Introduction to Grupo Más Vuelos
Grupo Más Vuelos, the proposed merger between Viva and Volaris, is a strategic move by these airlines to navigate the turbulent aviation sector. Their aim is to strengthen their low-cost model in Mexico, democratize air travel, boost tourism, and create economies of scale. The ultimate goal is to increase air travel penetration in Mexico, which currently stands at a mere 0.5 annual flights per capita relative to the country’s income, lagging behind countries like Turkey, Malaysia, Chile, and Colombia with similar income levels.
Strengths of the Combined Entities
The combined strength of Viva and Volaris lies in their ability to serve 86 domestic and international destinations and 324 routes using Airbus aircraft. This will result in approximately 990 daily operations, including takeoffs and landings, with further growth planned for the Felipe Ángeles International Airport as a key operational hub.
Regulatory Process and Fleet
The regulatory approval process for national and international authorizations is expected to take 12 months. As of October last year, their combined fleet consisted of 211 aircraft, with Volaris’ director, Enrique Beltranena, stating that they have pending orders for around 200 aircraft over the next few years.
Background of Volaris and Viva
Post-COVID-19, both airlines have sought to fortify their positions, recognizing the growing national and international markets. VivaAerobus signed a commercial partnership with US-based Allegiant in December 2021, which included a $50 million investment. Although the Mexican Federal Economic Competition Commission (Cofece) approved this partnership without conditions, the US Department of Transportation has put the process on hold.
Volaris’s Recent Developments
In May 2023, Volaris received its first aircraft directly from Airbus’s Mobile, Alabama facility, becoming the first foreign company to do so. Volaris also faced challenges with Pratt & Whitney engine reviews, leading to several grounded aircraft for over a year and a half. In response, Volaris announced a plan to lease foreign aircraft with crew, drawing criticism from pilot unions for violating Mexican law.
The New Airline Group
Grupo Más Vuelos will list on the Mexican (BMV) and US (NYSE) stock exchanges, leveraging Volaris’s current public company structure. Following the announcement, both parties are working to secure approvals from Mexico’s Antitrust Commission, the National Foreign Investment Commission, the US Hart-Scott-Rodino (HSR) antitrust law, and Colombia’s antitrust agency.
Key Operational Insights
- Creation of Grupo Más Vuelos: The controlling entity of Volaris will change its name to Grupo Más Vuelos, S.A.B. de C.V., listed on the NYSE and BMV.
- 50/50 Equal Merger: Shareholders of both companies will combine their stakes, with each party owning 50% of the new holding company.
- Independent Brands: Volaris and Viva will continue operating as separate airlines.
- Cost Savings and Efficiencies: The merger aims to achieve a more robust financial foundation, leading to lower capital costs, better leasing terms for aircraft, and joint purchasing savings.
- Route Network Expansion: The group will offer broader connectivity with 86 destinations and 324 routes.
- Anticipated Completion by 2026: The transaction is subject to standard closing conditions, including shareholder and regulatory approvals.
