AMLO puts fate of new Mexico City airport to a vote; Aeromexico’s small jet fleet hangs in balance

The fate of Mexico City’s new airport now hinges on a country wide vote after the country’s President elect Andres Manuel Lopez Obrador (AMLO) threatened to nix construction of the new facility during his campaign.


Summary:

  • The fate of Mexico City’s planned new international airport now hinges on a country wide vote;
  • The project, where construction has already started has been in doubt since the country’s President elect Andres Manuel Lopez Obrador (AMLO) won in national elections in Jul-2018;
  • Mexico City’s current main international airport handled 45 million passengers in 2017, much  higher than its stated maximum capacity of 32 million;
  • Doubts over the new airport project has meant national carrier Aeromexico has “put a pause” on its small jet evaluations to replace its older Embraer E-Jets.

AMLO won the election in Jul-2018, and will assume the presidency in Dec-2018. One of his pledges while campaigning was halting construction of the new airport under construction for Mexico City, which is scheduled to open in 2020.

As previously reported by Bloomberg, AMLO has characterised the airport project as “a $13 billion project that Lopez Obrador calls a waste of taxpayer money mired in corruption”.

Some of the new airport’s investors have warned that stopping construction would cost the country billions of dollars in wasted labour and materials.

But Mexico City’s main airport, Juarez International, is operating far beyond its planned capacity. Juarez handled 45 million passengers in 2017, which is 13 million higher than its maximum capacity of 32 million.

Previously, AMLO has stated he would hold public consultations on the fate of the new airport as he evaluates scrapping its construction. Now Bloomberg is reporting the President-elect said he will abide by the will of the voters to decide whether to proceed wit the project.

The publication is reporting Mexico’s citizens will decide by vote in Oct-2018 on halting or going forward with construction with the airport, even though he does not formally take office until Dec-2018.

Above and beyond the potential to waste billions if the construction of the new airport is scrapped, there are potential repercussions for the aerospace industry. Aeromexico recently stated it “put a pause” on its small jet evaluations to replace its older Embraer E-Jets during Mexico’s recent presidential election.

CHART – Aeromexico currently operates a fleet of 60 Embraer E-Jets including variants of the E170 and E190Source: CAPA – Centre for Aviation Fleet Database (data: as at 27-Aug-2018)

The airline has explained it needs to determine the fate of Mexico City’s new airport before moving forward with a replacement for its Embraer jets. If voters endorse ending construction of the new airport, Aeromexico’s largest hub and connecting point for North America, Asia and Europe, will remained a slot controlled facility. One of the reasons Aeromexico opted to shed its smaller 50-seat ERJ-145s was to maximise and improve  connectivity from Juarez International, which is notoriously congested.

Aeromexico believes Mexico “needs a new infrastructure, and hopefully the new airport continues to be built”, said company CEO Andres Conesa. Given the uncertainty over the new airport’s fate, the airline understandably has no plans to make a decision regarding a small jet order until some clarity about the new airport emerges.

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