Colombia in “aviation emergency” after collapse of low-cost airlines

Colombian Air Force's Boeing 737 transports passengers with aviation emergency. Photo: FAC

The Colombian Government could officially declare an “aviation emergency” after the only two Colombian-owned low-cost carriers declared bankruptcy in just over one month.

The grounding of VIVA late February, and subsequent collapse of Ultra Air this week, has impacted more than 1.2 million passengers, and crisis aggravated by the fact that both airlines sold tickets until hours before shutting down operations.

Colombia’s Ministry of Transport has filed criminal charges against the directors of VIVA for receiving money from an estimated 730,000 passengers while knowing that they could not respond financially. Transport Minister Guillermo Reyes has yet to announce a similar action against the owners of Ultra Air.

The sudden cancellation of flights by VIVA resulted in stranded passengers both domestically and internationally. The difference, however, between VIVA’s case and that of Ultra Air, is that VIVA was grounded due to a seven-month delay by the country’s  Civil Aeronautics Administration (ACC) to approve a merger with the country’s largest airline Avianca. Ultra Air’s demise has been blamed on “adverse economic conditions” as the last official statement claims.

These adverse conditions include an unfavorable foreign exchange rate, high cost of fuel and recent tax hike on airline tickets from 5% to 16% with the passing of President Petro’s tax reform. Tourism and travel associations had petitioned the national government to exclude airline tickets from the surcharge to help the sector recover with the post-pandemic.

“We are already in an emergency situation without a formal declaration,” noted Minister Reyes during a press conference on Thursday. “We will, however, raise this issue at the next Ministerial council.”  The collapse of Ultra Air, company founded by Briton William Shaw, and ex-founding partner of VIVA, has isolated popular tourism destinations from Bogotá and other important hubs including Medellín, Cali and Bucaramanga.

Ultra Air, until as recently as last month, had reassured the market that it had leveraged enough capital to stay operational. The low-cost carrier was offering online ticket sales until April 2024. The end of Ultra Air, and grounding of VIVA, despite an eleventh-hour approval by the CCA to merge with Avianca, resulted in President Petro declaring cities that are now severed from the transportation grid as “social destinations.”

The cities most impacted by the aviation emergency are Cartagena, San Andrés, Riohacha, Santa Marta and Leticia (Amazonas). To rescue stranded passengers, President Petro ordered the Colombian Air Force to start moving passengers to their destinations, including the use of FAC 001 – the President’s private Boeing 737.

On Thursday evening FAC 001 took off from San Andrés for Medellín’s Rionegro with the first 120 passengers onboard. The Air Force’s Boeing 767 “Jupiter” – and largest plane in the defense fleet – will operate between Bogotá and Cartagena.

Avianca, the country’s flagship, has been absorbing passengers stranded by VIVA given that the airline had purchased US$240 million in company shares ahead of the announced merger. On Thursday, Avianca confirmed that it would extend its “protection plan” to Ultra Air, but given the busy Easter season, seat availability on flights “could be much lower.” Avianca added an 52 additional flights since VIVA shut-down on April 27, represented in more than 60,000 passengers.