When Aeroméxico began its financial restructuring in mid-2020, everything pointed to the fact that nothing would ever be the same. As different tranches of financing poured into the airline and it negotiated new labor and lease contracts in the process, it became clearer that the change would be a watershed in the company’s history, and would point a path that does not get any easier. travel than the pre-pandemic market.
In 2020, Aeroméxico’s decline seemed headed for a bottomless pit. With more than 11 million passengers off the radar due to covid-19 and more than 40,000 million pesos in losses in the third quarter of 2020 – the worst figure in the company’s history – the rescue of the company required extraordinary measures , which resulted in an entry to Chapter 11.
Aeroméxico’s decision did not seem so radical when it comes to the air sector. Other companies, such as Avianca and LATAM Airlines, used the US Bankruptcy Code to emerge from the crisis, changing fundamental aspects of their respective business models.
The Colombian Avianca, for example –with a business model relatively similar to that of Aeroméxico in terms of trunk routes– emerged from Chapter 11 with a format that, in its words, includes “the best attributes of the low cost model”, which in that The country is led by airlines such as Viva Air and Wingo.
However, in the case of Aeroméxico, these changes are uncertain. On the one hand, the company reports a growth projection in the coming years that is higher than that put on the table by other companies in the air sector, considers Carlos Ozores, vice president and general director of the air sector at the ICF consultancy. “There is a certain optimism with Aeroméxico in terms of capacity. In the Mexican market there are opportunities with the exit of Interjet, on the one hand, which has been filled to a certain extent by Volaris and Viva, because the market has recovered exceptionally”, he explains.
The airline’s forecasts are for continued growth. On the one hand, it plans to recover the level of passengers it had before the pandemic this year. In 2022 it expects a traffic of 16.8 million users and in 2025 it expects to have 32.1 million passengers, almost double.
A similar dynamic is expected in the revenue category, which the airline projects to be 71% higher in 2025 compared to 2019, reaching more than 117,800 million pesos.
In addition to this, the company is expected to continue with the renewal of its fleet, in which new equipment has been incorporated, such as the Boeing 737 MAX, but in which other aircraft with several years of operation remain, such as the Embraer 190, which make up the Aeroméxico Connect fleet, intended for regional flights.
Ozores sees it feasible for the airline to evaluate other types of aircraft in the future, such as the Airbus A220, which the European manufacturer showed Aeroméxico on a regional tour in April this year.
“Buying new aircraft has certain advantages of operational efficiencies, such as lower maintenance costs. (…) The A220 I do believe is a potential aircraft for Aeroméxico. It offers operational characteristics superior to the E190, such as greater range and very competitive unit costs compared to larger aircraft.”
These expectations cast doubt on the strategy that the airline will follow to achieve such volumes of passengers and revenue, since it implies a growth rate that other companies have not only been able to follow, but also exceed, specifically in the low-cost segment.
Since the pandemic and Interjet’s cessation of operations, the Mexican low cost segment has had unprecedented growth. During the first quarter of this year, Viva Aerobus had 128% more passengers than in the same period of 2019, and Volaris registered 70% more passenger traffic. Even in the international part, the growth of Viva Aerobus was almost six times in the quarter accumulated compared to 2019.
“Before the pandemic, Aeroméxico realized that there was significant demand internationally, but it saw that the greatest demand came from the domestic market, which had been monopolizing the low cost companies,” says Brian Rodríguez, an analyst at Monex Grupo Financiero.
Hence, targeting the low-cost segment can be tempting, but this is where the airline seems to be pointing in another direction.
More experiences
Part of the airline’s commercial strategy aims to reinforce business units focused on the retention and loyalty of travelers, as well as key distribution channels.
On the one hand, during its restructuring, the company began the process of acquiring the entire Club Premier program, operated by PLM Premier, where Aeroméxico had a 51.14% stake, and which led it to buy 48.85% from the Canadian company Aimia. remaining in a transaction valued at 187.5 million dollars.
In addition, the airline announced the transformation of its Gran Plan brand into Aeroméxico Vacations, through which it will offer travel packages that will include plane tickets, hotel, transportation and experiences, in association with the tourist group PriceTravel Holding, which is the technology provider of the platform.
For Gerardo Herrera, an academic at the Universidad Iberoamericana, these decisions respond to the challenge of taking advantage of the strong growth prospects in air traffic in the coming years, but without becoming its competitors. “Today, the prospects for recovery are good, really the three winners of the pandemic are Aeroméxico, Viva Aerobus and Volaris,” says the specialist.
“In its commercial strategy, Aeroméxico returned with price campaigns in which I generally see that they try to raise ticket prices, and convince people to buy at low prices; but the challenge is how you manage to position yourself like this without becoming a low-cost airline”, he concludes.
