Viva Aerobus and Allegiant Air are pushing for a joint venture covering flights between the United States and Mexico. The planned alliance promises to deliver big results that have never been seen before among low-cost carriers in North America. In making their case to the United States Department of Transportation (DOT), Allegiant and Viva Aerobus highlighted how they planned to become the largest low-cost option between the US and Mexico and add routes to destinations they believe are uniquely positioned to offer.
Complementary route networks
As of now, Allegiant Air is an entirely-domestic airline. It has no scheduled flights to Mexico. Targeting some Canadian passengers, the airline does fly to some border towns like Bellingham and Plattsburgh to serve customers willing to drive across the border to catch a low-cost flight to popular vacation destinations.
Viva Aerobus does serve transborder routes. It has a healthy domestic network within Mexico, but it is one of the more sizable low-cost carriers in the market. The airline serves some of the bigger points in the US, like Los Angeles, Las Vegas, and Chicago, and some secondary destinations like Cincinnati and Nashville. Its network is oriented toward leisure and visiting friends and relatives (VFR) traffic.
This sets the two airlines up to work well together. With no overlapping routes, the two carriers are not at risk of consolidating or reducing transborder routes, as is a concern raised in other joint ventures.
A difficult market for Viva Aerobus
For Viva Aerobus, getting US-originating leisure traffic has been difficult. Viva and Allegiant submitted data since 2014 for its Cancun-bound routes from the United States. The airline has tried several different routes from the US, such as New York, Charlotte, and Houston to Cancun, though it ended up cutting those routes, which were primarily focused on US-originating traffic.
The question then becomes why this alliance would benefit Viva Aerobus. The simple answer is gaining a US customer base and US point-of-sale revenue through Allegiant. The goal is to tap into Allegiant’s customer base and use that to expand nonstop options between the US and Mexico, though still with an eye on leisure and VFR traffic.
The airlines released a prospective five-year service map for transborder flights, and the airlines have some ambitious plans. Based on the dots the airlines put on the map, the two airlines are planning a sizable expansion from Florida to Mexico and targeting some midwestern destinations like Grand Rapids, Minneapolis, and Columbus.
Growth in market share
In 2021, of origination and destination (O&D) traffic, Viva Aerobus had a 5% share in the market. This compared to 22% for Delta/Aeromexico, 22% for American Airlines, 17% for United, and 11% for Allegiant. Viva’s 5% is on par with Southwest’s 6%, Alaska’s 5%, and Frontier’s 5%.
With the alliance, Allegiant and Viva Aerobus expect to become the fourth-largest player in the transborder market. It estimates that Delta/Aeromexico, American, and United all lose a point of their 2021 numbers. Viva and Allegiant would take an 11% share in the market, beating out Volaris and Southwest.
The two airlines highlighted this growth in the context of low fares. Viva and Allegiant are confident they would be beneficial to fares in the market because of their ability to enter existing markets and offer lower average fares while also helping expand traffic between destinations.
Where would Allegiant and Viva grow?
Allegiant and Viva Aerobus were explicit in their growth strategy. There are three key leisure gateways in Mexico for US citizens. These are Cancun, Puerto Vallarta, and Los Cabos. Cancun typically gets the most service from the US of these destinations. Still, it only has three route options to smaller destinations compared to 41 route options to major airports, including large hubs like Dallas, Minneapolis, and Denver.
Puerto Vallarta has zero nonstop options to small and medium airports. Los Cabos, similarly, has zero as well. Allegiant and Viva view this route map as a blank slate and see some ambitious route options. From those three Mexican leisure gateways, Allegiant and Viva see room for more service:
- 83 Allegiant-served airports from Cancun, of which 76 have no nonstop service
- 90 Allegiant-served airports from Puerto Vallarta, of which 82 have no nonstop service
- 91 Allegiant-served airports from Los Cabos, of which 81 have no nonstop service
This would be a huge benefit for many secondary communities. Smaller midwestern destinations like Fargo, Bismarck, Cedar Rapids, and St. Cloud were listed as potential destinations. However, one of the largest markets the two airlines see room for growth is in the southeastern United States. This means growth to places like New Orleans, Shreveport, Greenville, Jacksonville, and plenty of other destinations.
Viva Aerobus and Allegiant could still add more nonstop flights to destinations that currently see nonstop service from the United States on major network airlines that typically come at a higher cost. Allegiant has shown it is willing to take on network carriers. Allegiant highlighted that it could potentially add three-weekly flights between Las Vegas (LAS) and Mexico City (MEX) to complement Viva’s eight weekly flights. With the joint venture, the two airlines can coordinate to offer more convenient flight times on existing routes, thereby enhancing offerings.
On the other hand, Viva sees opportunities to add only 14 routes over the next five years and 31 over the next ten years. However, with the alliance, the airline sees opportunities to add 88 routes over the next five years and a further 24 between 2026 and 2031. Most of these markets would target nonstop point-to-point service, with the potential for a few incremental connections. Allegiant notoriously does not sell any connecting flights.
What if the alliance is not approved?
To show regulatory officials the benefits of the alliance, Allegiant revealed two, five, and ten-year plans for transborder service without the partnership with Viva. Allegiant does not envision launching nonstop service to Mexico until 2031 at the soonest. By 2041, Allegiant expects it could have a handful of routes out of Cancun.
However, with the alliance, Allegiant could enter the transborder network as soon as 2023 with the help of Viva. Allegiant could start selling transborder flights much sooner with the alliance. In an apparent nod to Secretary of Transportation Pete Buttigieg, who hails from South Bend, Indiana, Allegiant highlighted a new route that would only be possible due to the alliance.
This is a route from South Bend (SBN) to Cancun (CUN). Allegiant says it is not easily routable for the airline as it cannot do an out and back routing because it lacks an aircraft and crew base in SBN. However, given Allegiant’s strong point-of-sale in SBN, it believes the route could work under the operation of Viva, which would use its Mexico-based aircraft and employees to make the route work. Allegiant could, meanwhile, focus on routes from some of its bases to Mexico.
Compared to another joint venture
Full-service carriers Aeromexico and Delta Air Lines have a joint venture covering transborder travel. This joint venture has been around since May 2017 and has proven beneficial to both airlines. At the fourth anniversary of the joint venture in 2021, the airlines touted the over 22 million passengers who flew between the US and Mexico through this partnership and over 40 new routes.
Delta Air Lines needed the Aeromexico partnership because it does not have a Texas hub, unlike American (Dallas) and United (Houston). Texas is an ideal geography for a hub to open service to interior points of Mexico. Through Aeromexico, Delta can offer an extensive array of services to interior Mexican points via a connection in Mexico City and even some outright nonstop opportunities.
Allegiant and Viva are not quite in the same position but gain similar benefits. Allegiant can tout benefits of access to Mexico for its customers. This is a deficiency it had. Its larger ultra-low-cost peers, namely Frontier and Spirit, all serve Mexico from the US. Even Southwest, which has a relatively minimal international network, has a sizable presence in key leisure Mexican markets.
Ultimately, both Allegiant and Viva promise growth and new nonstop opportunities for more customers. Almost no other airline is likely to launch nonstop service in many markets these two carriers are targeting. Regulatory officials will look closely at the alliance, but so far, the airlines are making a pitch that could reshape the entire US-Mexico market.