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Allegiant and Viva Aerobus Submit New Joint Venture Proposal to DOT
Allegiant and Viva Aerobus have submitted to the U.S. Department of Transportation (DOT) under Docket DOT-OST-2021-0152, a new proposal to expedite the approval of their cross-border Joint Venture.
The two airlines are requesting expedited JV approval by the fall and to begin their partnership by the first half of 2023. Both airlines will start new routes once Mexico is restored to Category I status, thus providing new nonstop and affordable services to the Aztec country.
This partnership of the two low-cost carriers seeks to expand travel options between the United States and beach destinations in Mexico, not to coordinate schedules to connect passengers between North and South America.
Once Antitrust Immunity (ATI) is obtained, both operators seek to expand non-stop routes between both countries, thus offering greater point-to-point travel options, unlike legacy airlines, which offer a large part of their flights for connecting passengers.
The proposed alliance between the two companies will increase seat capacity in the market and increase the passenger load factor between the U.S. and Mexico’s vacation markets, as well as create 900 new jobs during the first two years of the JV’s approval.
The Allegiant and Viva Aerobus partnership will not monopolize the market between the two countries either, the JV between Delta Air Lines and Aeromexico has a large share of the cross-border segment; on the other hand, American and United are the largest air carriers between Mexico and the United States.
Allegiant proposes to initiate several non-stop services to Mexico from multiple cities in the U.S.: Austin, Baltimore, Chicago, Cincinnati, Fresno, Fresno, Houston, Las Vegas, Los Angeles, Memphis, Nashville, Newark/New York, Nashville, Rockport, San Antonio, South Bend, St. Louis and Southwest Florida.
The Nevada-based low-cost airline plans to initially share routes with Viva Aerobus being the operator and Allegiant part of Marketing, because the U.S. company will make an estimated investment of $15 million to improve its computer systems and to start its own flights to Mexico in 2025, with the announcement of new routes in 2024.
Viva Aerobus’ initial plans include launching non-stop services to the United States from several Mexican cities: Tampico, Queretaro, Torreon, Merida, Guadalajara, Mexico City, Chihuahua, Veracruz, Monterrey, Bajio and Morelia, thus offering a wide range of cross-border vacation destinations to the U.S. at affordable prices.
The Mexican low-cost airline also responded to the DOT that it has no common shareholder with Colombian carrier VIVA, ruling out any plans to coordinate operations in South America.
If the JV is approved both companies request the relocation of their airport facilities to select airports: Cincinnati (CVG), Chicago (MDW), Las Vegas (LAS), Nashville (BNA), Orlando – Sanford (SFB), Mexico City (MEX), Monterrey (MTY), Cancun (CUN), Puerto Vallarta (PVR) and Los Cabos (SJD).
Effects of Proposals
Both airlines are seeking major benefits from terminal co-location: significant cost savings from sharing terminal facilities, gate and ground handling services, joint purchasing and other efficiencies of scale.
Allegiant, with the implementation of the Joint Venture, seeks to lend expand its operations in the most congested Mexican airports: Mexico City (MEX) and Cancun (CUN) both destinations with strong demand from U.S. leisure passengers, with the partnership with Viva Aerobus it will be able to enter these markets with ease and operate with convenient slots.
The U.S. company ruled out operating in the Felipe Angeles International Airport (NLU) and Toluca (TLC) due to the lack of public transportation and other infrastructure limitations, making its operation not viable. The company mentioned that other U.S. operators offered flights to TLC and withdrew from the market in a short period of time.
Puerto Vallarta (PVR) also has slot limitations on certain days of the week, this restriction limits airlines from making substantial changes to their flight schedules. The partnership will allow Allegiant to take advantage of Viva Aerobus’ slots and coordinate schedules to optimize the use of slots.
The partnership that Allegiant and Viva Aerobus have agreed to is a long-term alliance, the applicants believe that the ATI for 15 years or more is necessary to enable and encourage a necessary investment in new aircraft, digital platforms and maximization of operations that will allow for a favorable expansion in competition on multiple routes between the United States and Mexico.
This article was written by Rainer Nieves Dolande for Aviacionline.
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