Colomabia’s Viva, the first ultra-low-cost airline to operate in Brazil

RIO DE JANEIRO – Amidst an adverse scenario of global fuel price hikes and the devaluation of the Brazilian real against the dollar, the Colombian airline Viva begins operations in Brazil this Thursday, June 23.

The debut will be marked by an inaugural flight between Medellín and São Paulo this morning.

It is the first ultra-low-cost company to operate in the country, the same segment as Ryanair in Europe and Spirit in the United States. The ticket prices of these companies usually stay between 25% and 40% below the cost of traditional airlines.

In the low-cost segment, the discount percentage varies between 20% and 25%. Jetblue in the United States and the British EasyJet are examples of low-cost companies.

The destinations of the new flights in Brazil will be Miami, Punta Cana, Cancun, Mexico City, and Colombian beach cities like Cartagena, Santa Marta, and San Andres.

For Miami and Orlando, roundtrip tickets per person start at R$2,300 (US$440), considering the current dollar exchange rate. For Cancun, the prices start at R$3,000, and for Cartagena, at R$1,700.

Company executives estimate that prices are about R$1,000 below traditional airlines, on average.

All flights first pass through Medellin, Colombia. But the company’s executives guarantee this connection lasts less than an hour. The airline will have the capacity to carry 188 passengers per flight.

FAVORABLE TIMING

Initially, Viva will operate three flights a week in the country, on Tuesdays, Thursdays, and Sundays, departing from the São Paulo International Airport. Félix Antelo, president and CEO of Viva, told Exame that the objective is to have daily flights within a year.

The tickets, sold in Brazil since March, a moment in which the omicron variant wave had already cooled down, are being more demanded than expected. “We expected passengers on the connection to Brazil to represent 20% of the flight, but they are representing 50%,” Antelo says.

About the challenging moment of the Brazilian economy, the executive believes that if the focus on reducing costs is maintained, the result will come. “It certainly won’t be in the next nine months, but we believe the scenario can improve in the second half of 2023. We will be positioned to take advantage of it.”

Asked if the airline has been readjusting prices, Antelo says yes, but it still manages to maintain the margin that separates it from traditional companies proportionally. “Everyone has readjusted prices.”

HOW VIVA REDUCES COSTS

There are three reasons the airline can reduce its costs, according to Antelo: standardized and modern fleet, online sales, and customized fares.

Viva’s fleet comprises only one type of aircraft, the Airbus A320neo, with a maximum of one year of operation. This characteristic reduces the costs of training and equipment.

Although the use of each aircraft is maximized in operation (each plane turns 12 hours a day, 25% more than in a traditional company), it is offset by these efficiencies.

Viva’s basic fares allow each passenger to take only one carry-on bag. Every service is charged extra. In addition, tickets are sold mainly over the internet, which also helps to reduce costs. If tickets are purchased at the airport, prices can rise by at least 50%.

HISTORY

Founded ten years ago, the airline operates 45 domestic routes in Colombia and Peru. But its international expansion is recent: it began in 2021, when it opened four new routes: connecting Medellin with Mexico City, Cancun, Orlando, and Bogotá with Mexico City.

This year it launched flights from Medellin to Buenos Aires in Argentina, and Punta Cana, in the Dominican Republic. Now, with the operation in Brazil, it adds 13 international routes. In the coming years, it plans to open 30 new routes, between domestic and international.

In 2016, the airline placed an order for 50 airplanes, which will be delivered by 2025. So far, it has already received almost half of them.

ACQUISITION UNDER APPROVAL IN COLOMBIA

Avianca acquired Viva two months ago, which has just formed the Abra group along with Brazil’s Gol. The operation is still subject to approval by the Colombian competition regulator, a process that, according to the executives, should take between six months and a year.

The Abra group will hold a non-controlling stake but with 100% of the economic interests in the company. In addition to the three airlines, the group also has a convertible debt investment that amounts to a minority stake in Chile’s Sky Airline.

Abra plans to create a kind of corporation that will take care of the evolution of the operating companies through an efficient and combined management of the infrastructure of all of them.

The goal is to have the largest network of complementary routes in the region, with minimal market overlap and a focus, of course, on low-cost operations.

Within the group, the airlines will continue with their activities independently, as well as brands and leadership. The difference will only be a new organization of control.

The estimated potential of the Abra group for the next few years is revenue of US$10 billion, with a fleet expansion that could include 500 aircraft.

When asked if the company should remain in the ultra-low-cost segment under the new shareholder’s management, Antelo believes so but emphasizes that there is still no official announcement about the strategy.

The executive also points out that it is too early to determine how much the acquisition may affect the company’s strategy but believes that the brand’s ‘obsession’ with costs aligns with its strategy.

With information from Exame