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Will There Ever Be A MX/AM Merger?  
User currently offlineNAVEGA From United States of America, joined Nov 1999, 741 posts, RR: 0
Posted (5 years 7 months 3 days 23 hours ago) and read 2916 times:

Have read over the past 10 years in different Topics in this Forum that either Aeromexico has purchased Mexicana or that Mexicana has offered to Purchase Aeromexico and I would
like to hear from our friends in Mexico, if they feel this will eventually happen and if so why and if not, why also.

17 replies: All unread, jump to last
 
User currently offlineEddieDude From Mexico, joined Nov 2003, 7561 posts, RR: 43
Reply 1, posted (5 years 7 months 3 days 21 hours ago) and read 2838 times:

One of the things that had to happen in order for the U.S. and Canada to enter into the NAFTA with Mexico was that Mexico had to enact economic competition laws. After the federal government, through the IPAB (Mexico's equivalent of the FDIC) and Nacional Financiera (a federal government financing agency) became the majority owner of both AM and MX following the peso crash and financial crisis of 1994 and 1995, the Mexican antitrust watchdog resolved that the two carriers could not be merged, and further resolved that the government had to sell the two airlines separately. Due to bureaucracy, a series of economic downturns and political unwillingness, the sale got postponed once and again until MX was finally sold to Grupo Posadas, a major Mexican hospitality company listed on the Mexican Stock Exchange. Between the date of the sale of MX and the date on which AM was also put on the auction block, several LCC's entered the Mexican market and ate into AM and MX' domestic marketshare. As we all know, in terms of international traffic, the competition with the likes of CO, AA, IB and AF is fierce. When AM was finally sold, MX was one of the bidders, but their bid was frozen by the antitrust authorities even though it was clear that the circumstances that prevailed at the time of the resolution to sell them separately had changed big time. I am not sure what others think, but the sale of AM was perhaps the last good opportunity that AM and MX had to merge, which does not mean this won't happen, but it will be more difficult.

At this point in time, the two carriers are fiercely fighting against each other, launching competing routes and trying by all means to steal passengers from each other. In terms of fleet, AM is about to become an all-Boeing operator (mainline), with 737NG's, 767ER's and 77E's in its fleet, plus orders for 788's, and its regional feeder 5D is becoming an all-Embraer operator ERJ-145's and EMB-190's. On the other hand, MX's low cost arm is an all Fokker 100 operator and MX mainline is moving towards and all-Airbus fleet (A32X's and A332's) with some odd 767ER's that will most likely be retired when more A332's arrive. Plus, AM has stayed true to its role as founding member of SkyTeam and MX has now become a oneworld carrier, so they not only compete domestically, but also belong to competing alliances.

MX's hub is T1 of MEX, whereas AM has moved all of its operations (together with DL's) to the brand new T2.

In terms of ownership, MX is majority owned by Posadas, and certain other investors have also acquired a stake in the company. AM on the other hand is backed by Citigroup (minority investor) and a large number of high-profile Mexican investors. While Posadas is under the obligation to disclose periodically financial information of MX due to the fact that Posadas is a listed company (and therefore we can know how MX is doing), AM is under no such obligation, so it is harder to know whether they have profits or losses. Posadas will certainly begin to feel the pressure from the global crisis and they may not be in a position to infuse cash to MX in the near future if need be. On the other hand, it is possible that the big names behind AM could inject more funds to AM if required, although this is not certain by any means.

Under this reconfigured scenario, it seems unlikely AM will try to make an offer for MX or vice versa.

Nonetheless, the case for a merger is compelling. If AM and MX became one, the resulting airline would have a very strong domestic routemap and would fly to the most important cities in Canada, the U.S., Central and South America. Plus, it would have a presence in Asia and Europe. The opportunity to realize savings through cost cutting and combining operations would be very substantial, and the company (perhaps LatAm's largest carrier) would give its international competitors a run for their money.

