Mexico Could Open Domestic Flights To Foreign Airlines

Mexico Could Open Domestic Flights To Foreign Airlines

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I tend to think that this is one of those ideas that sounds better than it really is. However, it could set quite a precedent for the industry.

Mexican president wants foreign airlines to operate domestic flights

Mexican President Andrés Manuel López Obrador has indicated that he wants to allow foreign airlines to operate domestic flights within Mexico, in order to help drive down prices. As is the case in most of the world, currently cabotage laws prevent foreign airlines from operating wholly domestic flights.

As López Obrador described this proposal:

“The other thing is to open up aviation. Let’s open it up to competition. That’s democracy. Let foreign airlines come in, from Europe and the United States, so that they can operate flights inside the country.”

López Obrador seems eager to lower fares, and bring service to smaller cities that lack flights. Furthermore, this is clearly also a push to get more service to Mexico City’s new airport, Felipe Ángeles International Airport (NLU), which is a former air force base that’s currently underutilized. Also, López Obrador has an interesting definition of democracy.

Mexico already has pretty low fares

Is opening up Mexico to foreign airlines a good idea?

I think the first thing to note is that this is only a proposal as of now, so if this does happen, I imagine it will be some time. I’ve seen many people suggest that eliminating cabotage rules would be good for competition, though I’m a bit more lukewarm on this, personally.

In the case of Mexico:

  • Airfare is already quite cheap within Mexico, while aviation taxes are fairly high; while it’s a fast growing market, I question how lucrative it is to get into
  • Both Mexico’s full service and low cost carriers haven’t exactly been doing great financially, and opening up the market to foreign airlines would only make that situation worse
  • The goal seems to be to open up service to smaller airports in Mexico that are underserved, though I’d be willing to bet that if foreign airlines started domestic service in Mexico, it would likely be in already crowded markets, like Mexico City to Cancun
  • Allegiant and Viva Aerobus are launching a joint venture, which will see more cooperation between the two countries; however, I can’t imagine Allegiant would want to operate its own flights within Mexico, since labor costs are much higher in the United States than Mexico

I doubt anything will come of this, but who knows. If it does happen, I doubt it will accomplish the goal of lowering airfare and/or opening service to smaller markets.

Could we see foreign airlines operate in Mexico?

Bottom line

Mexico’s president has proposed opening the domestic aviation market to foreign airlines, in hopes of increasing competition to smaller markets and lowering fares. There aren’t many countries that allow foreign airlines to compete in domestic markets, so if this did happen, it would be pretty remarkable. However, I think it’s pretty likely that this doesn’t come to fruition.

What do you make of the concept of Mexico opening up domestic markets to foreign airlines?

Conversations (25)
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  1. Lieflat19 Member

    Lucky,

    Can you do an article on which countries allow foreign carriers to operate domestic flights? I think it would be a great learning experience for us and a good research project for you. You have covered 5th freedom before, let's learn about this "freedom"

  2. Please no more Mexicana! Guest

    Emirates or Qatar ? I am flying to Mexico the First Day they operate.

    1. Unhoeflich Diamond

      Your wish has been granted. Mexicana went out of business in 2010.

  3. Joseph Guest

    Vote for Viva aerobus!

  4. Ricardo Guest

    Brazil has done this already, in 2019. Airlines operating in Brazil (including domestic flights) can be 100% foreign-owned. Brazilian Congress passed a law.

    Guess how many foreign airlines have started to operate Brazilian domestic flights? Zero!

    Maybe because of COVID, maybe because the Brazilian market is too tough, who knows.

    I'm still waiting for my BA GRU-GIG, or QR GRU-FOR flights! ;)

  5. ConcordeBoy Diamond

    This guy can't be as dumb as he makes himself out to be:

    Anyone with even half a brain can predict that int'l carriers are going to operate the likes of Mexico City to Cancun, Monterrey, Guadalajara, and etc.

    They're not gonna do Aguascalientes to Culiacan, or Puebla to Hidalgo.

    So all that's going to happen is that the local carriers will be drained of whatever revenue they're making off the major routes, while...

