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Mexican leader angers airlines as military leads aviation overhaul

On a sunny Friday morning this month, the outdoor plaza at Mexico City’s new Felipe Ángeles airport was so quiet you could hear insects chirping, interrupted suddenly by the roar of three F-5 fighter jets overhead.

The gleaming airport is the most visible sign of how Mexico’s president Andrés Manuel López Obrador has reshaped aviation in Latin America’s second-largest economy — by inserting the military across the sector and trying to push airlines to use his new hub.

The process has put him at odds with domestic and international airlines and the US government, and so far has not lured much passenger traffic. Inside the terminal, none of the 100 check-in desks had a queue, while at arrivals a recruiting office invited scarce passengers to join the military.

Old-school leftist López Obrador in 2019 tasked the defence ministry with building the airport at a cost of $5bn after cancelling a partially built one designed by architect Norman Foster, claiming that the project was plagued by corruption. Felipe Ángeles opened to great fanfare last year.

The new airport — which is run by the army — is slick and airy but is also 44km from the city centre, with limited ground connections. Airlines say they have to set ticket prices so low to fill planes that they struggle to make money.

About 7,700 passengers flew to or from the airport each day in July, compared with 90,500 at Benito Juárez, the capital’s saturated main airport.

López Obrador has enlisted the armed forces to help bring his projects to fruition across the economy but their insertion into aviation has been especially pronounced © Pedro Pardo/AFP via Getty Images

López Obrador is trying to change that. This month, the armed forces in Mexico will start selling tickets on its own commercial airline out of the new airport.

At Benito Juárez, pure cargo operations were stopped by presidential decree this year, raising ire among US officials. Passenger flights were cut sharply in a second government decision in August, this time prompting a fierce backlash from international and local airlines.

Peter Cerda, regional vice-president at airlines association Iata, said: “Making the unilateral decision of just pushing capacity somewhere else . . . without good analysis, particularly without collaboration with the industry and working together like it occurs in every other city around the world, that’s what’s been ineffective here.

“Ultimately the passenger is going to suffer . . . with less availability of flights, [fewer] destinations and higher prices.”

López Obrador has enlisted the armed forces to help bring his projects to fruition across the economy, from building train lines to government bank branches, claiming they are more efficient and less corrupt than bureaucrats. But their insertion into aviation has been especially pronounced.

The army now controls 12 airports including a new one it is building in the hipster beach resort of Tulum in the Yucatán peninsula. The navy controls seven airports, including Benito Juárez, and customs at every terminal in the country. Before López Obrador came to power, state-owned commercial airports and customs services were run by civilian ministries.

“What do you train an armed forces to do? Well, they’re supposed to defend the homeland,” said Ryan Berg of the Center for Strategic and International Studies. “They’re not supposed to run an airport.”

For its new airline, the government spent 816mn pesos to buy the brand Mexicana, an airline that went bust in 2010. Mexicana will be subcontracted to a third party, meaning cabin crew will be civilians rather than military, but generals will oversee its administration.

Mexicana airlines planes
The government bought the brand Mexicana for 816mn pesos. López Obrador says the military airline will be 20% cheaper than commercial carriers © Eliana Aponte/Reuters

López Obrador has relied on the military to realise his political projects in the young but stable democracy, despite concerns over a lack of accountability and allegations of corruption. He has defended his strategy as one of working on behalf of the Mexican public.

“Previously the neoliberal governments, that were at the service of a predatory minority, worked to sell public goods, goods owned by Mexicans,” he told a press conference in August. “We haven’t sold; on the contrary, we have bought public companies.” 

A handful of nations including Colombia and Argentina have small military-run passenger airlines, but they were mostly set up decades ago to fly to underserved remote areas.

In a presentation seen by the Financial Times, a Texas-based company called Petrus Aero Holdings said it had a preliminary lease agreement with the government for two Boeing 737-800s for $350,000 each per month. Petrus would earn another $627,000 a month for additional services in the first six months before adding another eight planes, the presentation said.

Paul O’Driscoll, head of advisory for the Americas at Ishka, an aviation data group, said the prices set out in the presentation were “not cheap, that’s for sure”.

He added that any lessee facing a tight deadline to begin operations would pay more, particularly in the current market where demand for aircraft exceeds supply. Luis Evia, senior business adviser at Petrus, said the figures were “incorrect and exaggerated” but that because of confidentiality agreements, he could not give more details.

He said the company, now renamed SAT Aero Holdings, would provide services including crews and maintenance and had hired experienced specialists from the original Mexicana Airlines.

The defence ministry did not respond to a request for comment but set aside some 8bn pesos for the airline in the 2024 draft budget. López Obrador said tickets would go on sale this month between the new airport and major cities already covered by private sector companies, such as Guadalajara and Monterrey.

He says the military airline will be 20 per cent cheaper than commercial carriers, something the aviation sector is watching closely to spot any subsidies that might breach Mexican competition law.

Passengers gather at Terminal 1 of Benito Juarez International Airport
About 90,500 passengers flew to and from the capital’s saturated main airport, Benito Juárez, each day in July © Raquel Cunha/Reuters

“Mexico is very well served by low-cost carriers,” O’Driscoll said. “They have very new fleets, they have high order books, they’re well-funded. There’s no obvious need for a new competitor.”

A major stakeholder in the future of Mexican aviation is the US. With hundreds of daily flights between the two countries, it is one of the world’s busiest cross-border routes.

This week Mexico regained its Category 1 rating from the US Federal Aviation Administration after more than two years with a lower rating because of safety concerns. The upgrade allows the country to once again add new flights and routes to the US, and for US airlines to sell tickets on Mexican-operated flights.

But the Mexican leader’s decision to limit cargo flights has raised concerns in Washington. Transportation secretary Pete Buttigieg visited López Obrador in June to discuss the move, which meant companies faced delays and higher costs as they awaited the new transport infrastructure.

The US has avoided publicly criticising Mexico’s government, whose co-operation it needs in areas such as migration and security.

But in a July letter the Department of Transport said Mexico was not fully implementing a liberalised transport deal between the two nations, citing “recent actions the government of Mexico has taken affecting US carrier operations at Benito Juárez international airport”.

As a result it suspended an application from Mexican airline VivaAerobus and US counterpart Allegiant for antitrust immunity, showing how integration between the two nations is already being affected.

“The unilateral decisions without consultation or good analytical study — that’s what’s hurting the industry, the growth and the passengers ultimately,” Cerda said.

https://www.ft.com/content/ae61a69f-0e40-4f84-ba49-33c6c177403d Mexican leader angers airlines as military leads aviation overhaul

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