Depressed pricing still hangs over Mexico’s domestic market, but demand holds steady

Mexico's domestic market continues to grow at a steady pace, with passenger levels increasing 9% year-on-year for the first nine months of 2017. But pricing in the country's domestic market was depressed during 3Q2017, creating challenges for the larger airlines operating in Mexico.

The country's second largest airline, Volaris, continues to be under pricing pressure in 4Q2017, while Aeromexico believes its capacity rationalisation in the domestic market is helping its yield performance. For Aeromexico, the more challenging geographical region is the US transborder market.

Aeromexico does expect some capacity rationalisation in the US transborder market, but the region remains competitive, and is strategically important for both Aeromexico and Volaris. Their respective performances on US routes could remain challenged until leisure demand firms up.