Unlike the consolidated US, Europe's fragmented airline market and abundance of secondary airports are key to Ryanair's success. Ryanair leverages its high passenger volume to negotiate extremely low landing fees with smaller, competing airports, creating a sustainable cost advantage that larger legacy carriers tied to primary hubs cannot replicate.
Volaris and Viva can likely win regulatory approval for their merger by offering a political quid pro quo. By shifting capacity to the former president's underutilized, military-run Felipe Ángeles airport (AIFA), they allow the government to declare its controversial infrastructure project a success, creating a powerful non-economic incentive for approval.
Despite attractive growth, new airlines struggle to enter the Mexican market due to the incumbents' scale. Volaris and Viva, controlling a large portion of domestic capacity, can strategically add flights and slash prices on any route a new entrant attempts to serve. This pricing power ensures any startup would be driven to bankruptcy within months.
US legacy carriers like Delta successfully neutralized low-cost threats (Spirit, Frontier) by introducing "Basic Economy" fares. Leveraging their scale and loyalty programs, they could price-discriminate, matching LCC prices on a fraction of their seats while maintaining premium pricing on the rest, effectively starving competitors of the price-sensitive traffic they relied on.
The proposed merger combines Volaris's owner (Indigo Partners), which secures bulk discounts on Airbus orders, with Viva's owner, who also controls Mexico's largest bus conglomerate. This creates a powerful synergy: a low-cost fleet supplied by the ultimate customer acquisition funnel (the bus network), forming a unique and sustainable competitive moat.
A significant portion of both Volaris's and Viva's fleets are grounded due to a defect in Pratt & Whitney engines. While a financial drag, this has impacted both major low-cost carriers equally because they operate identical fleets. This symmetrical headwind prevents one from gaining a market share advantage while the other is capacity constrained.
The primary growth driver for Mexican airlines like Volaris is not taking share from rivals, but converting travelers from the country's massive long-range bus industry. With 3 billion annual bus passengers, airlines tap a huge, underpenetrated market by offering a superior value proposition on a dollar-per-hour basis, fueling structural demand growth.