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 Travel & Outdoors | December 2005 
Mexican Air Travel May Double in 3 Years on Discounts
 Adriana Arai - Bloomberg
| | Mexico is Latin America's second-largest aviation market after Brazil, with 20 million passengers a year. |
Mexico is preparing for domestic air travel to double in as few as three years, predicting new discount airlines such as Interjet will pull 20 million passengers off the bus, the country's aviation chief said.
Interjet, the first low-cost carrier to begin service from the Mexico City area, introduced fares this month that beat premium bus travel. Almost 40 million people annually travel 400 kilometers or more on buses equipped with televisions, air conditioning, and washrooms between cities served by airports, said Gilberto Lopez Meyer, Mexico's civil aviation director.
"We can double the number of domestic air passengers if half these people begin flying," Lopez Meyer said in an interview in Mexico City on Dec. 20.
The first discount fares introduced in Mexico are encouraging, he said. Mexico City-based Interjet, one of five startup projects, began flying four routes on Dec. 5 with prices that are as little as a quarter of those charged by the nation's largest airlines, Mexicana and Aeromexico.
They can be cheaper than the bus, too. Traveling to the beach resort of Cancun from Mexico City on a luxury bus run by Autobuses ADO costs 1,284 pesos ($120) and takes up to 23.5 hours. Interjet's fares to Cancun from the Toluca airport, 69 kilometers from downtown Mexico City, start at 1,205 pesos, including taxes.
A round-trip ticket to Guadalaraja from Toluca can be as cheap as 1,144 pesos on Interjet, compared with 5,145 pesos charged by Mexicana or Aeromexico.
"I hope these prices are here to stay," Lopez Meyer said. "If the discount fares are on average 50 percent cheaper than the legacy carriers, we'll have achieved our goal."
Temporary Subsidies
Avolar Lineas Aereas SA began flying from the northern city of Tijuana to four towns in September. Another two carriers probably will start operations by June, Lopez Meyer said. One is sponsored by Mexican billionaires Carlos Slim and Emilio Azcarraga and the other is backed by Brazil's Gol Lineas Aereas Inteligentes SA.
Mexico is Latin America's second-largest aviation market after Brazil, with 20 million passengers a year.
To help lower fares, the Mexican government is expanding airport capacity and giving the startup carriers temporary subsidies on services such as fuel delivery that reduce operating costs by about 10 percent, Lopez Meyer said. Passengers get 50 percent off on airport tax when flying from secondary airports.
Interjet, owned by the son and grandson of former Mexican President Miguel Aleman, can break even in a year by maintaining the current fare structure so long as the planes fly 65 percent full, Chief Executive Officer Jose Luis Garza said in an interview in Mexico City. The carrier has a five-class fare system with a 50-peso difference between them, he said.
Competitor Reaction
The Alemans spent $230 million to buy seven Airbus SAS's A320 from insolvent Italian airline Volare Group SpA and put down $60 million in equity capital to start Interjet, Garza said. Interjet placed firm orders for 10 new Airbus planes and has options to buy another 10, which would demand investments of $1.2 billion, he said. Interjet has no debt.
Reacting to increasing competition, Mexicana and Aeromexico introduced promotional fares and expanded service to Toluca. Government-owned Aeromexico began flying to the industrial city of Monterrey from Toluca on Dec. 14 for as little as 822 pesos. At Interjet, fares to Monterrey start at 745 pesos.
To contact the reporter on this story: Adriana Arai at aarai1@bloomberg.net |
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