of the ultra low cost model in Colombia and with it, continue to offer more routes at lower prices.

“We have a long-term vision for expansion in South America and we are able to continue to invest in our growth. We believe in the potential of the Colombian market. Our alternative will benefit users, strengthen free competition in the sector and promote tourism and connectivity in the country,” Ortíz explained in a statement.

In the document, JetSmart indicated that the planes used by the company reduce fuel consumption by more than 25% per seat compared to the previous generation. Similarly, it records a 25% reduction in emissions of carbon dioxide (CO2)Consequently, they stop emitting more than 12,000 tons of matter per plane per year.

Furthermore, it was noted that the alliance is sought after because the airlines do not have common routes in Colombia and they both operate new fleets of Airbus A320neo.

“At JetSmart, we have the experience, capabilities and resources to successfully complete this transaction and we look forward to moving forward quickly and efficiently,” said the executive director of JetSmart, an airline that is part of the airline portfolio of Indigo Partners, a fund investment company that controls five other airlines and currently operates 79 routes in seven South American countries and Colombia, where it has operated since late 2019, with connections to Bogotá, Cali and Medellín.

The communication of the Chilean airline became known after the executive director of Viva Air, Felix Antelosaid Radio Blue that the only option for salvation was to merge with Avianca, since until now (the morning of February 7) a different alternative had not appeared, despite the fact that the company had been looking for it. He underlined that in the event of failure of the integration, it will be up to the shareholder to define the Plan B to the company.

Faced with the alleged proposal, Viva Air spokespersons confirmed on February 8 to Week that they have already received the proposal for the acquisition of the Chilean airline and that they have already begun to study it.

“At this time, the organization is examining the possible implications that this announcement may have in the development of the process that is taking place today before Aerocivil, in which there is already a demand to promote integration between Viva and Avianca“, spokespersons for the low-cost airline told the media.

Meanwhile, Avianca, through a statement, assured that the offer of the Chilean company is only intended to generate a “distraction”.

“Avianca and its shareholders consider that JetSmart’s declaration of interests has the sole purpose of using a clearly unworkable proposal to distract from Viva and Avianca’s request for integration,” the airline said. while ensuring that, so far, they have not received any proposals to transfer their economic participation to Viva.

It must be remembered that Avianca and Viva Air They asked for the merger. However, the Civil Aeronautics (Aerocivil) replied that said union will not take place to avoid scenarios of monopoly and unfair competition in some cities.

The aviation authority also concluded that allowing this the integration “presents risks to competition in the sector and the welfare of consumers.” He gave several arguments to prevent this union. For example, he pointed out that the fusion would strengthen the market power of Avianca, Viva Air and Viva Peru.

“Stakeholders participate in 59 national routes, which handle 93.7% of the country’s domestic traffic. Among these roads, on 29 national roads round trip they participate incidentally,” Aerocivil said.

According to the entity, if the merger is authorized, this merged company would be the only option for consumers of sixteen national roads.

If this merger were authorized, a retreat more than seven years in terms of free competition and new entrepreneurs “would face new difficulties in expanding or entering markets affected by higher barriers to entry and greater market power”.

Viva, which has been described as a “valuable alternative for Colombian and regional consumers”, has previously mentioned that it is in crisis and could disappear if the merger does not take place. Faced with this eventuality, Aerocivil affirms that this situation should be tested so they can make an exception.