The chief executive of Aeromexico expects competitive pressure on routes between Mexico and the USA will ease in 2018, a change that could provide some relief to downward pressure on yields.
"We expect… this growth in the transborder market will moderate," chief executive Andres Conesa says during the airline's 2017 earnings call on 21 February.
The competitive environment is "gradually correcting", he adds.
Aeromexico's yields slipped 4.3% year-over-year to Ps1.335 (7.09 cents) in 2017, while the carrier's operating profit fell 12.9% to Ps3.1 billion, the company reported.
Conesa attributed the yield decline partly to performance of routes between Mexico and the USA. "We continue to see softness in transborder markets," he says. "Most of the pressure came in the US market. That pressured yields."
Competition on Mexico-US routes increased after Mexico and the USA in 2016 adopted a new air agreement that lifted restrictions on the number of airlines that could serve Mexico-US routes, Conesa notes.
Available seats from Mexico to the USA jumped 9% year-over-year in 2017, according to FlightGlobal Diio data. However, data shows that capacity between the countries actually declined 6.2% year-over-year in the first quarter of 2018.
Conesa says Aeromexico's performance on domestic and, in particular, medium- and long-haul international routes, helped offset performance of its Mexico-US flights.
Though the carrier cut domestic capacity by 1% in 2017, international expansion pushed up Aeromexico's total available seat miles by 12.8%, executives note.
Last year Aeromexico added flights to cities including London, Tokyo, Amsterdam, Madrid and Shanghai, Conesa says.
Higher fuel prices also contributed to a less profitable year in 2017, executives say. In the fourth quarter of 2017 Aeromexico paid 16.3% more for fuel in pesos than in the same period of 2016, it reported.
Though Aeromexico has struggled to translate that jump into higher ticket prices on domestic routes, it has had success doing so on international routes.
Gradually, international fares are "reflecting the new conditions", says chief financial officer Ricardo Sanchez Baker.
Source: Cirium Dashboard
