Juan Carlos Zuazua Cosio, CEO of Viva Aerobus
On Thursday, January 13th I had the privilege to interview Juan Carlos Zuazua Cosio. Mr. Zuazua is currently the Chief Executive Officer of Viva Aerobus. He has over 15 years of experience in the airline industry in roles ranging from Chief Commercial Officer to Public and Government Relations Manager with Viva Aerobus. This interview has been edited for length and clarity.
Joshua Kupietzky: How did you start your career in the aviation industry?
Juan Carlos Zuazua: I started by accident, Joshua. I was in the restaurant bar industry a little bit more than 15 years ago. I was doing my master's degree, and I had some spare time. I needed to do a study of the aviation industry, which I didn't know anything about apart from being a passenger every now and then. I was living in Monterrey [Mexico], and most of the airlines were in Mexico City. And the next day I opened the paper and saw a news article in which the Ryan family was in potential discussions to start a base of what they call a low cost carrier. So I contacted the government and told them to point me to these people. And I sent him an email and told him, if you need an extra pair of hands, I can help out. In the early days I started doing some work on the government side in public relations, and then in 2008 I was appointed Chief Commercial Officer. We were a very small airline—four aircraft back then. And then in 2010 I was promoted to Chief Executive Officer, right at age 29. So it's been a hell of a journey. Very exciting times. And I'm very happy to be here.
JK: VivaAerobus was the first airline in the Americas to resume 100% of the operating capacity during the pandemic. You have dramatically increased your market share in Mexico and recently created a fully-integrated Commercial Alliance Agreement with Allegiant that will expand travel options between Mexico and the United States. And now the airline is carrying more passengers than you did in 2019, and the airline has become profitable in 2021. All of this took place during a pandemic, when most airlines are just trying to stay afloat, but in VivaAerobus's case, 2021 has been a great year. What have you been able to do that airlines all over the world have struggled with?
JCZ: Good question. It's been a hell of a ride during this pandemic. In April 2020, when COVID hit in Mexico, demand fell 95%—we pretty much closed our business. We managed to recover full capacity by October or November of that year. And in 2021 we ended up transporting 27% more passengers than in 2019. I believe we did this thanks to several things: Number one, we protected our people. We work together with our people, and we never left anyone behind. We were very clear to everyone that we had no government subsidy, no government intervention, no government support. We were on our own. We needed to be bold, be different, be creative, and protect ourselves. Every single staff of Viva took a significant pay cut during the pandemic. But we knew that if we worked together, as a team, we would manage to bring the customer back. We'd be back stronger. Second: we worked together with our passengers defining the new reality, a new way of flying through COVID. We worked very closely with the airports and all the different vendors, and ensured we could bring the trust back from our passengers by implementing different initiatives. It is very important we never shut down as a business, which was different from other countries in Latin America. Therefore, we were able to stimulate demand early on and communicate the right messages to our passengers to ensure that they're able to fly again very fast. And lastly, I think it is very important in turbulent times to keep agility—be very nimble in decision making on many fronts, in cost management, capacity management, communicating with your people, and implementing new initiatives. I can tell you that it has been two very challenging years, but two years in which people have pretty much gone the extra mile, have been extremely creative, and have been extremely positive towards facing this crisis. So we are very proud of our people.
JK: You just touched on government subsidizing airlines. Unlike the United States, the government of Mexico did not subsidize airlines. Would you say not having any government support incentivised VivaAerobus to be more successful and attract as many customers as possible during the pandemic?
JCZ: I think number one, it incentivised us—not only me, but also our more than 3,000 employees because we knew that we were on our own. We didn't have any rescue net in which we knew that our salaries were going to get paid whatever happens, as happened in the US and in many other countries. So that created some sense of urgency in doing things outside the box, in going the extra mile, and in making sure we were ready. During the first days of the pandemic, our line technicians assured the aircraft were spot on. Even though the fleet was flying very few hours, our maintenance technicians ensured to have the aircraft available whenever they were required. Our crews, even though they were in their homes, were ready to come back. We kept training, we kept them updated on everything to ensure we were ready to come back. And of course all the management team was very productively working on different initiatives to ensure we would stimulate demand faster than others. So yes, I think that the lack of government stimulus or subsidy helped us act with a sense of urgency, to make sure we came out faster and came out stronger.
