On 15 February, Mexican airline Aeromar, which served 21 domestic and three international destinations, announced that it would cease operating definitively after 35 years of services in Mexico, the US, and Cuba.
Aeromar’s collapse came after years of financial problems. Since 2019, employees had said that the airline was essentially broke, with a debt of more than M$522m (US$28.9m) with Mexico City’s International Airport (AICM). According to local press reports, Aeromar had been seeking investments for the last five years, including from Colombian airline Avianca and the Mexican government. Most recently, a Brazilian company, Nella Airlines Group, had shown interest in acquiring Aeromar, holding negotiations over the course of some months. However, no agreement was reached over its debt. The collapse of the airline will affect some 700 employees, with labour unions claiming that the airline’s financial hole amounts to M$7bn.
Aeromar’s collapse adds to that of several other airlines that have failed in the last two decades. These include Aero California, which ceased operations in 2006 after the federal transport ministry (SCT) said it did not comply with safety standards; Líneas Aéreas Azteca, which stopped operations in 2007 due to financial problems and after the SCT deemed that its security processes were not up to scratch; Aviacsa, which was the third largest airline just two years before irregularities regarding maintenance and debts led to its collapse in 2009; and Mexicana de Aviación, known simply as Mexicana, which was the country’s oldest flag carrier, having been founded in 1921. It stopped operating in 2010 due to financial problems and debt. Most recently, Interjet ceased operations in 2020, after it went into administration following a strike by its employees to demand payment of overdue salaries and benefits. Although in November 2021 the airline said it would re-start operations in 2022, this did not happen.
According to Fernando Gómez Suárez, a local industry analyst, while factors such as fuel inflation, higher fees for airport services, and the coronavirus (Covid-19) pandemic put pressure on the whole sector, mismanagement within individual companies has been significant in all of these cases. He argues that Aeromar’s inability to secure capital was the main reason behind its collapse. However, a lack of oversight from the authorities was also key to the collapse not only of Aeromar, but also of other airlines. Similarly, Rogelio Rodríguez, an academic at Mexico’s national university (Unam), points out that the government has the obligation to ensure that companies that have a concession to provide public transport services, such as airlines, are financially viable, something which has not been done.
Indeed, this issue is at the heart of concerns regarding the current administration’s proposed purchase of Mexicana, which was announced in January. The government said it wanted to buy the brand and several fixed assets owned by the airline, valued at M$817m, and to have the armed forces-owned company Olmeca Maya Mexica operate it with the same name by the end of the current year. The company was created to run the Tren Maya tourist railway, as well as three airports that are being built in Tulum and Chetumal (both in Quintana Roo state) and in Palenque (Chiapas). It would be based at the Felipe Ángeles international airport (AIFA), which was inaugurated in March 2022 and which the company also manages [EB-22-04].
According to Mexico’s federal competition commission (Cofece), such a move – which would require amending the airports law that currently bans state-owned companies from simultaneously operating airports and airlines – could undermine competition and a level-playing field for other operators.
In any case, the process is facing obstacles after a group of 228 Mexicana pension holders opposed the sale and had it suspended with a legal appeal (‘amparo’). They represent about half of the total number of pension holders that have been seeking compensation from the airline, in addition to some other 8,000 former employees. The group wants the sale of the embargoed properties to be allocated to compensate the 450 pension holders, rather than to be divided evenly among all former employees. The courts will decide whether the pensioned workers’ appeal is valid or whether the embargo may end in order for the sale to proceed.
Despite the sector’s problems, there have been encouraging developments over the last month regarding local airline Volaris, which has become one of the largest passenger airlines in the country. Although it finished 2022 with losses, it recorded an increase in passenger numbers equivalent to 27% between 2021 and 2022, and its prospects for 2023 are positive. The company recorded net losses of US$30m as a result of an increase of 55% in its operating costs, mostly due to fuel price increases. However, in its financial report, Volaris forecast revenue of US$3.4bn for 2023, an increase from US$2.8bn recorded in 2022. In addition, the company expects to carry out capital investments for US$300m during the year.