the Colombian airline Live just finished land in Brazil, with a proposal to tickets up to 40% cheaper than the competition. With routes such as Orlando, Cancún and Punta Cana, the company wants to spread the culture of low-cost aviation in the country – in which the passenger only pays for what he will actually use – in order to consolidate himself here. With its reduced prices, the company promises to affect market rates and plans to reach daily flights from São Paulo in about a year.
“When we arrive at a new route, the prices of tickets in the market drop by an average of 35%. This is what we call the Viva effect”, he said to the Estadão/Broadcast the company’s vice president of operations, Francisco Lalinde.
Viva was founded in 2012 in Colombia by Irelandia Aviation, specializing in the development of low-cost airlines such as Ryanair. In April, the merger of Viva and Avianca into a holding company was announced, an agreement that still needs to be approved by regulatory authorities. Also in May, Brazilian company Gol decided to join Avianca under the same holding company, Abra, which is also awaiting approvals. For now, Viva remains independent.
The company will initially have three weekly flights from Guarulhos Airport (SP). In total, Viva will have the capacity to transport 188 passengers per flight departing from Brazil in A320neo model aircraft. In 2017, the company placed an order for 50 planes with Airbus, of which 23 were delivered and are already in operation. The deadline for receiving all units is until 2025. “This makes Viva’s fleet the most modern in Colombia, the second in South America and the fourth in the world”, says the executive.
According to him, keeping only one model in the fleet reduces costs, since the training for pilots, flight attendants and maintenance technicians is done only once. In the Viva model, the use of the aircraft is around 13 hours a day, while in traditional airlines this use is 8 to 9 hours a day. “We do a lot more flights with the same asset, this lowers the company’s overall costs.”
The SP-Medellin ticket will cost from US$ 269 (round trip). SP-Miami, US$ 449, also round trip. All international routes connect in Medellin (50 minutes). The ticket only includes a small carry-on bag (backpack). “Customers can customize their trip, according to their resources. We want to bring the culture that passengers only need to pay for what they will actually consume”, says Lalinde.
According to Márcio Peppe, partner in the aviation sector at KPMG, the best way to get an effectively “low-cost” fare is to buy all the necessary items in advance, such as luggage and differentiated seating, for example. According to the specialist, in Europe, where this market is quite consolidated, purchasing luggage at the counter of a low-cost airline can cost more than the ticket itself. “Companies in this sector seek to operate with the lowest prices, but the sooner the passenger buys, the more advantage he will have.”
According to Viva, buying items in advance can be up to 60% cheaper than over the counter. Only food items cannot be traded before. “We are going to study the behavior of the Brazilian consumer to perhaps offer this option”, says Lalinde.
In the first year of operation, the airline expects to transport 50,000 passengers in the country. An important share of sales must be direct, but travel agencies must also play an important role in driving demand. The plan is to grow until reaching daily flights departing from São Paulo at the end of the first year.
The Colombian arrives at one of the most challenging moments in the history of the aviation sector, after two hard years of the pandemic. Inflation plagues the country and costs with dollars and aviation kerosene (QAV) are keeping airlines awake at night. For Viva, however, the decision to disembark in Brazil was well calculated.
“We are going to operate in a market with many competitors, but our differential is the business model. As there are no low-costs in Brazil, the potential is enormous”, evaluates Lalinde.
For the KPMG partner, there are examples of low-costs that worked in the world, but that over time had to raise prices. “In Brazil, we don’t have companies that are actually low-cost. We only had airlines with a proposal to offer tickets with more affordable prices or payment in installments”, he recalls.
The Viva executive observes that in terms of QAV, the conditions in the Brazilian market are similar to those in Colombia, which can help with local adaptation. “In 2022, our biggest challenge is fuel, this made us review our growth plan for the year. We are getting ready to go through this turmoil”, says Lalinde.
Despite the potential, the Colombian may face the return of the mandatory baggage allowance, if Congress reverses the presidential veto on the issue. “We knew about this discussion when we decided to come to Brazil, we hope that the government does not interfere in this matter. We know that nothing is free, the ticket will be more expensive to compensate for this cost”, she explains. “We, as a low-cost company, want passengers to be able to define what they need,” she adds.
He points out, however, that the measure would not make the deal unfeasible. “We would have to study a new model, but our plan is to stay.” Peppe points out that the regulatory measure, if approved, would lead to increased costs for all companies. “Still the low-costs would cost less for the consumer.”