    This guy can't be as dumb as he makes himself out to be:

    Anyone with even half a brain can predict that int'l carriers are going to operate the likes of Mexico City to Cancun, Monterrey, Guadalajara, and etc.

    They're not gonna do Aguascalientes to Culiacan, or Puebla to Hidalgo.

    So all that's going to happen is that the local carriers will be drained of whatever revenue they're making off the major routes, while still be expected to serve the regional routes that foreign carriers want nothing to do with.

    Who wins in that situation, other than foreign carriers?

    1. Brian Gasser Guest

      Southwest, Allegiant, and now Breeze built their brands on point to point non hub service. If money can be made between airport pairs, someone will serve them.

  6. Brian Guest

    Is this an opportunity for SkyWest or other regionals to get another life out of the 50 seat RJs and build pilot hours for eventual promotion to the US market?

  7. Jim Guest

    That's one way to get around the FAA's Category 2 rating...

  8. Bernardo Ng Guest

    The current president knows nothing about aviation. He shut down construction of the texcoco airport citing high costs and corruption only to be heavily indebted to the point where it was cheaper to just keep bulging and finishing the airport than cancelling it. He quickly finishes building the new airport only for it to be a big white elephant. He wants to create a network of airports between Mexico City, Santa Lucía, and Toluca only...

    The current president knows nothing about aviation. He shut down construction of the texcoco airport citing high costs and corruption only to be heavily indebted to the point where it was cheaper to just keep bulging and finishing the airport than cancelling it. He quickly finishes building the new airport only for it to be a big white elephant. He wants to create a network of airports between Mexico City, Santa Lucía, and Toluca only to overcrowd the air space above Mexico City and cause a lot of incidents. He wants to reactivate a defunct airline without a real strategy or business plan. He couldn’t raffle off or sell the presidential plane. He knows nothing about aviation or running an airline or opening up new airport and he’s too stupid to let the experts take over. This can only end in disaster. Not to mention Mexico was downgraded to category 2 by the FAA under his watch.

  9. Nick Thomas Guest

    I don't pretend to follow Mexican politics, but I imagine this could be jockeying for some sort of amendment to the USMCA that replaced NAFTA. Delta Air Lines owns 49% of Aeromexico. I could very much see Delta wanting to cut costs on its regional flights by having those routes operated by Aeromexico, who presumably have significantly lower costs than SkyWest, Republic or Delta-owned Endeavor. Of course, I don't think the political dynamics in Washington...

    I don't pretend to follow Mexican politics, but I imagine this could be jockeying for some sort of amendment to the USMCA that replaced NAFTA. Delta Air Lines owns 49% of Aeromexico. I could very much see Delta wanting to cut costs on its regional flights by having those routes operated by Aeromexico, who presumably have significantly lower costs than SkyWest, Republic or Delta-owned Endeavor. Of course, I don't think the political dynamics in Washington would ever allow that to happen. The only possibility I could see are Puerto Rico, the Virgin Islands, Guam, the Northern Mariana Islands and American Samoa. Those territories, especially the Virgin Islands and the three in the Pacific, are really, really hurt by aviation cabotage.

    1. Tim Dunn Diamond

      Nick,
      I may be wrong but I think you are reading the opposite of what is being suggested. It would be US carriers (as well as other nationalities) being allowed to operate within Mexico and not Mexican airlines being allowed to operate within the US.
      And I don't think the US will allow cabotage - US airline unions have consistently been too powerful for Congress to even consider and it would amount to a massive, in-your-face outsourcing of American jobs.

