Mexico Sees Surge in Air Traffic Demand in the Wake of COVID-19

While COVID-19 quarantines are long past, the global aviation industry continues to face challenges in getting passengers to fly again. In Mexico, airlines received little governmental support during the pandemic but the country’s open border policy allowed the industry to stay afloat and swiftly recover once other countries opened their borders. The country is now seeing a robust recovery of passenger traffic but the industry is still being threatened by both internal and external factors. 

During the first two months of 2023, the number of passengers mobilized by Mexico’s airports grew by 28.2% year over year for a total of 28.93 million passengers, reports the Federal Agency of Civil Aviation (AFAC). Of those, domestic passengers totaled 18.86 million, a 27% increase year over year, while international passengers totaled 10.04 million, a 30.5% increase.

Air cargo also started 2023 with positive figures, growing by 5.2% during the first two months of the year for a total of 183,910 tons of cargo transported. Mexico City International Airport (AICM) was responsible for most cargo movements, transporting a total of 95,764 tons during January and February 2023, a 10.1% increase year over year, according to AFAC in its airport operational report. AFAC, an office of the Ministry of Infrastructure, Communications and Transportation (SICT), reports that domestic air cargo increased by 1% year over year to 59,241 tons in the first two months of 2023, while international air cargo grew 7.3%, reaching 124,669 tons during that period. 

While the aviation sector seems to be well on its way to recovery, recent governmental measures are shaking up the sector, such as the air cabotage reform and the movement of all air cargo operations that take place at AICM to Felipe Ángeles International Airport (AIFA).

In December 2022, President Andrés Manuel López Obrador formally proposed allowing air cabotage in Mexico. The suggestion was widely criticized by many players in the aviation industry, including workers, associations and companies. López Obrador argued that, through the authorization of foreign airlines, regional routes will expand, benefiting users by providing them a greater diversity of options at lower costs, which will also help to boost tourism. “Foreign airlines arriving from the EU and the US could grow the number of flights in the country. This would mean more competition. Recently, we went to Victoria (Tamaulipas) and there were no flights other than one at 6 a.m., which was very expensive. We are working on this (aviation prices) and we are going to solve it,” said López Obrador.

However, several groups in the Mexican aviation industry have criticized López Obrador’s cabotage initiative, including Mexico’s Air Pilots Labor Union (ASPA) and the Mexican Front for Defense of National Aviation (FDAN). “The premise that cabotage would foster competition within the Mexican aviation sector is false and it would only bring a massive impact on the industry, including job losses,” says ASPA Spokesperson José Gerardo Alonso.

In January 2023, López Obrador’s administration also banned cargo operations at AICM, the country’s largest cargo hub, starting in 2Q23. While the decision will not affect commercial airlines’ cargo operations, dedicated cargo airlines will have to move their warehouses, personnel and operations to AIFA or other airports. The decision aims to improve mobility for passengers and reduce saturation at AICM. However, cargo airlines argued that the switch would increase costs and threaten various business models based on sustainability and budget efficiency. 

The decision to ban cargo at AICM was also met with criticism from the aviation industry. The International Air Transport Association (IATA) argued that forcing airlines to move their cargo operations in such a short time frame is not feasible given the enormous technical, regulatory and infrastructure requirements. “Neither the airlines nor the associated cargo supply chain can pack up and move to an alternative airport. This process involves complexity and must be well-planned to avoid operational disruption. To do this, we need all stakeholders to work in a coordinated manner, ensuring the safe and efficient flow of cargo in and out of the country,” says Peter Cerdá, Regional Vice President for the Americas of IATA.

While AIFA had no recorded cargo operations during the first two months of 2023, according to AFAC, the airport is expected to grow sharply in the coming months due to the cargo ban at AICM. During that same period, AIFA received a total of 186,600 passengers, of which 175,800 were domestic and the rest international. 

Another issue that could potentially restrict airlines’ growth is limited competition in the jet fuel market, argues the Federal Economic Competition Commission (COFECE). While jet fuel is a key component of Mexico’s aviation industry, the market is dominated by a few major players, limiting competition. The Airports and Auxiliary Services Network (ASA) is the main supplier of jet fuel in the country and PEMEX dominates Mexico’s oil and gas market, including the production of derivatives like jet fuel, according to COFECE. Jet fuel represents between 25% and 30% of the operating expenses of airlines and contributed 3.08% of Mexico's transport GDP in 2021, according to INEGI.

Mexico’s aviation industry is expected to continue growing in 2023. The country expects to receive 39.4 million international tourists during the year, which is a 2.7% increase over 2022, reports the Ministry of Tourism (SECTUR). In addition, average spending per international visitor is estimated at US$448.2, representing an increase of 77.6% over 2019. Of the 39.4 million international tourists, 21,491 million will arrive by air. These latter tourists are expected to contribute US$25.2 billion to the local economy, US$1.647 million or 7% more than in 2022.