By Natalia Siniawski, David French and Kylie Madry
MEXICO CITY/NEW YORK, Dec 18 (Reuters) - Volaris and Viva Aerobus are close to agreeing a merger, sources familiar with the matter said on Thursday, a move that would combine two of Mexico's largest airlines and create a low-cost champion in the country.
The deal is set to be structured as a merger of equals. Both airlines will retain their own brands and hold 50% of a new holding company, said the sources, who spoke on condition of anonymity ahead
of a formal announcement that could come as soon as Thursday.
Volaris closed on Thursday at 14.89 pesos, giving it a market capitalization of around 17.4 billion pesos ($967 million). The company's largest shareholder is private equity firm Indigo Partners, which also controls U.S. airline Frontier and Chile's JetSMART.
Viva is privately owned and controlled by transportation group IAMSA, headed by magnate Roberto Alcantara.
Volaris and Viva did not respond to Reuters' request for comment.
Both airlines exclusively fly Airbus planes and operate similar routes. Their largest domestic competitor is flagship airline Aeromexico.
The deal comes amid recent years of turbulence for Mexico's aviation market, including disputes with U.S. regulators. In October, the U.S. Department of Transportation rejected more than a dozen flight routes proposed by Mexican airlines to the U.S., citing disagreements over Mexico's handling of flight slots at the country's main capital airport and its decision to move cargo flights to a more distant facility.
In November, Mexican President Claudia Sheinbaum said Mexican airlines would cede some of their slots at the capital airport to their U.S. competitors.
U.S. operators hold more than half of Mexico's international market share by passengers carried in the year through October, while Mexican airlines account for just under 30%.
($1 = 17.9913 Mexican pesos)
(Reporting by David French in New York and Natalia Siniawski and Kylie Madry in Mexico City; Additional Reporting by Sabrina Valle; Editing by Lincoln Feast.)
