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Mexico: crowded skies

Monday, February 3, 2014

VivaAerobus, the smallest of Mexico's top main airlines, will next week make an initial offering of shares to the public, among bullish prospects for the country’s aviation industry.

The company’s offering, scheduled for February 11 in Mexico’s stock market, is expected to raise more than $150 million.

VivaAerobus aims to leapfrog rivals Interjet (only in Spanish) and Volaris, with plans to triple its fleet within eight years, including orders for 52 Airbus A320 jets, at a cost of $5.1 billion.

The order would be the largest ever in Latin America for aircraft.

All three companies compete in the low-cost segment, Mexico’s biggest.

VivaAerobus last year carried close to 4 million passengers, compared to 7 million for each of Interjet and Volaris.

The nation's legacy airline, Aeroméxico, carried 15 million passengers.

But Aeromexico focuses on a market segment with greater purchasing power. It is also the only Mexican carrier, with an extensive network of international routes.

That leaves the other three companies to compete for the low-cost segment.

VivaAerobus’ pedigree includes a 49 percent stake held by the family of Tony Ryan, the late Irish tycoon, whose Ryanair dominates low-cost air travel in Europe.

Control of the company is in the hands of Roberto Alcántara, whose land transportation companies dominate Mexican intercity coach services.

Monterrrey-based VivaAerobus, which launched in 2006, operates 50 routes, all but one within Mexico.

For its part, Interjet is owned by Miguel Alemán, has pledged to invest more than $4 billion, including 20 Russian-built Sukhoi 100 aircraft, four which have already been delivered.

The son of a former Mexican president, Alemán has extensive contacts among the nation's political and business elite.

Volaris is controlled by Discovery Americas 1 and Indigo, private-capital funds, based in the United States.

In addition, a 25 percent stake is held by Avianca, Latin America’s second-biggest airline, based in Bogota.

An initial public offering of stock last September raised $350 million for Volaris, which will defray some of the cost of a proposed purchase of 44 Airbus units, likewise A320s.

All three low-cost airlines are gambling on continued growth in their segment of the market.

In recent years, airline traffic in Mexico has risen by more than 10 percent annually.