In the next several years some of Mexico's 14 airlines are likely to disappear. "Consolidation between airlines appears very probable," warns Jose Luis Garza, director general of InterJet, one of Mexico's low-cost startups. Even though air traffic could triple in the next several years, he predicts the number of airlines could decline.
Mergers during a period of growth sounds like a paradox, but insiders agree that it will happen unless traffic growth keeps pace with the projected capacity growth. Everyone expects the low-cost sector to stimulate the current market of 19 million annual passengers, but the crucial question is if it will be enough.
A quick canvas of growth plans highlights the quandary. Volar says it is ordering 20 Boeing 737-700s. Within a year VivaAeroBus expects to have eight 737-300s. Interjet is adding four Airbus A320s per year and Aerolineas Mesoamericanas is boosting its fleet of 50-seat Bombardier CRJ200s to 12. Avolar, meanwhile, is projecting a fleet of 50 Boeing 737s by the end of 2010.
Such plans translate into a 40% boost in capacity in the next several years. This year, 18% of Interjet's passengers are first-time flyers. Even if other carriers match that growth, it is unclear if this will be enough to fill all the new aircraft on order.
The swarm of low-cost carriers, who already control nearly 25% of the market, are affecting it in other ways. Most of them are operating new aircraft. Incumbents such as AeroCalifornia and Aviacsa have older fleets. AeroCalifornia already suffered a grounding earlier this year that lasted almost six months over maintenance problems with its ageing McDonnell Douglas DC-9s.
Lower fares are also challenging the incumbents. Aeromexico's third quarter revenue fell, mainly due to an 11% drop in domestic revenue brought on by low-cost rivals. That pressure is unlikely to ease. Experts generally agree the next several years could be turbulent for Mexico's airline industry.
Source: Airline Business
