Chile-based JetSMART has talked a good game for awhile now. It has wanted to grow throughout South America, and it has effectively promised as much to its US partner, American. It has used a mix of internal and external growth over the last few years, and now it is trying to turn external again with an offer for beleagured Viva Air in Colombia.
JetSMART started in Chile in 2017, and it grew quickly. It is backed by Indigo Partners, the Bill Franke-led group that’s behind Frontier, Wizz Air, and Lynx among others. At the end of 2019, the airline picked up the carcass of Norwegian Air Argentina, apparently thinking that going into Latin America’s most insane aviation market would be a good plan. By January 2020, this was the airline’s route map.
Fast forward to 2023 and you can see the airline has grown significantly.
In Argentina, it has moved its Buenos Aires operation from the secondary airport at El Palomar to the city’s two main airports, Aeroparque and Ezeiza. It has most recently started up a new Peruvian subsidiary which is slowly growing out of Lima. The airline lacks a significant Brazilian presence as well as one in Colombia, but it has the airplanes coming to rectify that.
As of now, JetSMART has 23 airplanes in service. Eight of those are A320s in Argentina with another 3 in Chile. The rest are A320neos or A321neos with potentially over 100 more on order, including some A321XLRs to really stretch those legs. (Side note: I say “potentially” because the order is with Indigo Partners and it can shift those airplanes around to its different companies if it wants.) These airplanes are coming very fast, with 18 expected this year alone.
Colombia, however, is a crowded market. Of course there’s the big boy Avianca which has turned itself into a low-cost carrier after a trip through the bankruptcy spa. And there’s LATAM which is everywhere in Latin America. But there are also several little guys with different hopes and dreams.
Seats Departing Colombia for Latin American Cities
JetSMART doesn’t even register on this chart, because it’s so tiny today. It has 1x daily from Cali that alternates between Antofagasta and Santiago in Chile. There’s also been flying to Santiago from both Bogotá and Medellín, but that isn’t in the schedule past March as of now. But with Viva’s capacity, JetSMART could all of a sudden be a player. Of course, if Viva can’t make a go of it on its own, could JetSMART do better?
JetSMART does have deeper pockets and it has a bigger vision. There’s a reason it linked up with American to provide feed to that airline’s long-haul network. It sees opportunity to become a continent-wide low-cost operator that can be a credible alternative to LATAM and Avianca. In fact, it already said it intended to open a Colombia operation back in November, so this would just be an opportunity to take out a large competitor and move in quickly.
On paper it looks good. Viva is about the same size as JetSMART with 24 airplanes in the fleet, most in Colombia but a couple in Peru. It has an all-A320 and A320neo fleet, so it would fit right in… though Viva went with CFM for its engines and JetSMART went with Pratt & Whitney so it’s not a perfect fit. That part looks ok, but then there are the financial issues.
Viva is in bad shape and has said it needs a savior to keep the airline alive. It just filed for bankruptcy protection to keep it alive until someone can buy it. That’s never a great sign, but it does mean that there’s really only one question to answer… at what price does it make sense for JetSMART? Because there’s always a price where it makes sense.
Viva has already agreed to be acquired by Avianca. True, Colombia’s competition regulator shot the merger down, but they’ve already gone back with remedies to try and get it pushed through. That review is ongoing, and it clearly doesn’t seem to faze JetSmart.
From a JetSMART perspective, I imagine it thinks it could go in there, take over Viva, leave the airplanes that are profitable in Colombia, and take the rest out into another place that could better use the capacity. If the acquisition price is right, this would be a really solid way to get into the country that it wants to enter anyway. In a sense, this is like what it did in Argentina, picking at the carcass of a nearly-gone airline.
Avianca won’t like this one bit, but it isn’t clear if it can get its merger pushed through anyway. Before this announcement, it might have been a Sophie’s choice for the government… either allow the Viva merger with Avianca or let Viva die. Now, however, there is an opportunity to keep Viva alive under the guise of another low cost operator. Sure, it’s not a Colombian airline so pride might get in the way, but it at least gives the regulators an option that didn’t exist before. And that’s probably not great news for Avianca.