Mexican And U.S. Budget Operators Jump-Start Consolidations

Mexican ultra-low-cost operators Viva and Volaris are celebrating 20 years of operations in 2026 by attempting a merger that would be a defining moment for the sector in Latin America.

Across the border in the U.S., Allegiant and Sun Country Airlines are poised to jump-start consolidation among ultra-low-cost carriers (ULCC) after budget rivals Spirit Airlines, Frontier Airlines and JetBlue Airways failed to push through their own proposed strategic transactions in recent years.

• Viva and Volaris attempt to write a new chapter in Mexican aviation history
• Allegiant and Sun Country combine as Spirit restructures 

For nearly two decades, Viva and Volaris have operated on similar business models—keeping costs under control to stimulate demand from bus travelers. In a recent investor presentation, Volaris calculated that the number of Mexico’s annual domestic airline passengers increased to 120 million in 2024 from 45 million in 2006, “though buses remain the predominant form of low-cost transportation.”

Given the continued strength of bus travel, significant upside remains for air travel in Mexico, where there are 0.5 air trips per capita. Volaris suggested that with Turkey’s 1.3 trips per capita as a benchmark, Mexico’s air travel market has potential to be about 150% larger than current levels.

Combining resources could help both Volaris and Viva capitalize on Mexico’s potential much more quickly while strengthening the merged company’s financial position. The airlines have a combined fleet of roughly 251 Airbus narrowbodies. Viva CEO Juan Carlos Zuazua has identified a sizable opportunity in reducing aircraft ownership, “which represents the largest expense, exceeding even fuel,” he noted after the merger announcement in December. The airlines say enhanced economies of scale could support the lowest unit costs excluding fuel among carriers in the Americas.

Each carrier plans to retain their respective brands. Their combined network encompasses 86 destinations, 324 routes and 991 daily flights, Volaris says. In addition to the vast number of routes and daily flights, Viva and Volaris combined represent 63% of Mexico’s departing frequencies, according to CAPA - Centre for Aviation. Viva’s share is 33%, followed by Aeromexico at 31% and Volaris at 30%.

Shortly after Viva and Volaris announced their intent to merge, Mexican President Claudia Sheinbaum made positive comments about the potential tie-up. The deal “has to be within the framework of the law, but it is a good thing that investment is increasing and Mexican companies in the aeronautics industry are growing,” Sheinbaum said, as Reuters reported. “It is very good news, as it will boost tourism, and there will be more competition with other domestic and foreign airlines.”

Consolidation among ULCCs in Mexico has happened much earlier in their evolution than in the U.S. There, Frontier and JetBlue each attempted to combine with Spirit, which is now reorganizing under Chapter 11 for the second time in a year. All of those carriers are adding or bolstering premium offerings under their go-forward plans.

But similar to their U.S. peers, Viva and Volaris are adapting to changing passenger preferences. Holger Blankenstein, executive vice president for commercial and operations at Volaris, explained last year that as its passenger base expands, the company is working to position itself as “the airline of choice not only to our core [visiting friends and relatives] base, but for all customer segments traveling from our core cities across our network in Mexico’s domestic markets.”

Volaris’ co-branded credit card is the largest of any industry in Mexico, Blankenstein noted. The company is also ramping up marketing of its Premium Plus offering, which features a blocked middle seat in the first two rows of the aircraft as well as priority boarding and overhead bin access.

Viva offers Priority Seats, which have extra pitch and recline and include priority boarding and disembarking.

The potential merger follows more than a decade of consolidation in Latin America between Avianca and TACA as well as between LAN and TAM into LATAM. More recently, the shareholders of GOL and Avianca have formed the Abra Group and are working to add Chile’s Sky Airline to the portfolio.

Latin America’s other large ULCC group, JetSMART—with affiliates in Argentina, Chile, Colombia and Peru—sees ample opportunities in the region. CEO Estuardo Ortiz told CAPA TV in September that close to 14 carriers ceased operations during the last five years amid consolidation. That enabled JetSMART to launch domestic operations in Colombia and Peru, he said, “and that’s why we have grown in the last three years almost threefold.”

