Colombian Low-Cost Carrier Viva Air Files for Bankruptcy Protection

Bogotá — Colombian low-cost airline Viva Air (Fast Colombia S.A.S.) has filed for bankruptcy protection in the Chamber of Commerce of Eastern Antioquia, due to the difficult economic situation that the airline is going through.

The airline is taking advantage of Colombia’s Law 1116 of 2006, to which decree 560 was added during the pandemic, and seeks to offer financial assistance to companies engulfed in financial crises.

The process will allow for the airline to request restructuring and enable it to continue operating, and which will include the reorganization of its assets, the restructuring of its debt, and the adjustment of its business plans.

“This has very significant implications, not only with respect to creditors, whose credits are suspended until a reorganization agreement is reached with them, except in the case of administrative expenses such as future salary payments, public services, fuel, among others,” Francisco Reyes, the former superintendent of companies, told Bloomberg Línea.

He added that the entry into bankruptcy proceedings will have an impact on a pending authorization by Colombia’s civil aviation authority (Aerocivil) regarding a merger with Avianca, as it could be trying to prove that, Viva Air is in a critical situation and that the merger is the only way to achieve a recovery.

Avianca and Viva Air have been in negotiations toward a merger for some time. Chilean low-cost carried JetSMART has also made an offer to acquire Viva Air, but which Avianca has rejected, claiming it is inviable.

When Avianca and Viva Air applied to Aerocivil for authoriztion to merge, the two companies argued that the critical financial situation of the low-cost airline was a determining factor in the plan, bur which was initially rejected by Aerocivil.

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