September 19, 2023
The Country’s Low Fare Carriers Find Themselves Caught in a Struggle with No Easy Route to Maintain Profitability
In a free and open market, Aeromexico, Volaris and Viva Aerobus would have no problem being profitable selling tickets in the post-pandemic recovery. But they don’t exist in a vacuum. They have the U.S. and Mexican governments to contend with.
First in May, the U.S. FAA lowered Mexico’s safety rating to Category 2, which barred the country’s airlines from expanding flights to the U.S. or building partnerships with U.S. carriers. (Which shut down Viva Aerobus’ Joint Venture with Allegiant Air.) The other low-cost carriers were hit hard as well, since taking advantage of increased demand would require adding additional flights to U.S. markets.
The whole situation is taking place in the middle of an Airport War, created by Mexican President Lopez Obrador. His administration is avoiding making upgrades to the popular Mexico City Benito Juárez International Airport (AICM), which is located in the center of the city. Opened in 1931, AICM is Mexico’s and Latin America’s busiest airport and the 16th-busiest in the world. On a typical day, more than 136,000 passengers pass through the airport to and from more than 100 destinations on four continents. In 2021, the airport handled 36,056,614 passengers.
Instead of making much needed improvements to the 90-year-old facility, Obrador opened Felipe Ángeles International Airport (AIFA) thirty miles Northeast of Mexico City at the site of the Santa Lucía Military Base. Owned by the Mexican government, AIFA will also be the home to the new state-owned Mexicana Airlines. Created by Obrador as a way to entice flyers to use the new airport, opponents claim there is no way the commercial carriers can compete with the new airline.
To further ensure the success of the new airport, Obrador is cutting the number of flights allowed at Mexico City International Airport (AICM). Beginning in January, aircraft movements, (together a takeoff and landing is considered one movement) will be limited to 43 per hour, a more than 30% drop from the 61 movements an hour allowed in 2022. This follows Obrador’s banning of cargo flights at AICM. To IATA’s credit, the trade organization did protest these last two moves, and was successful in getting the flight restrictions limited to Mexican airlines (Obrador originally wanted all carriers to be counted) and pushing the movement restriction forward to 2024. IATA also expressed its desire that Obrador consider the wishes of both citizens and suppliers by improving conditions at AICM.
Last month, the FAA formally reinstated Mexico’s Category 1 status. Volaris, who is strongest in leisure travel, was thrilled. “Once the US authorities announced the upgrade, we are prepared to use the flexibility of our business model to redeploy approximately 5% of our total capacity to international markets in the fourth quarter,” Enrique Beltranena, CEO of Volaris said at a conference with analysts and investors. Aeromexico, who has a more corporate travel base, will undoubtedly follow suit, but since so many of their business travelers are located within Mexico City, will it be at the new airport?
That remains to be seen. Obrador’s “Folly” has survived widespread resistance and even environmental scrutiny. (The remains of 200 mammoths were discovered during the construction of the airport’s terminal area, in the former Lake Xaltocan.) Access to the airport is poor, being limited to smaller roadways and the bus. Plans are afoot to extend the Suburban train and major highways, but these might not come for years. AIFA might become the next Houston Hobby Airport, which recently became the first 5-Star airport in North America. Or it might become the next Bellingham Airport, which made a stir at first than settled down to three low-fare airlines and modest business.
We’ll wait and see. Right now it’s the 25th largest airport in Mexico.
This blog was reviewed for accuracy by
Hal Pierce, Director Marketing, Teplis Travel
