ANALYSIS: For VivaAerobus, growth begins at home

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Even though Mexico's airlines have made international flights a key plank of their growth in recent years, low-cost carrier VivaAerobus believes that home is where the game should be played.

The Monterrey-based airline has kept a relatively low profile since it began operations in 2007, as fellow low-cost carriers Interjet and Volaris expanded their route networks into the USA. In comparison, VivaAerobus has only one scheduled international route from Monterrey to Houston and operates seasonal flights to Las Vegas.

But if you ask VivaAerobus chief executive Juan Carlos Zuazua, the airline is perfectly content with not growing its footprint in the USA.

"The domestic market delivers the lowest cost solution," he tells Flightglobal. "When you go to the US, you lose a lot of time with aircraft being on the ground longer. You can imagine the inefficiencies."

The airline is evaluating new destinations in the USA, but Zuazua emphasises: "Nothing will deviate from our domestic focus."

VivaAerobus route map

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Source: FlightMaps Analytics

VivaAerobus operates to 26 destinations in Mexico, schedules in Innovata show. Zuazua foresees adding seven more domestic bases on top of the three his airline already has at Monterrey, Mexico City and Cancun airports. He declines to name the locations of the new bases, saying that talks are ongoing with several local governments and airports, but says they will be "all across Mexico, [in] border cities, beaches and inner cities". Zuazua foresees the first new base to be added in 2015

From January to November 2013, VivaAerobus transported 3.4 million domestic passengers, latest available Mexican government statistics show. This puts it in fourth place behind Aeromexico, Interjet and Volaris.

Zuazua says the airline is "very optimistic" about the domestic market, pointing out that even though Mexico's population is around 112 million, only about 28 million passengers fly domestically. "It is still a small business," he says.

The airline believes it has an edge over other low-cost carriers because of its ties to the local bus industry. VivaAerobus was set up as a partnership between Irelandia Aviation and Mexican bus operator Grupo IAMSA. The backing of IAMSA has allowed the airline to sell airfares at Mexican bus stations, a privilege that other airlines do not have, says Zuazua. This has helped the carrier market fares to passengers who are willing to pay a little more to fly instead of spending extra hours on a bus journey.

"For example, a bus passenger arrives at a Mexico City bus station, and he goes and asks for a bus ticket from Mexico City to Monterrey. It's about a 12 and a half hour bus ride, and it's about 80 pesos [$6]," says Zuazua. "The same person selling the bus ticket will ask the passenger, would you like to go by VivaAerobus instead?" The flight time between Mexico City and Monterrey is about an hour and 30 minutes. Promotional fares on the airline's website go for about $47 each way between Mexico City and Monterrey.

VivaAerobus' domestic expansion will be done with its incoming fleet of new Airbus A320s. Last year, the carrier became the single Latin American airline to place the biggest ever Airbus order, when it announced a deal for 52 A320 family aircraft comprising 40 A320neos and 12 current generation A320s. The airline also has an additional 40 options, giving it the flexibility to take up to 92 aircraft, notes Zuazua.

The airline operates Boeing 737s, but will phase them out by mid-2016. VivaAerobus' first aircraft from the Airbus deal will arrive in the second quarter of 2015, but Zuazua says the airline will begin leasing A320s to replace some 737s that it is retiring from this year.