Cancún International’s recent inauguration of its $100 million Terminal 3 replaced the Hurricane Wilma-devastated Terminal 1.

The rise in low-cost airlines, and the building of new airports under the National Infrastructure plan have opened up the aviation sector to increased competitiveness

Mexico’s viability as a regional conduit for air travel is endemic to its future prosperity, and to its status as an international hub for the Americas. In July this year, the Mexican government announced, within its 2007–2012 National Infrastructure Plan, the construction of three new airports in the country – Ensenada, Puerto Peñasco and Riviera Maya. In all, total expenditure in these new airports and expansion works at Toluca, Puebla, Cancún, San José del Cabo, Loreto, Nuevo Laredo, Monterrey, Guadalajara and Puerto Vallarta will be MXN 59 billion, or just under $5.5 billion, with MXN 35 billion allocated for the new airports. The final phase of the Secretariat of Communications and Transport’s (SCT) feasibility study into a new airport in Mexico City is scheduled to reach conclusion in December.

Also, this month the SCT unveiled its new logistical centre, Centro Logístico Aeroportuario de Puebla, designed to facilitate the projected 50 percent increase in air cargo traffic during the period of the National Infrastructure Plan.

During the inauguration of Guadalajara’s Terminal 2 on August 16th, Communications and Transport Secretary, Luis Téllez, stated that the Mexican airports concession system “continues to fulfil its function, with more than MXN 12 billion pesos (just over $1 billion) invested over the last few years.” Guadalajara’s airport is operated by Grupo Aeroportuario del Pacífico, which operates 12 airports in the country, including the popular Pacific resorts of Puerto Vallarta, Los Cabos, La Paz and Manzanillo.

Indeed, Mexico’s three private operators, OMA, GAP and ASUR, which jointly administer and operate 34 airports across the nation, have recently completed or are undergoing major expansion works on their busiest sites.

Aeropuertos del Sureste (ASUR), an operator of nine airports in the country’s southeastern region whose shares are also traded on the New York Stock Exchange, recently completed work on Terminal 3 of its Cancún International Airport, representing an investment of more than $100 million. Serving more than ten million passengers in 2006, the airport in Cancún is Mexico’s second largest and prized as the one serving the most international passengers in Latin America. Undoubtedly, ASUR is poised to be a leading contender in the bid for the Riviera Maya concession.

Freeing the skies
Mexico currently boasts one of the most liberalized aviation sectors in the region. Mr Eduardo Pérez Motta, president of the Federal Competition Commission, points out that two decisions caused a breakthrough in the industry: “The first one was not to allow the two large airlines, both in hands of the government, to merge. Only one was sold, Mexicana de Aviación; the other, Aeroméxico, is still in the hands of the government,” pending a sale at some point in the last quarter of this year. “The second action,” he continues, “was the opening of the market to new low-cost carriers”.

This breakthrough is, indeed, impressive: the new airlines have managed to capture 20.4 percent of the market in one year, with a projected growth rate three times greater than GDP growth for the next few years. In addition, they have been responsible for generating unprecedented demand in the sector. In 2006 alone, total passenger traffic grew by 12 percent, with the Mexican Civil Aviation Authority publishing estimates of 85-90 million domestic passengers annually by 2015.

Interjet’s maintenance base at Toluca Airport maximizes efficiency to cut costs and to attract foreign carriers.

Mexico is now home to eight new low-cost carriers – the largest number in any other country or region worldwide – prompting concerns regarding the sustainability of such concentration. Ami Lindenberg, executive vice-president of Aeromar, an executive airline with more than 20 years of operation experience, believes that, “it is very difficult to compare how low-cost companies work in different places. Low-cost airlines began to work in the U.K. and in the U.S. in a very different environment, with their initial operations offering routes not in traditional airports but in alternative ones.” Aeromar, with a fleet of 19 ATR 42 executive aircraft, serving 24 destinations in Mexico differentiates itself by offering “excellent service, centering on high frequencies and excellent itineraries” to business-oriented clients. Its competitive advantages of operating out of Mexico City’s International Airport and code-sharing with AeroMexico, ranked as the leading Latin American player, on North American destinations should allow it to capture much of the incoming corporate clientele from Europe and beyond.

However, the aim of airline liberalization was to make the market “more democratic,” as Pérez Motta points out. The initial intention was to make air travel more accessible to a higher percentage of the Mexican population and, if the aforementioned statistics are anything to go by, the market is evidently yielding the prescribed results. In addition, leading low-cost airlines such as Volaris, a dual investment by Telmex tycoon Carlos Slim and Televisa family Azcarraga, and Interjet are announcing expansion plans for up to 20 new aircraft each in the coming three years. In fact, all players are confident that there is plenty of room to grow, with the most significant limiting factors being the current capacity of airport infrastructure and the lofty airport charges, which comprise between 50-60 percent of a ticket’s total cost. The latter is generally seen as the airlines’ toughest obstacle to growth.