JK: A few months ago, VivaAerobus announced a Commercial Alliance Agreement with Allegiant, which will expand options for nonstop leisure air travel between the United States and Mexico. How will this help VivaAerobus in the long term? And do you think VivaAerobus will join one of the main three alliances in the future?
JCZ: Good question. So, number one: we will not join those alliances, those alliances are between legacy airlines. I believe that what makes our prospective alliance unique is it is the first time two ultra low cost carriers formed a joint venture, in which we're going to be offering a nonstop direct service between Mexico and the US to plenty of new passengers and hundreds of new markets. So the beauty of this alliance is that we're going to be able to connect a lot of small and midsize cities in the US to all the beautiful leisure destinations in Mexico, flying nonstop instead of flying big hubs and then connecting. We're going to be able to move you direct from many of the regions in the US. We're going to be doing exactly the same from the US to Mexico and also complementing our networks, our big hubs in either Mexico or in the US. And in the second stage, we're going to be able to connect our flights, meaning for example, a passenger we originating in Mexico City flying to Las Vegas, which is a big Allegiant hub—they're going to be able to connect from Las Vegas to another destination, let's say Portland or vice versa. If somebody could come from the US into Monterrey, Mexico City and Allegiant customers are gonna be able to connect to someplace else. So I think there's a lot of benefits. The information is public, you can go into DOD, you can see the JV [Joint Venture] application file on the consumer benefits we foresee. We will not compete today, so they is not going to be a market consolidation; it is going to be the opposite—we're going to create new connectivity, a new set of destinations, and most importantly, lower fares to consumers.
JK: Is there a plan for this alliance to expand to more ultra low cost carriers in the US, Mexico or South America?
JCZ: Absolutely. I mean, in the future we'd like to expand and invite others to join. We will certainly evaluate that. The reason why we started with this alliance is because the Mexico-US international market, during 2021, was the biggest international market in the world in terms of passengers per annum. Pre-COVID it was 31 million passengers per annum, of which half were leisure customers coming from the US to Mexican leisure destinations. It has traditionally been one of the top three international markets. So that's the reason why we are so bullish on this opportunity. And we're talking about alternating these benefits to our consumers.
JK: VivaAerobus, like all carriers, has retooled its network since the start of the pandemic. What has worked and what hasn't? Do you see your network targeting more business or VFR (visiting family and relatives) travelers as you continue to emerge from the pandemic? What lessons has the pandemic taught you about its network and the mix of leisure and business travel?
JCZ: We faced a similar crisis in 2009—we had the H1N1 influenza crisis, which was also a pandemic, which started in Mexico. What we have seen in this type of crisis is that the VFR and leisure segments are the more robust and resilient markets that can rebound much faster. Of course the business passengers take a little bit of time to recover, given that we are an ultra ULCC [ultra low cost carrier], more than 80% of our business are on the initial VFR side and those segments are performing extremely well during the pandemic. And we foresee that those continue to perform very well. We saw a big shift in what we call the ‘blisure,’ business and leisure people—people flying for business and staying remotely, moving their home office to the beach office in some other place or commuting every now and then to an alternate place to work. So that's a trend that I believe is gonna stay, given that most corporations will never return 100% to normal office—most of them will leave a big component of working from home. So that creates a unique opportunity for somebody to try and work remotely every couple of weeks from a nearby destination by taking a short haul, very, very affordable flight with VivaAerobus. We saw that a lot of people working from the beaches are working from different destinations away from the big cities. And that's a trend that in our view will continue. Business travel in Mexico has recovered to 2019 levels, particularly on the small and medium SME section. That's where we focus most of our efforts;some of the big corporations still are not doing the amount of travel they were doing before, but the small and medium enterprises are traveling back on. So look, leisure and VFR are the two key segments for our business, but I think the smaller and medium companies are back on this year too.
