Cabotage Would Threaten Mexico’s Air Connectivity: ALTA

Mexico's aviation industry is in the spotlight due to recent discussions around whether to allow air cabotage. Authorizing cabotage would jeopardize the connectivity of the country, says the Latin American and Caribbean Air Transport Association (ALTA).

“Enabling cabotage would allow airlines from other countries to capture domestic market shares without investing in the country, in its connectivity and in generating jobs. In addition, it would reduce incentives to invest in national airlines, in developing national connectivity, even on less attractive routes, ultimately affecting flight prices and harming employment and growth,” says José Ricardo Botelho, CEO, ALTA.

Air cabotage should only be implemented in three cases: when the country does not have connectivity, when there is a market failure and when there is not a strong airline industry in the country. According to ALTA, none of the above is a situation that occurs in Mexico. In the country, there are 220 routes operated by eight local airlines that serve Mexico’s 32 states.

“Foreign airlines focus primarily on the main and profitable routes with high prices, displacing local operators that generate investment and jobs in the country, even in remote places and destinations where routes are not so profitable and, in the long run, it reduces the connectivity of the country and the options for citizens,” says Botelho.

While several players besides ALTA claim that cabotage could be damaging for the aviation sector, removing barriers to entry would be positive as it would increase the number of competitors on domestic air routes and benefit the entire market, as long as there is reciprocity, as reported by MBN. The supply and demand theory works the same in aviation as in any other industry. As the offer of domestic flights grows, pressure on the market increases, providing users with more options to fly while companies are forced to improve their prices and quality of service to maintain user loyalty.

However, air cabotage is not an economic measure that lowers the prices of plane tickets but a technical measure that impacts the industry at different levels, mainly on air connectivity and overall security, says Botelho: "Contrary to what it may initially seem, allowing cabotage is an extremely aggressive measure that weakens the local industry and ends up harming the passenger, the movement of cargo and, consequently, the country in terms of tax revenue, job creation and the number of routes that would be reduced.”

Aeroméxico Supports ALTA

Aeroméxico showed its support for ALTA's position, adding that the implementation of cabotage in Mexico generates risks. Through a brief statement, the country’s flagship carrier said that cabotage cannot me implemented in Mexico, a country where the airline industry generates jobs and tax revenues with effective competition and good connectivity.