Tuesday, 21 December 2010

Mexicana's bankruptcy and the quickly-adapting Mexican air travel market

Picture: Wikipedia

Mexico's second-largest carrier, Mexicana de Aviación, went bankrupt last August, however, the market moved in quickly to fill the void. Mexico's air traffic did not even register the loss of such a large operator. On one hand a number of new international routes were opened, mainly between the US and Canada and several Mexican destinations. Domestically, the spare demand has been absorbed by local operators, flag carrier Aeroméxico (a Sky Team partner) and Mexican low-cost airlines such as Volaris, Interjet and Viva Aerobus, that reported increasing load factors and market share.

As this article points out, this was possibly a case of excess capacity that has now wiped out. The speed with which the market adapts to the new situation highlights the dynamism of the air travel sector and its capacity to adapt to supply and demand factors and, in my opinion, strengthens the case for limiting government subsidies to loss-making airlines.

In any case, despite there are people willing to defy the new market equilibrium: a reborn Mexicana, under new management, plans to start operations in January. The new Mexicana will be smaller, it has rehired 30% of the previous staff, and operate a fleet of 20 aircraft. Half of its routes will be to international destinations, and, if everything goes well, the plan is to increase the fleet to 30 aircraft during the year and hire the remaining 70% of the staff of the original company.

This is certainly a bold move, since it might bring back excess capacity, but will possibly be good for Mexican air travellers, as the new Mexicana will have to work hard to regain its place under the sun and this possibly means lower fares...


Stephina Suzzane said...

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