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Allegiant is planning a joint-venture with a Mexican budget carrier; Here’s how it will work

Feb. 20, 2022
4 min read
Allegiant is planning a joint-venture with a Mexican budget carrier; Here’s how it will work
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When ultra-low-cost carriers Allegiant and Viva Aerobus announced plans in December to form a joint venture, it was not quite clear what that would look like for customers.

Other joint ventures, like the one between Delta and Aeromexico, or between American and British Airways, see the airlines coordinate on overlapping routes, plan networks around multi-airline connections.

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But Allegiant and Viva Aerobus, a low-cost carrier based in Mexico, have no overlapping routes.

In fact, their networks are remarkably distinct. Allegiant focuses on low-cost flights within the U.S., while Viva offers cheap flights between the U.S. and Mexico, as well as within Mexico itself.

Both airlines intend for their flights to be point-to-point, meaning no stops or connections, and the airlines have absolutely zero overlap on their route maps. That begs the question: why the joint venture?

At the annual Routes Americas conference this week in San Antonio, Viva Aerobus CEO Juan Carlos Zuazua shared a few more details of the coming joint venture (which still must be approved by each country's regulators).

"Once we get approval, we're going to be able to coordinate a lot of our network decisions and our growth decisions between Mexico and the U.S.," Zuazua told TPG after an appearance on a conference panel. "Not only from north to south, but also from south to north."

Allegiant does not currently offer service to Mexico or any other international destination. Even if it began to operate internationally, the difficult logistics of selling tickets in a foreign currency would likely mean it would focus entirely on U.S.-originating passengers at first — similar to Southwest.

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A slide presented by Viva Aerobus CEO Juan Carlos Zuazua at the Routes Americas conference in San Antonio in February 2022. (Photo by David Slotnick/The Points Guy)

Zuazua noted that unlike other joint ventures, including Delta-Aeromexico, the Allegiant-Viva tie-up would not plan for connecting passengers — both airlines would stay true to their point-to-point business models.

"We're not connecting traffic," Zuazua said. "That can be an option, but it's not a priority. Our priority is connecting [markets] on a point-to-point market basis."

Instead, the idea is expanding service and sharing profitability, he said.

"The idea is to create a new market, a market that doesn't exist," Zuazua said, thinking of hypothetical cases. "For example [San Antonio] is a big city, and you can only get service to Cancun. You can't fly to Los Cabos, etc. We could have connectivity, two flights a week, perhaps."

Still, this seems like something that Viva Aerobus could do on its own. If Allegiant doesn't offer connecting passengers from other cities, or start flying to Mexico on its own, what's the point of the partnership? If Allegiant gets to share in the U.S.-Mexico profits, what does Viva get?

In essence, distribution, according to Henry Harteveldt, an airline and travel industry analyst and founder of Atmosphere Research.

Related: Frontier, Spirit announce blockbuster merger that would create giant ultra-low-cost airline

"Allegiant has a massive customer database and Viva will benefit through the co-marketing with Allegiant," Harteveldt said. "For Allegiant, this gives them instant access to one of the most popular leisure destinations for U.S. travelers at very little risk and very little expense."

Allegiant can help sell service to Mexico, operated by Viva, without having to commit aircraft and crews to an international operation. In exchange, it can share in the profits.

"You know Allegiant will be studying the results of this very carefully. And undoubtedly, if they see that this works well, I expect we'll see Allegiant announce its own flights from the U.S. to Mexico," coordinated with Viva, Harteveldt added.

And of course, there's another benefit: this gives Allegiant another tool to compete after the Spirit-Frontier merger, which was announced more than two months after the joint venture with Viva Aerobus.

Featured image by (Photo by David Slotnick/The Points Guy.)
Editorial disclaimer: Opinions expressed here are the author’s alone, not those of any bank, credit card issuer, airline or hotel chain, and have not been reviewed, approved or otherwise endorsed by any of these entities.

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TPG Editor‘s Rating
Card Rating is based on the opinion of TPG‘s editors and is not influenced by the card issuer.
4 / 5
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10XEarn unlimited 10X miles on hotels and rental cars booked through Capital One Travel
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The Capital One Venture X card is one of the best all-round travel credit cards ever launched. Not only is it offering a tremendous welcome bonus, but cardholders can earn tons of miles on everyday spending and receive a 10,000-mile anniversary bonus to boot. Its annual fee is $395, but cardholders can count on up to $300 in statement credits toward travel booked through Capital One Travel each year and other valuable benefits like access to Priority Pass lounges and Capital One’s own growing family of airport lounges.

Pros

  • Excellent welcome offer worth 75,000 miles after you spend $4,000 on purchases in the first three months.
  • Up to $300 in annual travel statement credits toward bookings make through Capital One Travel.
  • 10,000 bonus miles (worth $100 toward travel) each account anniversary.

Cons

  • The $395 annual fee might be expensive for some, but this card’s benefits provide much more value than that.
  • If you don’t travel frequently, this might not be the best card for you.
  • Earn 75,000 bonus miles when you spend $4,000 on purchases in the first 3 months from account opening, equal to $750 in travel
  • Receive up to $300 back annually as statement credits for bookings through Capital One Travel, where you'll get Capital One's best prices on thousands of options
  • Get 10,000 bonus miles (equal to $100 towards travel) every year, starting on your first anniversary
  • Earn unlimited 10X miles on hotels and rental cars booked through Capital One Travel and 5X miles on flights booked through Capital One Travel
  • Earn unlimited 2X miles on all other purchases
  • Unlimited complimentary access for you and two guests to 1,300+ lounges, including Capital One Lounges and the Partner Lounge Network
  • Receive up to a $100 credit for Global Entry or TSA PreCheck®
  • Use your Venture X miles to easily cover travel expenses, including flights, hotels, rental cars and more—you can even transfer your miles to your choice of 15+ travel loyalty programs
  • Named editors' choice for "Best New Credit Card of 2021" by The Points Guy
  • Earn 10 miles per dollar when you book on Turo, the world's largest car sharing marketplace, through May 16, 2023