It is not clear if more consolidation is in the cards for Latin America, but JetSMART has proven to be opportunistic lately. In early 2023, the group engaged in due diligence to purchase struggling Colombian ULCC Ultra Air but opted to terminate that process. Ultra ceased operations in March of that year (AW&ST March 13-26, 2023, p. 50).

Meanwhile, in the U.S., Allegiant’s proposed acquisition of Sun Country is expected to withstand scrutiny from the Trump administration. The two carriers have almost no route overlap, which could simplify regulatory review. Under terms of the transaction, announced less than two weeks into 2026, Sun Country’s brand would be combined under Allegiant’s in an acquisition valued at $1.5 billion (AW&ST Jan. 26-Feb. 8, p. 60). Related filings for antitrust review and a shareholder vote are expected “within the coming weeks,” executives said in early February. The deal is expected to close in the second half of the year, pending necessary approvals.

As the balance sheets of other U.S. value airlines continue to struggle in the post-COVID-19 pandemic years, the question may not be if another merger will be proposed, but when.

For Spirit, $50 million in debtor-in-possession funding is awaiting its next steps—progress either on a stand-alone plan or a strategic transaction. Five months into its second restructuring, the carrier has a leaner operation due to efforts to cull both its fleet and network. The ULCC most recently moved to transfer its four leased gates at Chicago’s O’Hare International Airport to United Airlines and American Airlines for a combined $60.2 million. Court-approved measures have thus far enabled Spirit to exit 14 airports and reject leases for more than 80 aircraft. It is now seeking bankruptcy court approval to auction 20 Airbus A320ceo-family aircraft, with an initial bid from CSDS Asset Management of $533.5 million.

Network optimization remains “a core pillar” in its work “to realize substantial operational improvements and position Spirit for long-term growth,” a Feb. 3 court filing states. But the ULCC is still recording operating margins in the double-digit negatives, according to recent monthly operating reports. As time ticks by, what is the plan?

“I suspect that it’s more a question of opportunism [than] it is of strategy,” says Craig Jenks, president of consultancy Airline/Aircraft Projects Inc. “A company that survived as long as they did did not do it 100% by charging the ‘lowest fare.’ They had certain embedded strengths—and those are the strengths you’re going to capitalize on. Those are the strengths that people are going to be interested in.”

Spirit’s slots and embedded market presence in Fort Lauderdale, Florida, are at the top of that list, Jenks says, as the primary hub could give carriers with network gaps a much-needed foothold for connections into Latin America and the Caribbean to compete against American Airlines’ stronghold in Miami. Spirit’s remaining fleet of Airbus A320- and A320neo-family aircraft is also valuable, whether for parting out or for carriers that had pushed out retirements of older airframes.

The A321neos would be the most likely to find new homes, possibly with Delta Air Lines or Frontier. Delta, prioritizing fleet growth and renewal, is still flying 101 ex-Northwest Airlines A320-family aircraft—56 A319s and 45 A320s, Aviation Week’s Fleet Discovery database shows. The A321neos may also be attractive to Alaska Air Group, which is weighing doubling or eliminating the type in Hawaiian Airlines’ fleet, post-merger.

“I think what everyone is probably doing, including themselves, is inventorying . . . what can be monetized and what is going to be useful for someone else,” Jenks says. As for who may act on it, “Quite often, it’s not who you think,” he notes.

Budget rival Frontier has been an on-again-off-again interested party since 2022, when it sought to acquire Spirit for roughly $3 billion before JetBlue unseated it in a bidding war.

After undergoing a CEO transition at the end of 2025, the Denver-based ULCC is focused on strategic shifts to return it to sustained profitability. Frontier plans to achieve that through a rightsizing of the fleet, cost cutting, reliability improvements and loyalty program growth.

The carrier’s capacity plans for the year ahead reflect a “real improvement” in the revenue environment, new CEO James Dempsey said, and a more disciplined environment on the heels of significant reductions from budget rival Spirit.

“We are very focused on bringing the airline back to sustained profitability,” Dempsey told investors. “I’ve been given a clear mandate to change the business and bring that back.”

In some ways, at the beginning of 2026, both Frontier and Spirit find themselves in the exact same position that they have been in for the last few years—attempting to prove their longevity in the U.S. marketplace.