A roadmap to the Mexican aviation market

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This article was originally published on March 11, 2022. 

Prior to the COVID-19 pandemic, Mexico’s aviation market had been growing steadily despite many challenges.  

 

The steady development was driven by several factors, including the expansion of the low-cost carrier market, the conclusion of the US-Mexico ‘Open Skies’ agreement which eliminated restrictions on routes between the two countries, and more. 

 

However, along with the world’s strongest aviation markets, Mexico’s aviation sector has also been crippled by the global pandemic. But now, global air travel is beginning to gradually recover. So, what does commercial aviation in Mexico look like today? 

 

Here is AeroTime’s guide to understanding aviation in Mexico.  

 

Mexico’s first airlines 

 

The airline industry has deep roots in Mexico. Mexico was home to one of the oldest carriers in the region. The world’s fourth oldest airline and Mexico’s first carrier, Mexicana Airlines, took to the skies in 1921. Thirteen years later in 1934, Mexico’s second full-service carrier (FSC), Aeromexico, was founded. 

 

The carriers became major rivals in Mexico. However, despite the competition, both Aeromexico and Mexicana complimented each other in terms of the markets they served. Aeromexico was serving Europe and Brazil, while Mexicana controlled destinations in Canada, Central America, and Argentina.  

 

However, with the growth of global air travel in the region during the mid-2000s, the situation changed. Both airlines started competing in the same markets.  

 

In an interview with Flight Global in 2009, the chief executive of the now-defunct Interjet, Jose Luis Garza, predicted that either Aeromexico or Mexicana was going to fail because neither airline was able to survive the competition while operating in the same domestic and international markets.  

 

Eventually, Aeromexico won the race, as the country’s former flag-carrier, Mexicana Airlines, ceased operating in 2010 due to financial difficulties.  

 

In 2011 and beyond, there was still a slim chance that Mexicana would restart its operations. But since 2010, the Mexican aviation market has grown significantly. Another profound change in the country’s aviation sector has been the growth of low-cost airlines versus traditional airlines. 

 

The country’s key low-cost carriers such as Aeromar, Interjet, Volaris, and Viva Aerobus used Mexicana’s demise to expand. The emerging Mexican budget airlines took many of Mexicana’s domestic destinations, leaving the cash-strapped airline without a market in which to operate. 

 

Meanwhile, Aeromexico was left as Mexico’s sole full-service carrier. 

 

Current key players in Mexico’s commercial aviation  

 

Before COVID, Mexico’s aviation market had eight notable passenger airlines, including Volaris, Grupo Aeromexico, Viva Aerobus, Interjet, Aeromar, Magnicharters, Transportes Aéreos Regionales, and Aéreo Calafia.  

 

However, as the global pandemic brought air travel to a halt, Mexico lost one of its airlines. Interjet, which faced financial hurdles before the pandemic, ceased operations in December 2020.  

 

Prior to its bankruptcy, Interjet was considered the third largest airline by passenger numbers. But its business model, which combined low-cost and full-service models, left the airline with debt and caused it to lag behind its competitors. 

 

 

Without Interjet, Mexico currently has seven notable passenger carriers.  

 

Today, Mexico is dominated by two low-cost carriers, Volaris and VivaAerobus, as well as Mexico’s sole full-service carrier Grupo Aeromexico. 2021 was considered as a growth year for budget airlines Volaris and VivaAerobos, and a recovery year for Grupo Aeromexico. These airlines are the main competitors in the country, having carried a total of 54 million passengers in 2021, according to the Federal Agency of Civil Aviation (AFAC) of Mexico.  

 

Meanwhile, Aeromar, Magnicharters, Transportes Aéreos Regionales, and Aéreo Calafia are smaller competitors which have niche markets and only operate inside the country. These airlines carried a total of 1.4 million passengers in 2021, according to the AFAC. 

 

Volaris – a leader in the low-cost and domestic sector 

 

Throughout the pandemic, Volaris consolidated its position as the country’s leading domestic operator, with a near 40% market share. This growth has been largely attributed to Interjet’s demise and the financial difficulties of Grupo Aeromexico.  

