What would Viva Aerobus do with Allegiant’s $50 million investment?

  • Allegiant Air Airbus A319-111 in the sky
    Air Allegiant

    IATA/ICAO code:
    G4/AAJ

    Airline type:
    Very low cost carrier

    Year of foundation:
    1997

    CEO:
    Maurice Gallagher Jr.

    Country:
    United States

Last year, Allegiant Air announced it would invest $50 million in ultra-low-cost Mexican carrier Viva Aerobus as part of its fully integrated commercial alliance agreement. Last week, the two airlines submitted a new joint venture proposal after the Department of Transportation (DOT) requested additional information, including Viva’s plans with this investment.

Viva’s projects

Allegiant Air and Viva Aerobus are planning a fully integrated commercial alliance agreement and are seeking antitrust immunity for the alliance from the DOT. The objective is to “significantly expand nonstop leisure air travel options between the United States and Mexico while reducing fares to make it more accessible and affordable for residents of both countries,” airlines said last year.

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After the DOT requested more information about the partnership, including what the US$50 million investment in Viva Aerobus was to accomplish, the two carriers said the capital investment was strategic and “used to demonstrate Allegiant’s commitment to the alliance partnership, and is not intended to be a payment to Viva for the purpose of preparing the alliance.”

The Mexican ultra-low-cost carrier intends to use the net proceeds of the investment to “general business purposes”, including fleet renewal and expansion, repayment of existing aircraft financing, route expansion, working capital, maintenance of current aircraft and engines, and marketing expenses.

Overall, the money would be used to fund Viva’s businesses and is not specific to the alliance, “although some of the spending made with investment funds may ultimately benefit the alliance.”

Viva Aerobus and Allegiant Air seek to enter into a fully integrated commercial alliance agreement. Photo: Guillermo Quiroz Martínez via @gquimar.

Viva Aerobus fleet maps

Interestingly, Viva Aerobus could use some of the money to increase its fleet. The airline currently has a fleet of 62 aircraft based on the Airbus A320 family and has an ongoing order for 33 more units. This year, the Mexican carrier has complained about Airbus delivery delays that have impacted its ability to open new routes.

Unlike its Mexican counterparts, Volaris and Aeromexico, Viva Aerobus has not increased its order in recent years. Volaris added several aircraft and moved others from the Airbus A320neo to the A321neo last year in Dubai. Aeromexico has signed new lease agreements with Dubai Aerospace Enterprise to receive additional MAXs and Dreamliners. This has allowed both companies to expand their fleets, Volaris now has 114 planes and Aeromexico 140. Viva Aerobus has yet to make a similar move, but if the DOT approves its alliance with Allegiant, it could happen.

Allegiant Air plans to invest US$50 million in Viva Aerobus. Photo: Vincenzo Pace | Single flight.

What will happen to the partnership if the DOT closes the Alliance?

So what if the DOT says no to the immune relationship between the two ultra-low-cost carriers? Without antitrust immunity, Allegiant and Viva would independently bear significant costs to develop the infrastructure and technology needed to successfully launch and promote the cross-border service, they said. If the DOT blocks the alliance, the two airlines will not seek a codeshare or interline agreement. There would be no type of alliance between the carriers. “From Viva’s perspective, a codeshare instead of an immune alliance would significantly reduce the potential benefits of partnering with Allegiant…..Viva cannot make a dent in the US market or meet the needs American passengers with a simple codeshare.”


Do you think a partnership between two ULCCs will benefit the air transport market between Mexico and the United States? Let us know in the comments below.

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