Mexican airlines Volaris and Viva Aerobus strike merger agreement

By Natalia Siniawski, David French and Kylie Madry

MEXICO CITY/NEW YORK, Dec 18 (Reuters) – Mexico’s two busiest airlines, Volaris and Viva, said on Thursday they have agreed to merge, creating a new low-cost airline group that would become the country’s largest domestic carrier.

The carriers will continue operating under their existing brands, preserving independent commercial operations while combining ownership at the holding-company level, the companies said in a joint statement, confirming an earlier Reuters exclusive saying a deal was near.

Both airlines exclusively fly Airbus planes and operate similar routes. Their largest domestic competitor is flagship airline Aeromexico.

“We expect the formation of the new airline group will allow us to realize significant growth opportunities for air travel in Mexico,” Volaris Chief Executive Enrique Beltranena said.

The deal would promote low-cost air travel in Mexico by boosting its network and reducing operating costs, which, in turn, would contribute to the country’s economic growth, the pair said in their statement.

The companies expect the deal to close in 2026, with shares remaining listed in Mexico and New York. The deal will need the blessing of antitrust regulators, and will likely attract opposition from Aeromexico, which is currently the largest Mexican carrier for international travel and takes about a third of domestic business, as do Volaris and Viva.

MERGER OF EQUALS

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

Volaris’ largest shareholder is private equity firm Indigo Partners, which also controls U.S. airline Frontier and Chile’s JetSMART. Viva is privately owned and controlled by transportation group IAMSA, headed by transportation magnate Roberto Alcantara.

The new group’s board will be made up of members from both carriers and headed by Alcantara.

The deal comes amid recent years of turbulence for Mexico’s aviation market, including disputes with U.S. regulators. In October, the U.S. Department of Transportation rejected more than a dozen flight routes proposed by Mexican airlines to the U.S., citing disagreements over Mexico’s handling of flight slots at the country’s main capital airport and its decision to move cargo flights to a more distant facility.

In November, Mexican President Claudia Sheinbaum said Mexican airlines would cede some of their slots at the capital airport to their U.S. competitors. 

U.S. operators hold more than half of Mexico’s international market share by passengers carried in the year through October, while Mexican airlines account for just under 30%.

($1 = 17.9913 Mexican pesos)

(Reporting by David French in New York and Natalia Siniawski and Kylie Madry in Mexico City; Additional Reporting by Sabrina Valle; Editing by Lincoln Feast.)