The merger plans of Mexican airline Viva Aerobus and Las Vegas-based carrier Allegiant are moving forward after receiving regulatory approval in Mexico, but the airlines must still await approval from the US Department of Transportation (DOT) after convincing the authorities of the benefits of the alliance.
The low-cost airlines are seeking antitrust immunity from the DOT in order to finalize their plans before Mexico regains Category 1 air safety status from the US Federal Aviation Administration (FAA).
Antitrust immunity grant allows the participants in a joint venture to collude in the offering of routes that they agree to include in the agreement.
The expedited approval “would allow immediate improvement in utilization and sales of existing service and provide sufficient time to develop plans and introduce new services by the first quarter of 2023, allowing the applicants to launch new routes once Mexico is restored to Category 1,” the airlines told the DOT in a document filed in August.
Originally, the application to the DOT, submitted in December 2021, was expected to receive a resolution in July 2022; but according to the document submitted by the companies to the regulator, their expectation is to receive approval this fall, according to the document.
The airlines are seeking to obtain antitrust immunity, which allowed for further integration between Delta and Aeromexico in 2016.
Antitrust immunity will allow Viva Aerobus and Allegiant to coordinate without restrictions on issues such as pricing, flight scheduling and network planning.
Viva Aerobus says this is key in light of the challenges it has faced in launching cross-border services focused on leisure travel, primarily due to a lack of brand awareness among US consumers.
The airline told the DOT that its Mexican competitors have been able to circumvent this by linking up with other US carriers, such as Delta, and with Aeromexico, and with code-sharing between Volaris and Frontier, both of which have Indigo Partners as investors.
The airlines reported on October 17 that Mexico’s antitrust watchdog COFECE approved the alliance without restrictions, but that it would not proceed if they do not obtain antitrust immunity from the DOT.
“Viva would reallocate its resources to pursue a joint venture or alliance with another non-US airline to serve routes outside the US, to the detriment of US consumers,” the airline told the Mexican regulator in August.
Viva Aerobus agreed in December to a commercial alliance to integrate its operations with US-based Allegiant, which will bring in $50 million of capital for the Mexican carrier.
The two airlines have identified more than 250 potential new non-stop routes to destinations in the two countries.
The alliance would open the door for Allegiant, based in Las Vegas, Nevada, to include Mexican destinations in its offerings, including Cancún, Los Cabos and Puerto Vallarta.
Viva Aerobus will add more routes to those it already has in the US, as Allegiant operates in 130 US cities. The Monterrey-based airline is targeting tourist destinations for its Mexican customers, such as Las Vegas and several cities in Florida.