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News Article

COVID-19’s Rampage Through the Aviation Sector

By Alicia Arizpe | Thu, 04/02/2020 - 11:24

The global aviation industry has been severely hit by the economic effects of the COVID-19 pandemic and Mexico has been no exception. Amid the crisis, local and international industry associations call on governments to implement measures to support the sector as it continues to provide essential services while it grapples with the effects of the epidemic.

The full economic effects of the COVID-19 pandemic are still to be felt but its impact on several industries is undeniable. One of the sectors that might have been hurt the most to this date is the aviation industry, which just a few months ago was growing at what seemed an unstoppable rate. Yet, travel bans, closed borders and the desire of many to stay home to avoid the virus have sent the industry plummeting at an unprecedented rate.

Before the pandemic reached Mexico, its largest aviation hub, Mexico City International Airport (AICM), had grown and positioned itself as the top airport in Latin America in terms of connectivity and 15th in the world, according to OAG. The airport had grown continuously in routes and passenger traffic since 2010 at such a rate that it quickly surpassed its own infrastructure and reached its full capacity in 2014. Lack of space did not mean it stopped growing. In fact, passenger traffic grew steadily until February 2020. The airport’s oversaturation had airlines scrambling for its highly contested slots and raised increasingly louder calls for an alternative, which took shape first in the construction of the now-cancelled NAIM and afterwards on the undergoing refurbishing of the military base at Santa Lucia.

Things took a sharp turn once COVID-19 came to Mexico. The first case was announced on February 28 and while at first many in the country did not seem too wary of its effects, airlines and airports in affected areas were already reporting the devastating effects of the virus on their operations. 

At the time, the effects of COVID-19 in foreign airports were already shockingly severe. Just in February, the Hong Kong International Airport, a major travel hub in a city heavily hit by the outbreak, reported that flight movements fell by a staggering 44.5 percent. Drops in travel spread alongside the virus. Airports just in Asia-Pacific are estimating losses up to US$5.6 billion in revenues just in 1Q20. In early March, the International Air Transport Association (IATA) warned that the already severe effects of COVID-19 could cost the global aviation industry up to US$113 billion in lost revenue in what at the time it called the “worst-case scenario.” But just a few weeks later the organization admitted that the situation was worse than expected and updated its estimates to US$252 billion in lost revenues during 2020 due to the pandemic.

In March, COVID-19 made itself felt among Mexico’s population. In one month, cases rose to 1,378 and 37 deaths. As cases increased, official recommendations on the virus aligned to those of countries already heavily affected by the pandemic. On March 31, Mexico’s Ministry of Health informed the population of the advance of the virus and urged citizens to take preventive measures to avoid contagion, including self-quarantine and avoiding unnecessary travel. Mexico’s government, however, has not made any moves to limit mobility in sharp contrast to other countries in Latin America.

While Mexico has not closed its borders, the country’s aviation industry is indeed suffering as other nations curtailed travel to contain the pandemic. Miguel Torruco, Minister of Tourism, informed that visits to the country had dropped sharply during the 13th week of 2020, with 24.3 percent less ticket sales to the country, in comparison to the previous week. Visits from North America fell by 21.2 percent, from Asia by 77.2 percent and from Latin America by 75 percent, as many countries have closed their borders or limited non-essential flights. AICM alone reported a 50 percent drop in total flights and Mexico’s second most visited airport, Cancun International Airport, saw a 75 percent drop in operations and had to close two terminals to offset costs.

Considering these numbers, national and international industry associations are calling for support from local governments as, even though passenger traffic has fallen, airports remain key to the efficient transport of necessary goods and medical supplies to fight the COVID-19 pandemic. Mexico’s National Chamber of Air Transport (CANAERO) warned that Mexico’s aviation industry was set to lose MX$30 billion (US$1.25 billion) during the COVID-19 crisis and is working with local airport groups and government institutions to develop measures to contain the damage. The chamber aims to develop short and long-term strategies that guarantee the sector’s survival. It is now working with SHCP to discuss the management of airport taxes (TUA) and with the Ministry of Tourism to develop a long-term strategy to promote Mexico. “We need to look after the cash flow of airlines because it is running out. Without them, there will be no operations, airports nor air-based supply chains,” said Luis Osorio, Director General of CANAERO.

Alicia Arizpe Alicia Arizpe Senior Writer