 

Compared to its rivals Grupo Aeromexico and VivaAerobus, Volaris carried the highest number of passengers in 2021. Volaris carried 24.4 million passengers in 2021, a growth of 11% compared to 2019 levels. Volaris has begun 2022 with strong figures. In January 2022, the airline carried 2.3 million passengers, a climb of 21% compared to 2020.  

 

Volaris reported a net income of 2.1 billion Mexican pesos ($102 million) in 2021, compared to 1.5 billion Mexican pesos ($73 million) in 2020.  

 

The Mexican low-cost carrier expects further growth throughout 2022, assuming that no “significant unexpected disruptions related to COVID-19 or other macroeconomics impacts the business” Volaris outlined in a 2021 financial report.  

 

Volaris will focus on network growth in Central and South America. The United States, a valuable market for all Mexican airlines, remains paused as Mexico aviation regulators struggle to recover Category 1 safety rating with the US Federal Aviation Administration (FAA). 

 

As of December 31, 2021, Volaris’s fleet comprised 101 aircraft, with an average age of 5.4 years, according to the airline’s data. The airline’s fleet includes 79 Airbus A320s, 16 Airbus A321s, and six Airbus A319 aircraft. 

 

The COVID-19 pandemic has not stopped Volaris’s plans to expand its fleet. In November 2021, Volaris ordered 39 Airbus A321neo aircraft. In addition to the acquisition of 39 A321neos, Volaris agreed with Airbus to convert 20 jets in their current order contract from A320neo to A321neos. The carrier plans to end 2022 with approximately 115 aircraft. 

 

Grupo Aeromexico – Mexico’s sole full-service carrier 

 

Throughout the pandemic, Grupo Aeromexico has suffered adverse effects. The country’s flag-carrier filed for voluntary Chapter 11 protection in the United States in June 2020 with $2 billion in debt.  

 

Therefore, financial restructuring of the carrier has slowed down its growth. Despite the difficult financial situation, the carrier has continued operations while it seeks to come out of bankruptcy intact. 

 

Nearly two years after it filed for bankruptcy protection, the US Bankruptcy Court for the Southern District of New York approved Aeromexico’s restructuring plan in late January 2022, clearing the way to exit bankruptcy proceedings. According to the carrier, Chapter 11 proceedings will be completed in the first quarter of 2022.  

 

 

2021 seemed to be a year of recovery for Aeromexico, not only because the airline was on its way to a financial restructuring but also because it increased its aircraft fleet, narrowed its net loss, and carried more passengers than in 2020.  

 

In 2021, the airline slimmed its net loss to 18.8 billion Mexican pesos ($916 million), according to its 2021 financial report. This compares to 42.5 billion Mexican pesos ($2.1 billion) net loss in 2020. 

 

In 2021, Grupo Aeromexico carried a total of 16.7 million passengers, the carrier’s 2021 passenger traffic results show. This compares to only 9.5 million passengers carried by Grupo Aeromexico in 2020. Mexico’s flag carrier is also optimistic that more passengers will travel in 2022.  

 

“In spite of the challenging environment, the market has shown signs of recovery,” Grupo Aeromexico announced in the full-year financial report dated February 15, 2022. “The industry worldwide was negatively affected by the beginning of a new wave of COVID-19, Omicron, causing several flight cancellations during mid to late December. 

 

“The company remains committed to safely expand flight service in the coming months, in line with local regulations and customer demand, in full compliance with the highest health standards and protocols.” 

 

Grupo Aeromexico ended 2021 with 133 aircraft in its fleet, the airline outlined in its full-year financial report. The average age of Aeromexico Group’s operating fleet was 8.6 years.  

 

Aeromexico has a total of 86 aircraft in its fleet, including 36 Boeing 737-800s, 27 Boeing 737 MAXs, 18 Boeing 787 Dreamliners, and five Boeing 737-700 aircraft. Meanwhile, the group’s subsidiary Aeromexico Connect has a fleet of 47 Embraer E190 jets. 

