The Mexican aviation market has suffered a double blow recently. Firstly, the US government downgraded Mexico's aviation safety rating which restricts new services to US cities and limits airlines ability to carry out marketing agreements, and now coupled with Mexicana's financial difficulties could have a severe impact on Mexico's international connectivity.
Oneworld carrier Mexicana has drastically cut its network in a bid to cut costs, discontinuing international services to Sao Paulo, Buenos Aires, Caracas, Bogota and Montreal, it also suspended many services to North America. However,contrary to reports the airline will continue European services to Madrid and London Gatwick on week by week basis. With its Oneworld partners Iberia and BA able to feed these routes, Mexicana is able to continue these routes for the time being.
As the carrier struggles to survive it has been given protection from creditors under the equivalent of the US chapter 11 bankruptcy protection.
MEXICANA'S NETWORK
Mexicana is the second largest carrier in the Mexican market and is one of the world's oldest airlines. In terms of scheduled weekly seat capacity with its two subsidiary carriers Mexicana Click and Mexicana Link it is the largest carrier in the Mexican market.
The top five carriers are listed below in terms of domestic and weekly seat capacity in Mexico
|
Carrier |
Weekly Seats |
Destinations |
Market Share |
|
Mexicana |
280,319 |
66 |
29% |
|
Aeromexico |
257,910 |
62 |
27% |
|
Interjet |
100,156 |
22 |
10% |
|
Volaris |
88,628 |
26 |
9% |
|
Vivaaerobus |
43,531 |
26 |
5% |
|
Others |
184,879 |
20% |
|
|
Total |
955,243 |
100% |
Source Flightbase 14-20 September 2010
With a 29% share of the entire Mexican market, a complete Mexicana collapse including its subsidiaries Click and Mexicana link would have a severe impact on the aviation market in Mexico.
Mexicana operates 33% of its total operations from its Mexico City hub, with smaller based operations at Guadalajara and Monterrey and Cancun which has been a hub for its regional carriers.The collapse of Mexicana could have its most severe impact in terms of international traffic into Mexico. It is the largest carrier in terms of International weekly seat capacity from Mexico as the table below illustrates;
|
Carrier |
Weekly Seats |
Destinations |
Market Share |
|
Mexicana |
64,870 |
30 |
25% |
|
Aeromexico |
31,942 |
23 |
12% |
|
Continental Airlines |
31,847 |
3 |
12% |
|
American Airlines |
29,401 |
5 |
11% |
|
US Airways |
14,700 |
3 |
6% |
|
Others |
86,587 |
34% |
|
|
Total |
259,347 |
100% |
Source Flightbase 14-20 Sep 2010
Mexicana currently has a 25% share of all international seats from Mexico, double the size of its nearest competitor Aeromexico. Mexicana has led the way in terms of International expansion in Mexico, however it is interesting that the routes that are being cancelled are international.
Mexicana downsizing of its significant US and Canadian operation will have a significant impact on its international network, it operates 19 destinations in the US and Canada from Mexico, and according to IATA BSP data it is the largest transborder operator with a 23% share of the market to the US and Canada having carried over 8 million passengers (two-way) between May 09 and 2010.
Mexicana has been not just been impacted by the global recession, but the 2009 flu epidemic which severely impacted the leisure market and growing fuel prices have all led to the point where Mexicana is operating now under creditor protection. It may well seek to sell of its subsidiaries Click and Link which are viable units within Mexico. This could be the catalyst for a new carrier, similar to what happened with Swiss Air Lines following its demise after 9/11.
IMPACT ON THE MEXICAN MARKET
Mexican airports will be rushing to backfill capacity to the US with US based carriers. As the market is much stronger than last year this may be relatively easy to sell, however the domestic market could be more difficult to backfill. The low cost operators Interjet, Volaris and VivaAerobus and of course Aeromexico have limited fleets and would have to expand into non-core markets. To help the Mexican market there may be a rationale to introduce some form of public subsidy for regional routes that lose air service to the capital.
The growth of the low cost sector in Mexico has clearly had a severe impact on the two network carriers, and one solution would be for Aeromexico and Mexicana to create a combined entity. In the meantime it remains to be seen whether the Mexican government will allow Mexicana to fail or whether like many airlines in the US, public money will be used to bail out an important national airline.
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