Aeromexico leverages a unique position in Mexico’s aviation market
Mexico's only full service carrier Aeromexico finds itself in a somewhat unique position as it remains the country's solo intercontinental operator. Leveraging that position, the airline plans to take advantage of long haul demand - particularly to Europe.
Closer to home, Aeromexico and all of Mexico's largest operators are looking forward to the US issuing a safety upgrade for the company, which will allow Mexican airlines to resume growth in the strategic US transborder market.
The US remains Aeromexico's most strategic international market. Mexico's airlines are waiting for the US to issue a safety upgrade for Mexico after the US Federal Aviation Administration downgraded the country's rating in May-2021. As a result of the downgrade, Mexican airlines cannot add new routes or frequencies to the US or make equipment changes to their US market, including using larger aircraft.
The government has said that it would like to create a state-owned airline to operate on underserved routes. Previously, the government has stated that the airline could launch in 2023 and operate 10 aircraft, and would be operated by Olmeca Maya Mexica.
Aeromexico is confident that it can weather any changes to Mexico's domestic market, including the potential emergence of a state-owned airline.
Summary
- Aeromexico is experiencing solid demand on long haul flights to Europe.
- All of Mexico's airlines are waiting for the US to issue a safety upgrade for Mexico so they can resume growth.
- Mexico's domestic market continues to remain stable.
- Aeromexico does not seem concerned about the potential launch of a government-backed airline.
Aeromexico experiencing strong demand in European markets
Aeromexico appears to be taking advantage of its distinction as Mexico's only long haul operator.
Data from CAPA and OAG show that international operations account for 65% of Aeromexico's ASKs, and domestic routes represent 35%. The airline is part of Grupo Aeromexico which also includes regional operator, Aeromexico Connect.
Aeromexico: international and domestic ASKs, as of late Mar-2023
The company recently launched new service from Mexico City Juarez International airport to Rome Fiumicino International airport, and resumed flights to Tokyo Narita.
As of late Mar-2023, Aeromexico's service to Europe included Rome, Paris, Amsterdam, Madrid and London Heathrow.
CAPA's sister publication Routes Online has reported that the new service to Rome is initially being operated four times per week, with a Boeing 787 widebody. Frequencies will increase to five per week in Jun-2023.
The publication stated that Aeromexico's capacity to Europe during the summer of 2023 will grow by 20% year-on-year. CAPA and OAG's data show that Aeromexico will have a 27% share of the one-way capacity deployed between Mexico and Western Europe in Jul-2023, compared with a 22% share for the same period in 2019.
Routes quoted Aeromexico's Airport Affairs Director Abelardo Muñoz Martín, who said that "Europe is very hot right now."
Aeromexico is in a unique position to leverage the demand between the two regions, and work with its SkyTeam partners to offer broadened network scope in the Americas and in Europe.
Mexican airlines continue to wait for a safety upgrade from the US
Although Europe is a bright spot for Aeromexico, the US remains its most strategic international market.
Mexico's airlines are waiting for the US to issue a safety upgrade for Mexico after the US Federal Aviation Administration downgraded the country's rating in May-2021.
As a result of the downgrade, Mexican airlines cannot add new routes or frequencies to the US or make equipment changes to their US market, including using larger aircraft.
Mexican airlines are hopeful the US will issue a safety upgrade later in 2023, which will allow all of the country's airlines to resume transborder growth.
Aeromexico's SVP of institutional relations, government, airports and industry affairs Cuitláhuac Gutiérrez recently explained that "as an industry, we're investing a lot in new aircraft, but we're unable to invest those resources in the US, which is our most important international market", according to Routes.
Mr Gutierrez said that Aeromexico, Volaris and Viva Aerobus had roughly 80 next generation aircraft, which they cannot operate to the US - so the operators have to deploy the equipment elsewhere. As a result, Mexican airlines are losing market share to their US counterparts, he concluded.
Volaris represents roughly 15% of the one-way capacity deployed between Mexico and the US, and Aeromexico's share is 10%. Viva Aerobus has a 4% share.
American Airlines is the largest operator, with an 18% share, followed by Volaris' 15% share, and Delta Air Lines, which also has a 15% share. United Airlines has a 14% share.
Overall, one-way capacity between Mexico and the US is up 12% as of late Mar-2023, compared with the same period in 2019.
Weekly one-way ASKs from Mexico to USA, from late Mar-2019 to Mar-2023
Mexico's domestic market is stable, but will a new contender emerge?
Mexico's market is composed of two ultra-low cost airlines - Volaris and Viva Aerobus - and the country's full service, long haul operator, Aeromexico.
Before the COVID-19 pandemic and Aeromexico's Chapter 11 reorganisation, Volaris was the country's largest domestic operator measured by passengers carried, and that still remains the case.
For the first two months of 2023 Volaris had a 42% domestic passenger share, followed by Viva Aerobus' share of 29% and Aeromexico's 28% share.
The domestic market in Mexico has been relatively stable as the recovery from the COVID-19 pandemic continues. However, the government of President Andrés Manuel López Obrador has said that it would like to create a state-owned airline to operate on underserved routes.
Previously, the government has stated that the airline could launch in 2023 and operate 10 aircraft, and would be operated by Olmeca Maya Mexica, which is a government entity that runs the newly opened Mexico City Felipe Angeles International airport.
It is so far not possible to say whether those plans will actually materialise, and if the creation of a government-backed entity would distort the competitive landscape in Mexico. Aeromexico seems unfazed by the potential new operator. Routes reported Mr Martín said that Aeromexico was not afraid of competition: "We believe in our product and that we are best at what we do in Mexico", he stated.
Mexico's domestic stability shows no signs of waning
The current composition of the Mexican market has been in place for a while, and has arguably become a bit more stable since the market exit of Interjet during the COVID pandemic, then (more recently) the grounding of the regional operator Aeromar.
For now, that stability shows no signs of weakening, and Aeromexico seems confident in executing its strategy with or without the emergence of a new competitor.