Viva Aerobus and Volaris Merger Approved to Create Mexico's Largest Airline

The creation of a new airline group was sealed with the approval of the merger between Viva Aerobus and Volaris. Shareholders of the airline led by Enrique Beltranena approved the merger proposal by a majority, confirming the plan to create the Grupo Mexicano de Aerolíneas, sources told El Financiero. The formal announcement of the merger approved by shareholders will be made at the close of the market session on this Thursday, March 26, sources added. The merger proposal requires the vote of at least 90% of shareholders. At the extraordinary assembly on Wednesday, March 25, Volaris shareholders approved the merger with Viva Aerobus. Consequently, Viva Aerobus's outstanding shares will be cancelled to be exchanged for stakes in Volaris. As approved, Viva Aerobus shareholders will receive 1,078,528,426 Volaris shares, issued in two series and to be delivered to IAMSA Luchtvaart. Additionally, the merger process approved by shareholders involves issuing 87,448,251 nominative ordinary shares, which will be in circulation and held in treasury. «Once the merger is effective, the treasury shares, together with the shares that constitute the consideration described in the preceding paragraph, will represent 50% of the outstanding share capital of Volaris, on a fully diluted basis, assuming the conversion of such Treasury Shares,» Volaris detailed in the voted proposal. What market share will Grupo Mexicano de Aerolíneas have? If finalized, the merger between Volaris and Viva Aerobus would concentrate around 69% of all passengers transported by Mexican airlines, becoming the predominant player in national aviation. The new company's market share would be more than double that of Grupo Aeroméxico, for example. Meanwhile, if the total volume of passengers traveling to and from Mexico is considered, including U.S., European, Asian, South American, and Canadian carriers, Grupo Mexicano de Aerolíneas' market coverage would be around 44%. Although the global trend in the airline industry is airline mergers to achieve better costs and expand routes, the timing of the Volaris-Viva Aerobus merger announcement is turbulent, as the concentration of players is under regulatory review. Why did Volaris and Viva Aerobus agree to merge? The intention to form Grupo Mexicano de Aerolíneas is guided by three pillars: reinforced unit costs to create value; a stronger financial base; and a platform for the sustainable growth of the new enterprise. «The high compatibility between A320 family fleets, airport infrastructure, technology, systems, and technical capabilities creates significant scale and synergy potential to reinforce unit costs that are already among the lowest in the Americas,» explains the merger voting booklet. The Volaris-Viva Aerobus alliance will allow for the optimization of fleet ownership costs, a lower leverage ratio, and increased liquidity as a result of less costly operating expenses. The combination of these factors, according to the airlines, would enable a strengthened cost structure, with greater control over fares, allowing Volaris and Viva to sustainably increase their volumes and expand ultra-low-cost offerings in line with demand.