JK: How has the continued spread of the Omicron variant changed VivaAerobus’s calculus for 2022? Have you scaled back flying or destinations? When do you think the recovery will be on more stable footing?
JCZ: Yeah, good question Joshua. This is our fourth variant or fourth wave of COVID. The second way was in January and February last year; there was a lot of uncertainty. Governments were shutting down. We didn't know that much about COVID—both governments and passengers. There was a lot of uncertainty, plus the lack of vaccines, right? Then we got the Delta variant of course, with the vaccines already in process of rolling out, and now the Omicron variant. Yes, the Omicron variant is clearly having an impact on public perception. But I think, in Mexico similar to the US, there's a high percentage of vaccinated people. What's happening right now is if people get the Omicron variant they go home for a couple of days and then they're back to work or back to their activities in five days as the CDC guidelines dictate, instead of 15 days as in the past. Plus, the government is not putting more restrictions; they're not shutting down restaurants or shutting down economical activity in Mexico. So we don't see a big capacity reduction as happened in previous waves—particularly the second wave, Delta, didn't have that big of an impact as the second or the first one, which pretty much shut things down.
JK: I know that the low-cost airline market has been very successful in Mexico, particularly competing with the buses. Are the buses still VivaAerobus's largest competition, or are Volaris and Interjet and the other international carriers now becoming your primary competition?
JCZ: Number one, let me remind you that the Mexican aviation market is still very small compared to the US right. It's only 53 million domestic passengers a year and almost 48 million international passengers a year—about 100 million passengers both domestic and international—compared to the 1 billion passengers in the US. In Mexico, we have a very big bus industry. Three billion bus one-way journeys a year in Mexico; it is a huge industry that would be our biggest competitor. We are majority owned by the biggest bus company in Mexico. We compete with many of the bus brands and even sister companies in the group. But most importantly, I don't believe it's a market share game in Mexico. It is more about a market growth game, even though we compete head to head with Volaris and Aeromexico, along with other smaller carriers. We have over 120 routes, and we compete with buses pretty much on 115 of them. We compete with a couple of ferries in the water in the Baja Peninsula. And we compete with some airlines in 70% of our markets. So I would say the bus is the biggest competitor. But really we are growing the market.ltra low cost carriers in Mexico like Viva—we have demonstrated we can stimulate demand. We can stimulate demand with lower fares and we can grow the market profitably. So that's what we're doing.
JK: Recently, we have seen ultra low-cost carriers in South and Central America become very strong in their local markets. And now carriers are looking outside of their home markets which has created a 'boom' in the ultra low-cost sector. Are you looking at expanding your operations or opening new operations throughout North and Central America, and how far south in South America would you consider going?
JCZ: Number one: our biggest growth opportunity is still domestic, right in Mexico. It's one of the biggest countries in the region, with a growing middle class, and growing population. We have the lowest trips per capita penetration in the region, so there's still a lot of opportunity to grow domestically. Second to that, I will say international growth will probably be the US, and that's a reason why we did the Allegiant alliance. That's where the biggest international markets for Mexico are naturally. We're neighbors, there’s great opportunities and great scenery.But most importantly, people between Mexico and the US are so tied together on the leisure, VFR, and business sides. Second to that, I would say international growth in the south. We started expansion into Colombia—a couple of routes. Now we have served Bogotá, Mexico City, and Bogota Cancun. We foresee we will continue our growth between Mexico and Colombia. We have an interline agreement with VivaAir in Colombia, an ex-sister company we had, where we’re still very good friends. And there’s a lot of potential for Central America.I mean, pretty much everything there is within a five hour flight radius, that's something we will fly. Canada would also be something; we do some charters to Canada every now and then. But our focus is pretty much in North America, Central America and the northern part of South America.