    2. TimDunnLover101 New Member

      Nick,
      I agree with Tim. I don't think you read the article correctly. Cheers

  10. Klaus Guest

    Within Europe, other European airlines are allowed to offer domestic flights.
    But let’s take Germany as an example: the market for domestic flights is highly competitive (train, car, bus, Lufthansa), so that foreign airlines do not offer domestic flights. Easyjet tried it but stopped. Sun Air was not too successful

  11. Tim Dunn Diamond

    first, Emirates and any foreign carrier flying widebodies isn't going to be the solution. Interested and potentially viable carriers will be those from Central and S. America as well as the US and Canada that fly narrowbodies.
    second, this is the type of populist language that fails to address the reasons for high airfare - including high taxes which has been noted in the article
    and third, the most valuable airports including MEX...

    first, Emirates and any foreign carrier flying widebodies isn't going to be the solution. Interested and potentially viable carriers will be those from Central and S. America as well as the US and Canada that fly narrowbodies.
    second, this is the type of populist language that fails to address the reasons for high airfare - including high taxes which has been noted in the article
    and third, the most valuable airports including MEX will be off limits because of capacity controls while serving smaller cities and the new Mexico City regional airport will be where the carrots will be.
    and fourth, if this actually happens, AA and UA will salivate at being to jump into a larger position while DL will do all possible to help Aeromexico while adding some of DL's own service. US legacy carrier RJs might be part of the solution.

  12. Matthew S Guest

    AMLO is a traitor to the Mexican people again and again.

    1. Bernardo Ng Guest

      He is. He is a disgrace and all whom voted for him out of ignorance.

    1. Nick Thomas Guest

      The ideal situation would be allowing connections through Canada on otherwise wholly U.S. domestic flights. So flying from someplace in the US through Toronto, Calgary, Montreal or Vancouver to another airport in the US. That would be great. It's currently not allowed, unless done on a separate ticket.

    2. Chad Guest

      Yeah I sure would love to clear immigration twice on what amounts to a domestic itinerary.

  13. John T Guest

    Domestic flights in Mexico are already extremely cheap. I doubt any international carrier would have any interest trying to compete here, especially if they are tag flights with foreign crew.

    1. Jd Guest

      No, they are not. There are some routes where prices continue being extremely high. Except for main cities like CUN, MTY, GDL, etc some other markets have extremely high prices and/or limits on flight scheduled times. Aeroméxico has become a monopoly in many markets and it needs to end.

  14. Alvin | YTHK Diamond

    I mean, I'll take a Japan Airlines/Ethiopian flight between Cancun and Mexico City, but there are probably more lucrative fifth-freedom flights out there....

    1. ConcordeBoy Diamond

      That'd actually be 8th freedom flights, further complicated by the fact that neither carrier can do MEX nor CUN nonstop from their home airports, so would have to incorporate 5th freedom into it.

      Couldn't have picked two worse airlines to set up for such a service.

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Tim Dunn Diamond

first, Emirates and any foreign carrier flying widebodies isn't going to be the solution. Interested and potentially viable carriers will be those from Central and S. America as well as the US and Canada that fly narrowbodies. second, this is the type of populist language that fails to address the reasons for high airfare - including high taxes which has been noted in the article and third, the most valuable airports including MEX will be off limits because of capacity controls while serving smaller cities and the new Mexico City regional airport will be where the carrots will be. and fourth, if this actually happens, AA and UA will salivate at being to jump into a larger position while DL will do all possible to help Aeromexico while adding some of DL's own service. US legacy carrier RJs might be part of the solution.

2
Bernardo Ng Guest

The current president knows nothing about aviation. He shut down construction of the texcoco airport citing high costs and corruption only to be heavily indebted to the point where it was cheaper to just keep bulging and finishing the airport than cancelling it. He quickly finishes building the new airport only for it to be a big white elephant. He wants to create a network of airports between Mexico City, Santa Lucía, and Toluca only to overcrowd the air space above Mexico City and cause a lot of incidents. He wants to reactivate a defunct airline without a real strategy or business plan. He couldn’t raffle off or sell the presidential plane. He knows nothing about aviation or running an airline or opening up new airport and he’s too stupid to let the experts take over. This can only end in disaster. Not to mention Mexico was downgraded to category 2 by the FAA under his watch.

1
Klaus Guest

Within Europe, other European airlines are allowed to offer domestic flights. But let’s take Germany as an example: the market for domestic flights is highly competitive (train, car, bus, Lufthansa), so that foreign airlines do not offer domestic flights. Easyjet tried it but stopped. Sun Air was not too successful

1
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