 

VivaAerobus – Mexico’s second largest budget carrier 

 

In 2021, VivaAerobus positioned itself as the country’s second most important airline in the domestic sector. During the year, the budget airline carried 15.3 million passengers, a growth of 27% compared to the pre-pandemic year in 2019.  

 

“Despite the continuing effects of COVID-19 during 2021, we closed the year on a strong note and well above 2019 figures, proving once again the resilience of our ultra-low-cost business model,” CEO of VivaAerobus, Juan Carlos Zuazua, announced in a 2021 financial report 

 

In addition, VivaAerobus announced a new joint venture with US budget airline Allegiant Air in 2021. However, while Mexico remains in the Category 2 safety rating with the FAA, the business alliance will not be possible. 

 

VivaAerobus ended 2021 with 55 operational aircraft, according to the airline’s 2021 financial report. The fleet comprises 20 Airbus A320ceos, 20 Airbus A320neos, eight Airbus A321ceos, and seven Airbus 321neo jets, averaging an age of 5.1 years for 2021, making it one of the youngest fleets in Mexico. 

 

In 2021, VivaAerobus reported earnings before interest, taxes, depreciation, amortization, and restructuring or rent costs (EBITDAR) of 7.7 billion Mexican pesos ($375 million), compared to 3.8 billion Mexican pesos ($185 million) in 2019.  

 

Is Mexican aviation safety at risk? 

 

The Mexican aviation industry faces challenges beyond those caused by the pandemic.  

 

In May 2021, the FAA downgraded Mexico from a Category 1 to a Category 2 air safety rating because of a lack of compliance with international safety standards established by the International Civil Aviation Authority (ICAO). 

 

This means that Mexican airlines are allowed to fly into the United States but are prohibited from carrying out any flight expansion plans and business arrangements between Mexican and US airlines. In addition, the FAA has increased its scrutiny of Mexican airline flights in the US. 

 

A Category 2 safety rating means that “the country’s laws or regulations lack the necessary requirements to oversee the country’s air carriers in accordance with minimum international safety standards, or the civil aviation authority is lacking in one or more areas such as technical expertise, trained personnel, record keeping, inspection procedures, or resolution of safety concerns”, according to the FAA.  

 

“The FAA is fully committed to helping the Mexican aviation authority improve its safety oversight system to a level that meets ICAO standards,” the FAA announced in a statement. 

 

The International Air Transport Association (IATA) notes that a Category 2 is not a reflection of the airline’s ability to operate safely but rather of the regulator’s ability to carry out its responsibilities. 

 

The United States is one of the most lucrative markets for Mexican airlines. However, Mexican airlines do not seem too troubled by the new air safety rating.  

 

In its 2021 financial report, Grupo Aeromexico announced that the “decision implies that the company, can continue to operate, without restriction, the flights it currently has to and from the United States”.  

 

The airline also remarked that it would need to make a few adjustments to existing codeshares with airlines from the US. 

 

In a press statement dated May 25, 2021, Volaris announced: “Currently, we are operating at 113% capacity of what we had in 2019. Our operation levels in the US will remain the same until Mexico recovers its Category 1 status. As we had planned before, our growth plans will focus on the domestic and other markets we have the authorization to fly to.” 

 

In response to the decision, the Federal Agency of Civil Aviation (AFAC) of Mexico announced in a statement that it was fully committed to complying with the norms and standards of the ICAO.  

 

“The national airlines currently operate with high levels of safety and quality of service, comparable to the international standards of any line that flies in the neighboring country to the north,” the ACAF said. 

 

This is not the first time that Mexico has been downgraded to a Category 2 rating. Mexico last received a Category 2 rating in July 2010 but was able to recover to Category 1 by December 2010. 

 

According to the AFAC data, a total of 273 air incidents and 52 air accidents occurred in 2021 involving Mexican airlines in Mexico and other countries.  

 

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