Mexico’s Category 2 Safety Rating Continues to Harm Aviation

Mexican airlines were estimated to lose 65 percent of their revenue, equivalent to US$9.32 billion, as a result of the Federal Aviation Administration's (FAA) downgrade of the Federal Civil Aviation Agency (AFAC) to Category 2, reports the International Air Transport Association (IATA). Mexico's GDP would also see US$7 billion less due to the downgrade and the country would lose over 170,000 direct jobs and almost 780,000 indirect ones, added IATA. 

The downgrade to Category 2 prevents Mexican airlines from increasing their frequencies or strengthening their operations in the US through commercial agreements; however, latent demand can be met by US airlines. "The US market has recovered about 40 percent, leaving US airlines with significant levels of available capacity to position themselves in other markets, in addition to the government support they have benefited from, which gives them an important advantage," said IATA. This demand reduction, as a consequence of the degradation, is risking a total of MX$47.8 billion (US$2.37 billion), of which MX$4.78 billion (US$236.87 million) correspond to the drop in tax revenue from ticket sales, MX$301 million (US$14.9 million) to the loss of fuel revenues, MX$9.76 billion (US$484.16 million) to the loss of foreign direct investment from the US and MX$33 billion (US$1.6 billion) to touristic expenditures.

"Although the measure impacts all airlines, we know that there are airlines that are especially suffering the implications of this decision by the FAA, such as Aeromexico," said Rosario Avilés, an analyst of the airline industry, to A21. 

Since 2021, Mexican airlines have suffered losses approaching MX$9.2 billion (US$460 million) due to their limited ability to offer more flights to the US, as previously reported by MBN. CNET and Cicotur informed that Mexican airlines had a market share of 24.6 percent in international operations from January to April 2022, showing an important recovery from the same period in 2021, when they held a 22.3 percent market share. However, Mexican airlines are still facing a major challenge to recover their 2020 market share of 29.3 percent and their 31.8 percent market share in 2019. 

"Category 2 would put more jobs at risk and further decrease the industry's share of GDP. The assumed losses to the economy are far greater than the investment needed to meet the requirements set by the FAA," said IATA.