Colombia: why Viva and Ultra Air crisis could ruin mid-year holidays

By Daniel Salazar Castellanos

The Viva and Ultra Air crisis in Colombia has dealt a deep blow to the industry, which has not been able to take off after the collapse it experienced during the pandemic.

Now it could generate more impact on users for the mid-year holidays season amid price increases and lower availability of routes to travel at lower prices.

While Ultra Air points to reorganization as a survival alternative, Viva Air confirmed its disappearance from the market as it cannot operate since Avianca quit the integration after several battles.

The stoppage of both airlines came as a bucket of cold water for the airline industry, which will have its first major test of fire in the mid-year season without these two companies in operation.

During the Corpus Christi holiday weekend alone, the kick-off for the mid-year holidays, 490,819 passengers were mobilized in 2022 through the country’s various airports, of which 338,155 made domestic trips and 152,664 international trips.

“The cut in the supply of two airlines that had about 24% of the domestic market, plus the tax reform that affected the sale of airline tickets and accommodation, are creating the perfect storm,” warned in an interview with Bloomberg Línea, the country manager at Atrápalo Colombia, Ángela Ruíz.

She also refers to the alleged effects of the labor reform on the sector, along with the indebtedness of Colombians and interest rates.

On the other hand, “the price of the dollar will continue to indicate during the year whether we will be promoting receptive tourism for international visitors or whether we will be able to keep local travelers motivated to visit the country and other international destinations,” commented Ángela Ruíz.

Paula Cortés Calle, executive president of the Colombian Association of Travel Agencies and Tourism (Anato), had regretted Avianca’s decision in recent days, stating that “many travel agencies were hoping that the integration would be made and that the money given to Viva could be returned”.

“It is regrettable for the country to lose two airlines and the market contraction that this has generated in domestic flights”, he said.

Romain Maciejewski, a specialist of the travel platform Viajala, considers that travelers are facing “a shortage of flights to certain destinations, which should naturally lead to an increase in prices” for the mid-year vacations.

“On the other hand, several regional capitals lost a lot of connectivity with this crisis, such as Medellin, which was the base for Viva Air and Ultra Air, which will again force many travelers to connect to the Bogota hub,” he says.

He qualifies that the outlook is not negative, as the airlines launched promotions to the market to stimulate demand.

“However, the airlines still operating (Avianca, LATAM, Wingo, Satena, Easyfly) have been gradually increasing their operational capacity, opening routes, and frequencies to certain strategic destinations such as San Andres,” he said.

Even so, travelers continue to complain about the high prices of flying locally amid the external pressures airlines face due to the high fuel cost.

“The exit of the two airlines from the market leaves several problems. With a reduction in supply, prices tend to increase.”

“Unfortunately, this was a foreseeable situation,” INALDE Business School professor, researcher, and business consultant, Ignacio Osuna, told Bloomberg Línea.

He added that this “continues to drive inflation in this sector, which has been affected by this phenomenon”.

Another effect he perceives is a distrust of consumers concerning cheaper tickets and the low-cost model in general.

“That distrust will be medium and long-term.”

“It is not possible to rebuild that confidence in the short term, and this goes hand in hand with a third phenomenon, which is the rearrangement of the aircraft fleet and the operational capacities of the companies, but this is an action that also involves the acquisition of new aircraft and permits, so a sufficiently agile response to meet the demand of the most affected routes is not foreseen”, he pointed out.

He believes the market recovery could extend beyond the mid-year vacations and even last several years.

For Ricardo Fandiño de la Calle, partner of the law firm Gómez-Pinzón, recovery may be relative.

“If it is understood that the supply will once again have two other airlines competing with the existing ones, this may take no less than two to five years, but it is impossible to have full certainty.”

“If by recovery we mean that prices return to those ranges in which they were while there was more competition, then it is even more difficult since ticket prices have many other determining costs, such as gasoline, taxes, taxes, ground operations, etc.”

With information from Bloomberg

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