Ultra low-cost carriers Allegiant (ALGT) and Viva Aerobus unveiled a major commercial alliance agreement that they say will “dramatically” expand leisure travel options between the United States and Mexico. 

The two carriers announced on December 1, 2021 that they are planning a wide-ranging cooperation across many areas of operation, including code-sharing, scheduling, marketing and loyalty programs. It would be the first such cooperation for two ultra low-cost carriers (ULCC), they said.  

"Allegiant (ALGT) and Viva Aerobus operating together will be a tremendous win for consumers seeking affordable, nonstop travel between the U.S. and Mexico, and will create rippling economic benefits for hospitality sector business across both nations," said Allegiant (ALGT) chief executive Maury Gallagher.  

"This groundbreaking alliance should reduce fares, stimulate traffic, and ultimately link many new transborder cities with nonstop service. In short, it will bring meaningful ULCC competition to the U.S.-Mexico market for the first time in history." 

Allegiant (ALGT) and Viva Aerobus said they have identified more than 250 potential new routes for the alliance, for which they are requesting full anti-trust immunity. The partnership will lower fares “to make travel more accessible and affordable for residents of both nations”. 

Allegiant (ALGT) doesn’t currently fly to Mexico, although Viva Aerobus does offer some US destinations.  

The planned alliance would give Allegiant (ALGT) the chance to offer routes to vacation destinations in Mexico such as Cancun, Los Lobos and Puerto Vallarta. Viva Aerobus would gain access to Allegiant’s (ALGT) distribution network to help expand its US customer base. The partnership would enable Viva Aerobus to add routes in the United States, such as Las Vegas and cities in Florida.  

The alliance is anticipated to add new transborder routes and nonstop competition where currently only connecting service is available,” the two said in the statement, adding that specific routes will be announced at a later date, once approval has been received. 

If the alliance is approved, Allegiant (ALGT) and Viva Aerobus hope to offer flights under the partnership from the first quarter of 2023.  

As part of the planned deal, Las Vegas-based Allegiant (ALGT) will make an equity investment of $50 million in Viva Aerobus and Allegiant CEO Gallagher will join the board of the Mexican airline.  

The two companies require approval and antitrust immunity for their plans from the US Department of Transport and Mexican competition authorities.  

Viva Aerobus chief executive Juan Carlos Zuazua noted that the US-Mexico market is currently the largest international air travel market in the world and has outperformed during the pandemic due to its strong leisure and visiting friends and relatives (VFR) customer base. 

 "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," Zuazua added. 

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Cancun International Airport received 1.66 million passenger arrivals for the month of September 2021. That’s 4.4% more than September 2019.