The conclusion is that a merger looks far from certain. Competing alliances, different fleets, use of different terminals at MEX are just some factors that play against a merger, but there are other considerations. Perhaps the most important one is that the antitrust authorities would continue to oppose it... if MX could not persuade Mr. Pérez Motta and the other commissioners that the merger was not anticompetitive in 2007, I don't think they could be persuaded now or in the near future unless the LCC's continue to expand rapidly. Plus, which carrier would be the acquirer and which one would be the target? Or would the transaction be structured as an exchange of shares (true merger) in which all of Posadas, Citi and all the other investors would stay afterwards? In this latter case, how would the company be controlled? And most important, which brand would survive? Maybe AM as the mainline brand and MX as the regional feeder or low cost brand?

This is a very interesting but very complex subject. I think we will see the two airlines fighting more and more for our business in the years to come (which I guess we all agree is quite positive) and perhaps in a few years someone will revisit this possibility, especially if one or both airlines continue to lose money.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineKLM685 From Mexico, joined May 2005, 1577 posts, RR: 19
Reply 2, posted (5 years 7 months 3 days 20 hours ago) and read 2816 times:



Quoting EddieDude (Reply 1):

Brilliant!



KLM- The Best Airline in the World!
User currently offlineSflaflight From United States of America, joined Nov 2005, 1183 posts, RR: 1
Reply 3, posted (5 years 7 months 3 days 20 hours ago) and read 2811 times:



Quoting EddieDude (Reply 1):

Superb----- man, if you were a student of mine, I would give you an A.


User currently offlineGhost77 From Mexico, joined Mar 2000, 5215 posts, RR: 51
Reply 4, posted (5 years 7 months 3 days 20 hours ago) and read 2805 times:

Really interesting thoughts Eddie, I can't agree more with you.

What I may add, is that merger chances are gone.

We're going to see a battle MX-AM like JJ-RG had one time in the years to come.

MX last Nov 29th 2008, during the A330 arrival, in Gastón's words, they kind of declared without saying names, the war against AM. MX has very clear what they want, MX has this big advantage that the airline was privatized way before AM, so MX is ahead with almost 20 months of changes.

Posadas took control of MX, make a review of what was lacking, they started changing and investing really fast everywhere (technology too inside and not seen on the outside) and as a culmination of everything, a livery change, widebodies and new long haul, and this will be pretty it, more frames, destinations and growth.

AM has to still restructure everywhere, stop growth and with their 100 frames, study where wisely deploy their frames and seats. Keep a fleet of B777/763ERs and stop long haul expansion until they consolidate what they have now with more frequencies and also they wont stop MX by adding more seats or killing yields so they better take their precautions if AM wants to last for many more years. AM also needs badly a new CEO and a strong head. Who's in charge AM right now? Banamex? Nope... who of their 18 investors??? None... even 3 to 4 of the big guys and it's girl (Arambuzabala de Garza) recently declared they were not interested in the airline and they wouldn't spend more on it.

Also, fleets are way different, MX is heading almost as all Airbus operator and AM has Boeing and Embraer. 60 Airbus vs 53 Boeing's (once they get the 10 new deliveries due for 2009). Aeromexico's T7s and Boeing 767-300ER would be a nice a addition to MXA as well it's Boeing 767-200ER for conversion for a cargo division but that's it. OTOH, AMX would pretty much like Mexicana's presence in the US, Canada and South America.

A merger is not longer possible... what will be of Mexico... ask Brazil... been there done that. If AM does not do the right things market share will keep shrinking. They have to thank Volaris plans for 2009, but they'll have to worry with Interjet and don't forget Aviacsa... due to the 200 frames sent to VCV, ROW, TUS, MHV, etc... they're going out for shopping!!!

g77



Ricardo Morales - flyAPM - ¡No es que maneje rapido, solo estoy volando lento!
User currently offlineEddieDude From Mexico, joined Nov 2003, 7561 posts, RR: 43
Reply 5, posted (5 years 7 months 3 days 20 hours ago) and read 2801 times:

LOL, thanks a lot. Are you a lecturer? We are in the same age bracket though.

Sadly my Antitrust Law professor at the University of Chicago did not concur with you and I only got 177 (B) back in 2002-2003.



Next flights: MEX-GRU (AM 77E), GRU-GIG (JJ A320), SDU-CGH (G3 73H), GRU-MEX (JJ A332).
User currently offlineXA744 From Mexico, joined Mar 2004, 734 posts, RR: 3
Reply 6, posted (5 years 7 months 3 days 19 hours ago) and read 2784 times:

Fellows, no more need for a merger, I think.

