BOGOTA, Nov 8 (Reuters) - Colombia's civil aviation authority on Tuesday formally opposed a planned merger between Avianca, the country's flag carrier, and budget airline Viva, saying the transaction represented a risk to competition.
Avianca and Viva in April signed a deal to merge into one group and unify their economic rights as part of a strategy to strengthen both airlines after the global aviation industry was battered by the COVID-19 pandemic.
The civil aviation authority's decision tentatively blocks the merger, but it said the airlines can appeal.
If the merger were to complete, the combined group would control 100% of the services offered on 16 routes, the authority said. Potential competitors would face new challenges for growth or expansion into markets affected by the bigger barriers to entry resulting from the control that the new entity would hold following the merger, the authority added.
"According to the law, a merger such as the one planned by Avianca and Viva must be objected to, due to the adverse effects on the market," the authority said.
It also expressed concern over the impact the merger would have on airline customers.
"We're concerned about the meaning of the decision, as it goes against the needs of the country and ignores the potential effect that Viva's disappearance would have on consumers and the market," Avianca Chief Executive Adrian Neuhauser said in a statement.
Viva said it will consider its options following the aviation authority's announcement. The Colombian airline has 23 planes and around 1,000 direct employees.
Avianca exited a restructuring process last year after earlier filing for Chapter 11 bankruptcy in the United States. The airline has more than 130 plans and employs some 12,000 staff.
(Reporting by Luis Jaime Acosta; Writing by Oliver Griffin; Editing by Will Dunham and David Gregorio)
