Potential Cabotage Reform to Bring Challenges, Opportunities
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Potential Cabotage Reform to Bring Challenges, Opportunities

Photo by:   JESHOOTS.COM, Unsplash
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Sofía Hanna By Sofía Hanna | Journalist and Industry Analyst - Thu, 01/19/2023 - 14:40

A proposed reform of Mexico’s Airports and the Civil Aviation Law has drawn both praise and criticism for its potential impact on the industry, with aviation associations calling for adjustments that would protect local players. 

On Dec. 16, Mexican President Andrés Manuel López Obrador sent a constitutional reform initiative to the Chamber of Deputies proposing to modify the Airports and the Civil Aviation Law. The reform would reaffirm the nature of the Federal Civil Aviation Agency (AFAC) as the body in charge of issuing, suspending, canceling, revalidating or revoking certificates for those in the civil aviation sector. It would also raise the penalties for concessionaires who do not adhere to the authorized itineraries and modify regulations for cabotage, which would allow foreign concessionaires to perform cabotage activities in Mexico, which are currently prohibited.

The Mexican government justifies this change arguing that authorizing foreign players would allow the expansion of regional routes, benefiting consumers by providing more options at lower costs. However, the suggested changes to cabotage have generated multiple disagreements from players in the Mexican aeronautical sector. "Under no circumstances will we allow Mexican skies to be given away or sold to foreign interests and modifications without technical support to our legal framework, which put at risk the future of the industry, our professional development and source of employment," Ángel Domínguez Catzin, President, Front for the Defense of National Aviation (FDAN), told A21

An analysis by BBVA Research points that cabotage can increase the number of players and exert competitive pressure on the incumbents. "The elimination of barriers is always positive, but the initiative is incomplete given the lack of consideration of the international context, of a slot allocation mechanism and of a public policy that favors the market to make optimal use of the airport network as a whole," reads the report. A problem with the proposed regulatory changes is that it does not consider reciprocity, in which the markets that benefit from operating in Mexico also open their respective markets to Mexican airlines, says BBVA. 

The changes to the cabotage law are only some of the challenges Mexican air cargo operators are facing. A leaked document revealed that the Mexican government may close cargo operations at Mexico City International Airport (AICM) and move them to Felipe Ángeles International Airport (AIFA), as reported by MBN. The preliminary draft claims that AICM will ban cargo operations to improve mobility for passengers. Since May 2022, airlines and cargo agencies had been asked to consider moving to AIFA but industry leaders rejected the switch, claiming it would increase their costs and would threaten various business models based on sustainability and budget efficiency.

Photo by:   JESHOOTS.COM, Unsplash

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