Grupo Viva seeks to turn LCC tide in Latin America

Unveiled by investors Irelandia Aviation and Mexican bus transportation company IAMSA in early October, Grupo Viva was established to expand the Viva brand in Latin America. Both Irelandia and IAMSA have shares in Monterrey-based VivaAerobus and Medellin-based VivaColombia.

Unlike other parts of the world, the rise of the low-cost carrier has been somewhat muted in Latin America. The newly created Grupo Viva hopes to change that.

Unveiled by investors Irelandia Aviation and Mexican bus transportation company IAMSA in early October, Grupo Viva was established to expand the Viva brand in Latin America. Both Irelandia and IAMSA have shares in Monterrey-based VivaAerobus and Medellin-based VivaColombia.

Grupo Viva's chief operating officer Joe Mohan, formerly Copa Airlines' senior vice-president for commercial, tells Flightglobal today that the airline plans to launch a third Viva carrier by end-2015. He declines to specify where this carrier will be based, besides saying that the group is targetting Spanish-speaking countries in the region.

"If you look at the penetration of low-cost carriers in the rest of the world versus Latin America, there is a tremendous opportunity," he says. He points to Irelandia's track record in establishing low-cost carriers in other parts of the world, including Ireland's Ryanair and Singapore's Tiger Airways. Irelandia had also helped to develop Las Vegas-based Allegiant Air.

"We see that same ability to grow in the same fashion... thats why the formation of Grupo Viva happened," says Mohan.

Latin America's low-cost carriers have largely been limited to Mexico, Brazil and to a lesser extent, Colombia with VivaColombia. Besides VivaAerobus, Mexico is home to Interjet and Volaris, which have rapidly expanded in recent years. Brazil boasts Azul, an airline that has become the country's third largest carrier and is now on the verge of launching its first international flights.

But elsewhere, legacy airlines have staked a strong claim. Latin America's dominant airline groups LATAM and Avianca have secured footholds in several markets, while Panama City-based Copa Airlines has leveraged on its hub's position to offer a comprehensive network across the Americas. The substantial markets of Argentina and Venezuela, meanwhile, have long proven problematic to new entrants given protectionist government policies that favour the countries' state-owned carriers.

Grupo Viva believes that opportunities exist for the group in markets dominated by Latin America's legacy airlines. "We offer a truly different business model," says Mohan. "What we've seen in Mexico and Colombia, is that there's the ability to co-exist with the well-established legacy carrier. We will have the opportunity to grow those two airlines further, and find other niches which currently aren't being served."

Previous reports have indicated that Central America could be home to a new Viva carrier, but Mohan would only say that "in general, what we've seen is many countries [in Latin America] with large populations that are underserved right now".

Grupo Viva is in talks with airports and governments, he adds. "We are highly motivated to get this airline up and running by the end of 2015."

The group is also discussing with Airbus to transfer VivaAerobus' order for 52 Airbus A320 family aircraft to the group, to allow it the flexibility to allocate aircraft where it wishes based on market demand. "It makes more sense to diversify the allocation of that aircraft when market conditions change," he says. "If the Mexican economy is slowing down, and if another country offers a higher return, we will reallocate the aircraft."

Mexico's economy grew slower than expected this year, which has put pressure on fares and yields in the domestic market - a development that Mohan references.

VivaAerobus had placed the order for the 52 aircraft, along with 40 additional options, in 2013 to replace and grow its all-Boeing 737 fleet. Mohan says Grupo Viva is keen on accelerating the retirements of the airline's remaining 737s to end-2015 from 2016 originally. As such, the group is also in talks with Airbus to accelerate deliveries of aircraft from the Airbus order. Grupo Viva could also consider leasing A320s to backfill the 737s. VivaAerobus said earlier this year that it expects first deliveries from the second quarter of 2015.

Grupo Viva is not ruling out placing additional orders for aircraft down the road to meet the group's needs. Mohan indicates Viva will likely stick with the A320 going forward. "The simplicity [of having a single type] gives you benefits on the cost side... I would not expect us to have a different fleet type, but never say never."

Besides centralising aircraft orders, the group will likely synergise other activities such as marketing and finance. Grupo Viva will establish its structure in the coming months and will make more executive hires, says Mohan, who is now based in Panama City.

"We will be looking at where that [Grupo Viva] will be incorporated. Panama is one of the options, we will have to look at what's the best for the overall group," he adds, although he acknowledges that Panama has a history of incorporating airlines. Both Copa and Avianca are incorporated in the Central American country."

Regardless of where the group is based, Mohan emphasises that the third Viva airline will be "up and running" in its first year or by end-2015.

"We are very bullish, very optimistic about growing the Viva low-cost model through the region."

(Reproduced from Airline Business with kind permission from our data partner Flightglobal)

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