Ryanair co-founder Declan Ryan has reached a deal to sell his company Irelandia Aviation's 49 per cent stake in budget Mexican carrier VivaAerobus to majority stakeholder IAMSA in order to focus on expansion in central and South America.
Mr Ryan said the deal for IAMSA to take full control of the Mexican carrier was awaiting regulatory approval. He declined to discuss financial details, but a newspaper report in recent weeks suggested Irelandia would sell the stake for some $250 million (€226 million), five times its initial investment.
VivaAerobus declined immediate comment.
"We've been in Mexico 10 years, we adore the country," said Mr Ryan, who is managing partner of Irelandia. "But we think the new frontier is the whole of central and South America, and that's what we're concentrating on . . . to be frank, the Viva brand could be throughout South America."
Irelandia owns other brands including Allegiant in the US and Tiger Airways in Asia. Earlier this year, it took majority control of VivaColombia, and Mr Ryan singled out Colombia as a source of strong growth.
Double-digit growth
“Our focus for the next 20 years is the region down here,” Mr Ryan said. “I think the market’s growing. We can do double-digit growth in passenger volume, and then some.”
He declined to spell out Irelandia’s total expected investment, but said setting up a low-cost airline typically cost $50 million, and “in time, we could see five” Viva airlines in the region. The VivaAir holding company could list in the US in two to three years, he said.
Latin America – with its growing middle class, vast distances and high-cost legacy carriers – is ripe for competition in the airline business. Mr Ryan said he had “no doubt the Viva brand can go to 100 airports. It won’t be as big as Ryanair because the access to disposable income is not the same, but it’s still sizable. One rule of thumb is that if you can afford a handset, you can afford a low-cost airfare.”
While Colombia will be a hub, another key focus will be Argentina, which Mr Ryan described as "on the radar". However, he did not see a Brazil-based airline because it was too costly to set up there and Brazil was "not hugely welcoming" for foreign airlines.
"We would love to go to Venezuela in time, when things settle down," he said. He also saw opportunities in Costa Rica and Panama.
Mexico has reached a new open skies agreement with the US, which is expected to multiply routes and competition. Mr Ryan said that 10 years ago, when VivaAerobus started, there were 16 airlines in Mexico and now there were only four, but that fares had dropped sharply. Volaris, another low-cost carrier, successfully floated on the stock market in 2013.
– Copyright The Financial Times Limited 2016