Ryanair Bringing Ultra-Budget Airlines to Latin America
Some fliers love ultra-budget carrier Ryanair. The Dublin-based airline has made air travel in Europe as affordable as moving around the continent by bus or train.
Of course, Ryanair has its detractors. There have been plenty of complaints about the aggressive application of a la carte pricing policies. Some of the company’s cost-cutting ideas, such as charging for lavatory use, were just too outrageous to actually put into practice. Some of the other ideas, such as charging for carry-on baggage that is an inch or an ounce over allowable size and flying to remote secondary airports, are actually part of Ryanair's strategy to keep costs low.
Like it or hate it, the same kind of ultra-budget approach that has made Ryanair one of Europe’s largest and most profitable airlines is not going anywhere. In fact, the idea of absolutely-no-frills flying has now spread across the Atlantic.
No-frills flying comes to Latin America
The Ryan family, the driving force behind Ryanair, have invested in other carriers through their company, Irelandia Aviation. They are already major shareholders in two airlines that are based in Latin America.
Mexico’s VivaAerobus, based in Monterrey, and Medellin, Colombia’s VivaColombia are both expanding their domestic operations. They feature the same kind of no-frills service that Ryanair and airlines like Spirit and Allegiant offer.
Declan Ryan, the son of Ryanair’s late founder and namesake Tony Ryan, is the principal investor in a new firm called Grupo Viva. The company will seek to further develop VivaAerobus and VivaColombia while also launching a third airline, VivaCan, which will fly to destinations in Central America.
The other major investor in Grupo Viva is Mexican bus company IAMSA, which also owns a significant stake in VivaAerobus.
New continent, same strategy
Grupo Viva will be based in Panama City, which has become something of a tax haven for multinational businesses. To ensure that Viva has the same strategy that made Ryanair a success, Declan Ryan has brought along current Ryanair partner and COO Tony Davis to act as CEO of Grupo Viva.
The move to the Americas is making headlines, but it is actually not Irelandia’s first adventure on the far side of the Atlantic. The Ryans invested heavily in Las Vegas-based low-cost-carrier Allegiant Air. After it recovered from bankruptcy, Allegiant became one of the U.S.’s most profitable airlines. However, Irelandia is no longer a shareholder. The firm sold its shares during Allegiant's IPO.
The Irishmen will not be looking to quickly flip their Viva shares. They have said that they are in it for the long term with the trio of airlines, and they eventually hope to offer service to all of Central and South America.
The final frontiers for low-cost airlines
The so-called emerging markets are the final frontiers for airlines and their investors. The low cost model is well established in Europe, North America and Asia. New budget airlines have to compete against entrenched and proven brands like Ryanair, AirAsia, Southwest and JetBlue.
Brazil has a couple of well-established players, Gol and Azul Brazilian. However, the rest of Latin America is, more or less, still up for grabs. Mexico’s low-cost carriers, Interjet and Volaris, have a major share of the domestic market, but neither is dominant in the ultra-budget niche that VivaAerobus occupies.
Where else could the low-cost model still be successful? Perhaps Africa will be Irelandia’s next destination. Outside of South Africa, which has several budget airlines, the no-frills marketplace is still in its infancy. In many places, it is completely nonexistent. However, the continent's economies and cities are growing at a fast pace. Demand for cheap but reliable airlines could be on the rise in the very near future.
In the meantime, Grupo Viva is focused on South and Central America. Other low-cost airlines in the region are gearing up for a long battle for no-frills supremacy. Time will tell who makes it to the top of the market, but few people would be willing to bet against any airlines that have the backing of the Ryans.
More by Josh Lew
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