What Would Viva Aerobus Do With Allegiant’s $50 Million Funding?

Final yr, Allegiant Air introduced it might make an fairness funding of US$50 million within the Mexican ultra-low-cost service Viva Aerobus as a part of their fully-integrated Business Alliance Settlement. Final week, each airways offered a brand new three way partnership proposal after the Division of Transportation (DOT) requested extra info, together with Viva’s plans with this funding.

Viva’s plans

Allegiant Air and Viva Aerobus have plans for a fully-integrated Business Alliance Settlement and are searching for antitrust immunity for the alliance from the DOT. The target is to “dramatically broaden choices for nonstop leisure air journey between the USA and Mexico whereas reducing fares to make it extra accessible and inexpensive for residents of each nations,” the airways stated final yr.

After the DOT requested extra details about the partnership, together with what the US$50 million funding in Viva Aerobus was anticipated to realize, each carriers stated that the fairness funding is strategic and “used to exhibit Allegiant’s dedication to the alliance partnership, and isn’t supposed to be a fee to Viva for the aim of getting ready for the alliance.”

The Mexican ultra-low-cost service intends to make use of the online proceeds from the funding for “normal company functions,” together with fleet renewal and enlargement, reimbursement of current plane financing, route enlargement, working capital, sustaining present plane and engines, and advertising and marketing bills.

General, the cash could be employed to gas Viva’s companies and isn’t particular to the alliance, “though a number of the expenditures made with the funding funds could finally profit the alliance.”

Viva Aerobus and Allegiant Air wish to have a fully-integrated Business Alliance Settlement. Picture: Guillermo Quiroz Martínez through
@gquimar
.

Viva Aerobus fleet plans

It’s fascinating to notice that Viva Aerobus might use a part of the cash to extend its fleet. The airline at present has a fleet of 62 Airbus A320-family-based planes and has an unfilled order for 33 extra items. This yr, the Mexican service has complained about Airbus supply delays which have impacted its skill to open new routes.

Not like its Mexican counterparts, Volaris and Aeromexico, Viva Aerobus has not elevated its order lately. Volaris added a number of plane and shifted others from the Airbus A320neo to the A321neo final yr in Dubai. Aeromexico signed new leasing contracts with Dubai Aerospace Enterprise to obtain extra MAX and Dreamliners. This has allowed each firms to broaden their fleets, Volaris now has 114 plane and Aeromexico 140. Viva Aerobus has but to make an analogous transfer, but when the DOT approves its alliance with Allegiant, that will occur.

Allegiant Air is planning to make a US$50 million funding in Viva Aerobus. Picture: Vincenzo Tempo | Easy Flying.

What’s going to occur with the partnership if the DOT shuts down the Alliance?

So what occurs if the DOT says no to the immunized relationship between the 2 ultra-low-cost carriers? With out antitrust immunity, Allegiant and Viva must independently assume important prices to develop the infrastructure and know-how wanted to launch and promote transborder service efficiently, they stated. If the DOT blocks the alliance, each airways wouldn’t look out for a codeshare or an interline settlement. There wouldn’t be any kind of alliance between the carriers. “From Viva’s perspective, a codeshare as a substitute of an immunized alliance would drastically cut back the potential good thing about a partnership with Allegiant …..Viva can not make a dent within the US market or serve the wants of US passengers with a mere codeshare.”

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