Labour vs. Expansion: The Allegiant-Viva Aerobus Joint Venture Stalls Amid Union Backlash and Regulatory Uncertainty

The proposed joint venture between Allegiant Air (NASDAQ: ALGT) and Mexico-based Viva Aerobus has become a high-stakes battleground, pitting U.S. labor unions against corporate ambitions. With the Teamsters Union fiercely opposing the partnership, regulatory hurdles mounting, and operational challenges emerging, investors face a complex calculus of risks and rewards. This article dissects the key factors shaping the venture’s future—and its implications for shareholders.

The Labour Front: A Threat to U.S. Jobs and Wages

The Teamsters Union, representing 1,400 Allegiant pilots, has condemned the joint venture as an “un-American attempt to outsource jobs.” The union argues that the partnership would shift thousands of flights to Mexican crews, who earn roughly one-sixth of their U.S. counterparts’ wages. General President Sean O’Brien and Local 2118’s Captain Josh Alen have framed the move as both a blow to U.S. labor standards and a coercive tactic during ongoing contract negotiations.

The union’s stance is bolstered by allegations that Allegiant’s executives aim to “enrich themselves” by exploiting lower-cost labor. This creates a reputational risk for the airline, which has long marketed itself as a budget-friendly carrier for leisure travelers.

Regulatory Hurdles: Navigating Cross-Border Aviation Challenges

While Mexico’s anti-trust regulator approved the venture in 2022, the U.S. Department of Transportation (DOT) has yet to grant final approval. Key sticking points include:
- Airport Slot Restrictions: Mexico City’s overcrowded international airport struggles with capacity, while the government’s push to shift traffic to the newer Felipe Ángeles Airport has created slot shortages.
- FAA Safety Ratings: Mexico’s “Category 2” rating—a designation reflecting perceived risks in safety oversight—limits flight expansion for U.S. carriers partnering with foreign airlines.
- Political Interference: Viva Aerobus’s CEO has accused the U.S. of politicizing the review, citing parallels to the scrapped Delta-Aeroméxico joint venture.

The DOT’s delay, now entering its fourth year, suggests skepticism toward Allegiant’s ability to address these concerns.

Operational Risks: Viva Aerobus’s Grounded Flights and Capacity Strains

Viva Aerobus, a key partner in the venture, faces its own crises. As of early 2025, 21 aircraft were grounded due to engine issues, forcing reliance on costly “wet leases” (foreign-owned aircraft and crews). This operational instability undermines the venture’s foundational premise: leveraging Viva’s lower costs to expand Allegiant’s routes.

Meanwhile, Mexico’s aviation sector grapples with airport logistics and safety scrutiny. The FAA’s Category 2 rating—a holdover from 2021—remains unresolved, further complicating U.S. regulatory approval.

The Investor’s Dilemma: Weighing Risks Against Reward

For shareholders, the calculus hinges on three variables:
1. Regulatory Approval Timeline: A delayed or denied decision could erode Allegiant’s stock valuation. The company’s shares have fluctuated sharply amid the uncertainty, with a 12% drop in 2024 alone.
2. Labour Disruptions: A union strike or prolonged contract dispute could disrupt operations and revenue.
3. Viva’s Operational Viability: Its grounded fleet and reliance on wet leases signal financial fragility, raising questions about the joint venture’s long-term sustainability.

Conclusion: A High-Risk Gamble with Uncertain Payoffs

The Allegiant-Viva Aerobus venture is a cautionary tale for investors. While the partnership promises cost savings and route expansion, the hurdles are formidable:
- Labour Opposition: The Teamsters have the power to stall or sabotage the deal, with 1,400 pilots’ jobs at stake.
- Regulatory Gridlock: The DOT’s unresolved concerns over Mexico’s aviation infrastructure and safety could push the timeline into 2026 or beyond.
- Operational Red Flags: Viva’s grounded aircraft and FAA constraints highlight execution risks.

For now, the odds favor a prolonged stalemate. Allegiant’s stock has underperformed the S&P 500 by 18% over the past year, reflecting market skepticism. Unless the airline secures a breakthrough in negotiations with both the Teamsters and the DOT—and Viva resolves its operational issues—the venture’s promised rewards may remain out of reach. Investors would be wise to proceed with caution until these critical uncertainties are resolved.