Low-Cost Carriers Battle To Fill Mexicana Void

This week saw low-cost operators Volaris and VivaAerobus announce a number of new routes from Mexico City as the carriers seek to increase their market share from the nation's largest airport. The Hub takes a look at this low-cost battle.

The suspension of Mexicana services has left a huge opportunity for carriers to take over routes vacated by the oneworld member. This week Volaris opened seven new routes from Mexico City, to Hermosillo, Cancun, Chihuahua, Guadalajara, La Paz, Los Cabos and Merida with all services slated to commence this week.

Flightbase schedules taken from July 2010 illustrate the gap that has been left in Mexico City by the demise of Mexicana. The table illustrates capacity share amongst the leading Mexican carriers.

Source Flightbase 14-20 July 2010

As the Flightbase data demonstates Mexico City has not been a focus for neither Volaris, nor VivaAerobus in a market that has been dominated by the legacy carriers of Mexicana and Aeromexico. Volaris has its main bases Tijuana, Toluca, the secondary airport in Mexico City and Guadalajara. From Toluca, Volaris operates 134 weekly flights to 12 destinations. Interestingly all of Volaris' new routes from Mexico City are currently served from Toluca. However it is likely that Volaris will maintain all of its Toluca routes whilst expanding in Mexico City. Toluca is a strong market for Volaris where it will not intend to give up any of its market share, it has a 62% share of all scheduled weekly flights and is the largest scheduled airline ahead of Interjet. With the proximity that Toluca offers to the business district of Mexico City, Volaris will be confident that it can operate the same markets from Toluca and Mexico City.

VivaAerobus, meanwhile has it main operating base in Monterrey with a secondary base in Guadalajara, with no presence in Toluca and limited presence in Mexico City, will now seek to expand quickly and gain a foothold in Mexico City.

WHAT OTHER OPPORTUNTIES ARE THERE IN MEXICO CITY

With the downgrading of Mexico to a category 2 status, the Mexican carriers will not be able to fill the US routes that have been left by Mexicana. According to IATA BSP data, between June 2009 and 2010, Mexicana accounted for 17% of all O+D passengers between the US and Mexico, the third largest airline, carrying over 2.6 million passengers. Will the US carriers react to fill this void?

In the meantime Volaris and VivaAerobus may well look to domestic markets where Aeromexico now has significant market share. Veracruz is an option where Mexicana has vacated 47 weekly flights and Aeromexico remains the only carrier on the route. VIllahermosa now just has Aeromexico on the route, with Mexicana having operated 38 weekly flights. Tampico is another likely destination, Interjet operates six-weekly flights from Mexico and will seek to boost capacity, however there is clear scope for new carriers on the route with Mexicana having operated 34 weekly flights.

Aeromexico may focus on the International market for steady growth, having already announced two new planned weekly frequencies to Buenos Aires a route vacated by Mexicana, whilst markets such as Bogota and Havana could be ripe for expansion. Mexicana's European services to Madrid and London Gatwick may well allow Aeromexico to gain capacity share on its existing Madrid service, and contemplate a London service, a market dominated by British Airways non-stop and Iberia's service via Madrid which allows oneworld to dominate the market.