VivaAerobus Goes For Revenue Over Simplicity
It's still a ULCC but Mexico's third-largest airline wants to be more creative with its commercial approach.
When Irelandia Aviation, the investment firm founded by Declan Ryan (of Ryanair fame), held a 49 percent stake in Mexico's VivaAerobus, its CEO Juan Carlos Zuazua followed the standard low-cost playbook. He focused on simplicity and efficiency, prioritizing it more than revenue generation.
But Irelandia sold its stake in 2016, giving full control of VivaAerobus to its partner, Groupo IAMSA, the Mexican bus company. And Zuazua, who took over VivaAerobus in 2010, began to see his role slightly differently. VivaAerobus remains a ultra-low-cost carrier1, but it’s no longer always hewing to the Irelandia or Indigo Partners vision of what a ULCC must be. If there’s money to be made, Zuazua will take a look, even if it adds complexity or cost.
Zuazua is one of my subscribers, so he knows that I generally cheer on airlines with the simplest approaches. But in an interview last week, he reminded me that times change, and he stressed it doesn’t make sense for the Mexican upstart to follow a decades-old playbook created by Southwest and refined by Ryanair. Viva still adheres to many traditional rules, such as using the biggest aircraft (which increasingly are 240-seat A321neos), increasing utilization, deploying flight crews efficiently, and scheduling short turnarounds for airplanes. But on the commercial side, he said, ULCCs don’t need such rigidity, particularly the privately held ones that won’t be punished by investment analysts if CASM rises slightly from one quarter to the next.2
"Ryanair has been breaking some of the pages of the LCC bible," he said. "You need to be constantly creative in how you bring in new revenue sources."
Over the past three years, Viva has been embracing complexity, such as its proposed joint venture with U.S. airline Allegiant Air, a codeshare agreement with Iberia, a willingness to sell connecting itineraries, and soon, a complicated scheme to create a marketplace that essentially will allow passengers to trade tickets.
I wanted to know more about these initiatives and why they make sense for Viva. Read on to learn more.