Low-Cost Air Travel in Mexico Boosted with Volaris and Viva Merger

In a joint statement, Mexico’s two busiest airlines, Volaris and Viva, announced their agreement to merge and create a new low-cost airline group. This partnership aims to promote low-cost air travel in Mexico and contribute to the country’s economic growth.

The merger will result in the formation of the largest domestic carrier in Mexico, with both airlines continuing to operate under their existing brands. The deal, which was confirmed by the companies after an exclusive report by Reuters, will also allow for independent commercial operations while combining ownership at the holding-company level.

Both Volaris and Viva exclusively fly Airbus planes and have similar routes. Their main competitor in the domestic market is Aeromexico, the country’s flagship airline. Volaris Chief Executive Enrique Beltranena expressed his optimism for the new airline group, stating that it will open up significant growth opportunities for air travel in Mexico.

The merger is expected to be finalized in 2026, with the companies remaining listed in Mexico and New York. However, it will require approval from antitrust regulators and may face opposition from Aeromexico, which currently holds a third of the domestic market share for air travel.

Merger of Equals

Under the terms of the agreement, the companies will combine their holding entities in a merger of equals. Shareholders of Viva will receive newly issued shares in Volaris’ holding company, while existing investors of Volaris will retain their stakes, resulting in 50% ownership for each side.

Volaris’ largest shareholder is private equity firm Indigo Partners, which also controls US airline Frontier and Chile’s JetSMART. On the other hand, Viva is privately owned and controlled by transportation group IAMSA, headed by transportation magnate Roberto Alcantara. The new group’s board will consist of members from both carriers, with Alcantara as the chairman.

Challenges in Mexico’s Aviation Market

This merger comes at a time of turbulence in Mexico’s aviation market, including disputes with US regulators. In October, the US Department of Transportation rejected several proposed flight routes from Mexican airlines to the US. This was due to disagreements over Mexico’s management of flight slots at the main capital airport and its decision to move cargo flights to a more distant facility.

In November, Mexican President Claudia Sheinbaum announced that Mexican airlines would have to give up some of their slots at the capital airport to their US competitors. Currently, US operators hold more than half of Mexico’s international market share, while Mexican airlines only account for just under 30%.

Overall, the Volaris and Viva merger is a significant development in Mexico’s aviation industry. It is expected to bring about more low-cost options for travelers and contribute to the country’s economic growth.