Airports in the Valley of Mexico Must Define RolesBy Sofía Hanna | Tue, 08/09/2022 - 09:04
Q: Currently, the aerospace industry in Mexico generates 3.05 percent of the country's GDP. How is CANAERO working to increase that percentage?
A: In 2019, the aviation industry contributed US$65 billion to GDP, or 3.05 percent, and generated over 1 million jobs. In that year, the Mexican market was close to breaking the record of 100 million passengers, making it one of the most important markets in Latin America. The airports in Cancun and Mexico City had the highest connectivity in the region, surpassing those in Sao Paulo and Rio de Janeiro. Airlines were also renewing their fleets, and there was an expansion to boost connectivity in the country. Mexico also offered MRO services. In Queretaro, for example, Delta Air Lines and Aeroméxico opened MROs hangars. The country also built cargo hubs and clusters in the north of the country.
In 2020, the aviation industry suffered its worst crisis in history, with global airline traffic dropping by 95 percent. Neither 9/11 nor the 2008 financial crisis affected the industry at the same level. In 2020, we had about 7,000 aircraft grounded, and we did not have enough space for them. Many countries closed their borders, and the industry lost an estimated US$250 billion. This led the aviation industry to restructure. Some airlines had to stop flying, others transformed their business models, and others entered a financial restructuring. We forecast A global industry recovery by 2024.
Mexico was not exempt from the impact of this crisis, but local decisions benefited the local industry. Mexico never closed its borders and foreign airlines saw this as an opportunity to maintain operations, accelerating the recovery of the industry during the summer of 2020. Mexico has a solid domestic market, and this period strengthened its international market. The US and Canada and some Central American countries started to allow traffic to Mexico, allowing the country to position itself in the international market,
Q: What impact did the collaboration with the International Air Transport Association (IATA) have during this period and where is this partnership heading?
A: We were experiencing difficult times and we had to become more cost-efficient. In 2020, Mexican airlines were forecasted to lose US$9.5 billion in revenue. Meanwhile, the metropolitan airport system was undergoing changes and Mexico’s airspace was being revamped following the construction of Felipe Ángeles International Airport (AIFA) at the Santa Lucía military base.
The agreement with IATA, signed in July 2020, came at a time when we had to generate a solid team. The agreement brought expertise and knowledge to CANAERO of what was working globally, creating a more solid and efficient organization. CANAERO’s board of directors also underwent changes and implemented a different vision based on international experience. We also presented the authorities with what was working internationally and implemented COVID-19 tests at airports and generated global COVID-19 databases and lists of other countries’ requirements for passengers. These efforts strengthened CANAERO. Our goal is to help the market recover and become more efficient. The agreement was initially signed for 18 months but was renewed this year for a similar period.
The most critical stage of the pandemic is behind us. We are now focusing on relevant topics for the post-pandemic era, such as the development of the metropolitan airport system, security and the redesign of our airspace. Operations in the Valley of Mexico are also in the spotlight. We are working to prevent over-regulatory changes intended to benefit passengers, but in the end, any overregulation will lead to a market effect potentially reflected in cost; we are in the moment to give options to the passengers according with their travel expectations. We are actively participating in the recategorization of Mexico’s airspace with the US Federal Aviation Administration (FAA); this factor is key for the Mexican airlines' growth and the Mexican economy,
Q: How has global connectivity suffered after quarantines and with the war in Ukraine?
A: Aside from the pandemic, other factors are arising and impacting the industry. Globally, there is a shortage of talent and this summer has been difficult for airlines and airports. Airlines downsized during the pandemic and demand recovered faster than the airlines did. We are witnessing long waiting lines at airports in the EU and the US because the industry has not been able to recover its workforce.
Many employees who left the operational lines at airports are not interested in going back. Airport employees usually work at their position for many years and incorporating new people involves a learning curve. The increase in COVID cases also impacted the industry because there are not enough pilots, leading to a higher number of cancellations and delays.
The war in Ukraine generated complications in the EU and Russia. Airlines have to avoid flying over risk zones, increasing flight times by 30 percent. This, in turn, increased the use of jet fuel and impacted logistics and fuel costs. The oil used to produce jet fuel also increased in price, affecting its commercialization in Mexico. To face this challenge, we are working closely with PEMEX, SAT, and the Ministry of Energy. Other countries, aware of the situation, introduced incentives such as the temporary elimination of the VAT. This is not happening in Mexico, but we are confident the government is evaluating the situation. We will also focus on keeping ticket prices down because an increase is not good for anyone. We are close to Mexico’s Economic Budget 2023 that will be submitted to congress; we want to participate and prevent potential increases that would hamper the operations of airlines and especially the prices to passengers.
Q: What is CANAERO doing to improve the use of AIFA?
A: It is always better to have a single airport able to receive more operations and generate more jobs and connectivity than several. We expressed our position regarding the cancellation of Texcoco’s airport project but afterward, we supported the airport metropolitan system, which includes Toluca International Airport (AIT), Mexico City International Airport (AICM) and AIFA.
The CANAERO and IATA teams are working to make the system feasible. What is not in our hands is demand; passengers generate that. Starting in September, domestic airlines will begin increasing their capacity at AIFA and we will start to see more flights. It is necessary to define the role of each of the airports in the metropolitan airport system, as is the case in foreign countries. We need to define the system because we cannot have three airports providing the same services because they are going to compete with each other.
For the time being, Mexico City Airport will continue to be the main one due to its geographical location, demand and its connectivity. There is much to be done at this airport, and we are working with authorities to help it to operate efficiently. We are working to determine the real capacity of its terminals and airlines, which will help us to develop the alternate airports in the system.
AIT is emerging again thanks to the operations of Volaris and VivaAerobus. The challenge will continue to be AIFA. We will have to create connectivity, generate a market and create efficient road access to the airport. Infrastructure will be the main challenge for domestic airlines, AIFA as a bet because they are losing money today. It is essential to have a support plan with the federal government regarding infrastructure and incentives. As this happens, we will seek to mitigate the financial impact.
Q: What strategies can the country follow to recover faster?
A: We have to work on regaining the lost Category 1 for our airspace. The country was downgraded to Category 2 by the US, so national airlines cannot increase their offering to the US, which represents 70 percent of Mexico's international market. Domestic airlines have missed the opportunity to capitalize on a growth of 15-18 percent of the market share. US airlines continue to open routes in Mexico, but national airlines are falling behind. On average, we have about 70 passengers and cargo aircraft that cannot fly to the US today. CANAERO is insisting on the urgency of this issue, which represents an opportunity to generate value. The country is losing revenue and we are missing an opportunity to develop at this critical time for the industry. We are fully supporting our authorities with whatever we can; it is a process between both countries, but we are supporting the authorities to create the conditions that allow us to return to Category 1 as soon as possible.
The National Chamber of Air Transport (CANAERO) is an autonomous institution of public interest made up of more than 60 members, grouping national and international airlines, cargo companies, air taxis and service providers in Mexico, among other players.