The world's first ultra-low-cost international airline alliance is on the horizon as 2 budget carriers team up to bring cheap fares between Mexico and the US

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The world's first ultra-low-cost international airline alliance is on the horizon as 2 budget carriers team up to bring cheap fares between Mexico and the US
© Provided by Business Insider Allegiant Air and Viva Aerobus have applied to the US DOT to enter into an alliance. Carlos Yudica/Shutterstock and Viva Aerobus

  • Allegiant Air and Viva Aerobus announced plans to enter into the first ultra-low-cost international alliance.
  • The venture will allow the airlines to expand their networks in the US and Mexico via codesharing.
  • The agreement is pending government approval, but the alliance is planned to start in early 2023.

On Thursday, Las Vegas-based Allegiant Air and Mexico-based Viva Aerobus announced they have filed a joint application with the US Department of Transportation to create an international alliance.

In a press release from Allegiant, the pair shared their plans to enter into a “fully-integrated Commercial Alliance Agreement,” pending permission from the DOT and approval for antitrust immunity.

Antitrust immunity allows carriers in a joint venture to collude on routes included in the agreement, meaning they can modify prices and earn profits, according to the Department of Justice. Currently, there are 14 active antitrust alliances approved by the DOT, like United Airlines and Germany-based Lufthansa; Delta and UK-based Virgin Atlantic; and American and Australia-based Qantas.

Joining as a team, the duo will be able to coordinate their airline operations, including their data systems, loyalty programs, marketing, scheduling, and routes. The alliance will enable Allegiant, which does not currently fly to Mexico, to offer flights to Mexican leisure hotspots.

Meanwhile, Viva Aerobus will be able to add several routes to popular destinations in the US where Allegiant has a strong presence, like Las Vegas and Orlando. According to Allegiant, Viva Aerobus will have access to the Las Vegas-based airline’s distribution network and point-of-sale process.

The world's first ultra-low-cost international airline alliance is on the horizon as 2 budget carriers team up to bring cheap fares between Mexico and the US
© Allegiant Air Allegiant Air and Viva Aerobus’ prospective 5-year route map. Allegiant Air

Allegiant said in a press release that the pair intends the alliance to start in the first quarter of 2023, offering nonstop flights on routes that currently only have connecting service. However, there is one caveat. In May 2021, the Federal Aviation Administration downgraded Mexico to a Category 2 country, meaning airlines cannot create new service or routes, though that is still subject to change by the time the alliance begins. 

According to Allegiant, there are over 250 potential routes that have been identified in the DOT application. Allegiant and Viva Aerobus are two individual ultra-low-cost carriers that, according to Allegiant, cannot independently create the network or meet the same level of customer benefit that the alliance will offer.

“Allegiant and Viva Aerobus operating together will be a tremendous win for consumers seeking affordable, nonstop travel between the US and Mexico,” Allegiant CEO Maurice Gallagher said. “This groundbreaking alliance should reduce fares, stimulate traffic, and ultimately link many new trans-border cities with nonstop service. In short, it will bring meaningful ULCC competition to the US-Mexico market for the first time in history.”

Allegiant said in a statement that it has invested $50 million into Viva Aerobus and Gallagher is planning to join the Mexican carrier’s Board of Directors, subject to the approval of the Mexican Federal Economic Competition Commission.

The world's first ultra-low-cost international airline alliance is on the horizon as 2 budget carriers team up to bring cheap fares between Mexico and the US
© Allegiant Air Allegiant Chairman and CEO Maurice J. Gallagher, Jr. and Viva Aerobus Chief Executive Officer Juan Carlos Zuazua. Allegiant Air

“This unique ULCC alliance will create new non-stop connectivity and more competition, strengthening the immense Hispanic VFR market and offering amazing holiday get-aways for residents of both nations,” Viva Aerobus CEO  Juan Carlos Zuazua said.

According to Allegiant, the agreement between it and Viva Aerobus will, if approved, be the first ultra-low-cost international alliance in the airline industry. There are two low-cost alliances currently operating in the world, including U-Fly, a collection of airlines from Hong Kong, Mainland China, and South Korea, and the Value Alliance that consists of five Asia-Pacific airlines.

Low-cost and ultra-low-cost airlines differ because ULCCs provide fewer amenities and charge more fees than traditional low-cost carriers, therefore offering even lower fares, according to airline pilot Spencer Marker.

Read the original article on Business Insider

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