LATAM Airlines Group’s subsidiary in Colombia is interested in “initiating negotiations” to acquire struggling discounter Viva Air, which filed for protection from creditors last week.
LATAM Airlines Colombia said on 14 February it has written a letter to the president of the financially-strapped Colombian low-cost airline with the offer.
“The Colombian affiliate of LATAM group is prepared and has the capacity to strengthen its operations in the country,” the company writes. “As such, a potential acquisition of Viva Air Colombia becomes a growth opportunity, offering Colombian consumers the best value proposition in the local market in terms of service, and the country new alternatives to strengthen its connectivity and development of tourism.”
LATAM Airlines Colombia has been operating in that country for 11 years, and says it has a “continued interest” in investing further in the market.
“For this reason, we consider that this potential acquisition would be the best option to strengthen the conditions of the free market, as well as offer the necessary support to respond to the financial situation of Viva Air Colombia and its creditors, ultimately resulting in the strengthening of the Colombian airline industry,” the company says.
The battle for Viva is shaping up into a three-way fight, as Colombian legacy carrier Avianca and Chilean ultra-low-cost carrier JetSmart are also interested in acquiring the airline.
Avianca’s plans to take over Viva have been on the table for quite some time, but late last year they were rejected by Aerocivil, Colombia’s civil aviation authority. At the time, Aerocivil said the acquisition would harm competition. In January, however, the aviation regulator annulled that rejection, and said it would restart a review without forcing the companies to re-apply for approval of the transaction.
The Colombian regulator admitted to “the existence of a substantial irregularity in the processing of the administrative action in the first instance”. The file was returned to the country’s Directorate of Air Transport and Aero-Commercial Affairs for further consideration.
Then, on 10 January, JetSmart chief executive Estuardo Ortiz expressed interest acquiring Viva Air.
Chile-based JetSmart had “notified Viva Air… of our interest in acquiring 100% of its shares,” Ortiz wrote in a LinkedIn post. “It is an option to continue strengthening free competition and the low-cost model in air travel in South America, thus generating significant benefits for users, employment and tourism.”
Earlier in the day, Viva Air had voluntarily filed for the Colombian version of bankruptcy, known as PRE, “in accordance with the regulations that protect companies affected by the Covid-19 crisis, with a view to achieving its permanence in the market, pending the urgent definition by Aerocivil about its alliance with Avianca”. The process gives the airline 90 days to restructure its debts through negotiation with creditors. It had not been able to access capital during most of the last year, the airline said.
“After studying all the available alternatives in the face of the current situation, we entered into this voluntary mediation process while we wait for the urgent decision by the authority of our alliance with Avianca,” the airline added.
It will continue operating during the restructuring process.
According to Cirium fleets data, Viva Air operates 19 Airbus A320s based out of Bogota.