Colombia's Avianca backs down from Viva Air merger

An Avianca Airlines plane prepares to take off at the San Oscar Arnulfo Romero International Airport in San Luis Talpa

BOGOTA (Reuters) - Colombia's flagship airline Avianca is backing down from a merger with Viva Air, blaming conditions set by the country's aviation regulator, the company announced Saturday.

In a statement, Avianca said conditions set by the regulator "would not allow Viva to be a financially and operationally viable airline," and also put Avianca's stability at risk.

Among the reasons, Avianca said the deal gave little "regulatory flexibility" to reactivate Viva's operations.

It also said the deal required Avianca to assume routes, commitments and prices that "don't coincide with Viva's remaining capacity" after having suspended operations for two months.

"Regretfully the conditions of this resolution, which is a firm decision, make the rescuing Viva impossible," Avianca CEO Adrian Neuhauser said in the statement, adding that the conditions also but Colombia's connectivity at risk.

Colombia's aviation regultaor did not immediately respond to a request for comment.

The merger was a lifeline for embattled Viva, which has struggled financially in the wake of the coronavirus pandemic and seen its situation worsen due to higher fuel prices in 2022 and the depreciation of Colombia's peso.

Colombia's aviation regulator approved the merger in late April after repeated delays, with the civil aviation authority objecting to the deal last November, before annulling and reopening the process in January after citing procedural irregularities.

Amid the limbo, Viva Air abruptly suspended operations in late February, leaving passengers stranded in airports across the country.

(Reporting by Oliver Griffin; Writing by Alexander Villegas; Editing by David Gregorio)