Come negative balance with air cabotage

One week after the decree was presented that reforms, adds, and repeals provisions of the Civil Aviation Law to allow cabotage in Mexico (transportation of passengers, cargo, mail, or a combination of these between two points in the country by airlines foreign companies), the industry argues more harm than good, as well as ambiguities.

Dumping (which is a practice consisting of setting fares below costs), asymmetric competition, job losses and eventual financial collapses have been referred to as consequences in various spaces by the National Chamber of Air Transport (Canaero), the Front for the National Aviation Defense (FEDAN), which includes unions and schools, and specialists.

Given the eventual affectation, they ask the regulatory authorities of the sector to listen to their technical opinion before the modification is approved, whose initial objective is to generate more operations at the Felipe Ángeles International Airport (AIFA), where it was expected according to agreement With its business plan, it will close this year with 120 takeoff and landing operations, when to date around 60 are averaged.

In the document sent by President Andrés Manuel López Obrador to the Chamber of Deputies, a new article specifies the five conditions that foreign companies must meet before the Federal Civil Aviation Agency (AFAC).

However, there are doubts about its application, its effects and it is even reiterated that it violates an international agreement that Mexico signed and is in force.

“The objective of the initiative is not clear. Cabotage opens, but leaves it up to the authority to do it or not. There are no clear criteria. It is understood that it is to promote the use of airports that have technical and operational capacity and routes of strategic interest, with this it can be understood that they are starting from backwards: they do not want to promote competition but rather promote cabotage to promote AIFA ” , commented Rodrigo Pérez-Alonso, analyst of the sector and former director of Canaero.

Without passengers there are no routes

A former manager of a national airline who asked not to be mentioned highlighted in an interview that aviation is a business and works as such, so it is not possible to open a route if there is no demand to justify it (even in AIFA itself had to close the operation in Villahermosa due to low occupancy levels).

“One of the big questions is: How do we convince a foreign airline to come lose money on a route? Let’s think about opening AIFA-Campeche or AIFA-Loreto, clearly nobody is going to fly these routes for now, since there is no demand. In that case, as an incentive, they could be given the opportunity to make cabotage on other routes of greater interest such as Cancun, Monterrey or Guadalajara and that would be very dangerous for local companies, ”he commented.

From their perspective, the opening of the domestic market, which the air markets of the United States and Canada (Mexico’s trading partners in the Mexico-United States-Canada Treaty, known as T-MEC) do not have, for example, is not care and leaves the door open to future impacts for local businesses and consumers.

“It is clear that now there is no additional demand and the local airlines are attending to what is there and preparing for what is coming, they should be better supported. Just as cabotage is proposed, it could be that foreign companies take national ones out of the market if they put their huge fleets into operation here, because they are their competition in international operations and they will be able to whatever rates they want”, explained the executive.

Dumping and cabotage

For Rodrigo Pérez-Alonso, the damage would go further, so it is necessary for the government and legislators to listen to the voice of aviation so that the industry is not destroyed.

“Mexico would be at a total disadvantage before airlines that can dump, for example, one from Europe, one from the Middle East or China. It would be easy for them because they don’t have to go through the legal requirements to open their market in a reciprocal way and that creates problems. If the Chinese want to fly to a new destination in Mexico, they would no longer have to ask for permission but rather arrive at a point in the country and from there do cabotage,” he said.

Throughout the world, he said, governments have taken care of their industries in order to have a healthy development, because these are so sensitive that the slightest impact shakes them and, ultimately, companies go bankrupt. In this sense, the bilateral air agreements that have been signed with Mexico do not contemplate the possibility of cabotage, either unilateral or reciprocal.

As a context for the proposal to allow cabotage, it should be noted that the federal government drew up a short, medium, and long-term action plan to make AIFA have more passengers and “reach a financial breakeven point, consolidating the profitability of the itself, as well as getting the return on investment”.

Based on information from the Ministry of Infrastructure, Communications and Transport (SICT), one of the long-term actions (scheduled for the following year and that was brought forward) is: analyze in a working group the possibility of modifying the article 17 bis of the Civil Aviation Law, which allows air cabotage practices to foreign airlines, through the corresponding permit from the AFAC, as a mechanism that would allow the promotion of air operations in the AIFA.

That is in process and subject to debate.

alejandro.delarosa@eleconomista.mx