JK: With JetBlue recently flying across the Atlantic using a single-aisle aircraft, have you looked into flying one of your A321 Neos across the Atlantic?
JCZ: Not at all. We're an ultra low cost carrier with maximum density. We have 240 seats on an A321. So we will do a maximum of five hour flights. Our average flight length is 1 hour and 30 minutes, or a little bit less. So we will focus on charter flights.
JK: VivaAerobus has a large presence in Mexico City, and there has been talk about a three airport system. Are you in favor of this, and how will you make sure that your airline and travelers will have a good experience and will be successful with the new airport system?
JCZ: We already have two operating and the third one is opening in a couple of months. So I can tell you that multiple airports systems work. We've seen it in London where you have five. You have Heathrow, the main one, then you have Gatwick, Luton, London City, and Stansted. You have New York and you have many other hubs. In Mexico City the greater area has over 30 million in population, so there's a critical demand there. I believe three airports can certainly work. What is a key enabler for those to work is good public transportation in and out the airports. So you can have Mexico City Airport, which is the equivalent to the London City Airport, right in the middle of the city. With the subway, you can get into Mexico City Airport—very convenient, well located, but it's already saturated. And then you have Toluca, which is like 30 miles from the city center, and then you have Santa Lucia, which is pretty much 30 miles also, which is a new airport. Those two airports ground connectivity is being built. There is a train to Toluca being built which is going to have stops nearby the airport. I think that's going to be critical for passengers to connect in and out easily from the airport. We will be operating from two of the airports, and potentially three as you see some some carriers do in Europe. Since we do point to point travel, we will connect passengers with these airports. So you're going to be able to take, for example, our route into Monterey from Santa Lucia, which is a new airport. You're going to be able to fly from Monterey to Santa Lucia Airport or from Monterey to Mexico City Airport, so I think it will work with the right connectivity.
JK: VivaAerobus only operates the aircrafts from the Airbus A320 family. How did you choose the Airbus A320 family instead of the Boeing 737 or A220?
JCZ: We were a Boeing 737 classic operator for many years, very happy operating that aircraft. It was a power horse, but I mean eventually we needed to make an aircraft decision. Back then we analyzed the three programs, we analyzed the A320 neo [new engine option], we analyzed the 737 800 NG [next generation], and we also analyzed back then the Bombardier C Series 300. We spend a lot of time working with Bombardier, Airbus, and Boeing. We ended up deciding to select the Airbus A320. We placed a big order back then—55 aircraft—and we increased our order with A321 neos. Three years later, we have been very happy. In the end we see ourselves as an ultra low cost carrier. Single class configuration, a high utilization, getting the maximum productivity out of the fleet. So we are very happy with the current fleet we have.
JK: We started by talking about your background in the aviation industry. What advice do you have for young people trying to start a career in the aviation industry?
JCZ: Interesting question. I'll recommend three things not only for people who want to work in aviation, but for everyone. People say when you get into this industry, it is very hard to get out. I recommend to people,regardless of their passion, to stay hungry, stay healthy and stay positive. On the hungry side, it is very important to continue working on your intellectual side and seeing how you can continue learning in school or out of school—reading or looking for those passions in learning a second language, learning to play a new musical instrument, getting around with people you admire, and getting a mentor.Overall, learning is a good thing. On the positive side, I think it's also important for the balance of life—expressing gratitude. Everyday I credit the balance, I practice some mediation in the morning. One of the values in Viva is to have fun, and try to enjoy life as much as possible, spending time with family and friends as often as you can. And hanging around with positive people overall. And stay healthy. Most of all after this crisis, I think it's important for all, not only getting a good balance in life, but also getting good routines. Positive routines, right? You need to have a healthy body and a healthy mind. So stay healthy, stay hungry, and stay positive.