... Lots of dramatic changes to take place in the weeks and months ahead, will, undoubtedly, take their toll...

Our world, an aviation in it, will never be the same again !!!...

Lets all come back and have a chat once again by the end of the year...

Best regards

P.S. Merry X´mas to all of you out there !!!....  santahat 



No matter how you fly...just never get your wings clipped !
User currently offlineNAVEGA From United States of America, joined Nov 1999, 741 posts, RR: 0
Reply 7, posted (5 years 7 months 3 days 2 hours ago) and read 2681 times:



Quoting EddieDude (Reply 1):

Thank you for your most eloquent and eye opening answer.


User currently offlineJuventus From United States of America, joined Dec 2004, 2835 posts, RR: 2
Reply 8, posted (5 years 7 months 3 days 2 hours ago) and read 2660 times:



Quoting XA744 (Reply 6):
Fellows, no more need for a merger, I think.

Not sure if there will be no more mergers, but most definetly not between AM and MX. The Mexican aviation industry and its large tourism industry can support 2 majors easily. Hell if Taiwan can support Eva and China airlines, Mexico better be able to support AM and MX.

I'll be happy with 2 major/international airlines and 2 or 3 national carriers like Interjet, Volaris and Aviacsa.


User currently offlineBAC111 From United States of America, joined Feb 2007, 114 posts, RR: 0
Reply 9, posted (5 years 7 months 3 days 2 hours ago) and read 2655 times:

Eddie Dude--very well done. I learned a lot on a topic I've often wondered: why the 2 carriers have never merged.

User currently offlineViscount724 From Switzerland, joined Oct 2006, 24817 posts, RR: 22
Reply 10, posted (5 years 7 months 2 days 19 hours ago) and read 2551 times:



Quoting Juventus (Reply 8):
Quoting XA744 (Reply 6):
Fellows, no more need for a merger, I think.

Not sure if there will be no more mergers, but most definetly not between AM and MX. The Mexican aviation industry and its large tourism industry can support 2 majors easily.

I disagree. Canada had the same problem when it had two major airlines, Air Canada and Canadian (previously CP Air). They were both signifcantly larger than both AM and MX but spent so much time fighting with each other for market share on routes where they competed when they should have been devoting those resources to competing with their major international competitors. Since AC took over CP, they have a much stronger international presence with service to 5 continents, whereas previously AC had no presence in South America and in most of Asia or the South Pacific which were CP's designated territories. And for the last couple of years of CP's existence, both AC and CP were serving Japan, HKG, LHR, FRA and a few other major markets which made no sense.


User currently offlineNAVEGA From United States of America, joined Nov 1999, 741 posts, RR: 0
Reply 11, posted (5 years 7 months 2 days 18 hours ago) and read 2519 times:

Viscount724

Please keep in mind the population of Mexico. The Capital, Mexico, DF has more people than the whole of the country of Canada.

On this premise I conclude that you cannot compare Canada Aviation to Mexico Aviation.

They are not on equal terms in relation to population and therefore 2 major airlines can definately survive in the country of Mexico.


User currently offlineSflaflight From United States of America, joined Nov 2005, 1183 posts, RR: 1
Reply 12, posted (5 years 7 months 2 days 18 hours ago) and read 2506 times:



Quoting EddieDude (Reply 5):
LOL, thanks a lot. Are you a lecturer? We are in the same age bracket though.

Yeah, I'm a lecturer (profe). BTW, if English is not your first language, you have mastered it VERY well. Congratulations Eddie!

It's refreshing to see an a.nutter on here who can actually type and express himself articulately!

Feliz navidad!

A.


User currently offlineViscount724 From Switzerland, joined Oct 2006, 24817 posts, RR: 22
Reply 13, posted (5 years 7 months 2 days 17 hours ago) and read 2486 times:



Quoting NAVEGA (Reply 11):
Please keep in mind the population of Mexico. The Capital, Mexico, DF has more people than the whole of the country of Canada.

On this premise I conclude that you cannot compare Canada Aviation to Mexico Aviation.

They are not on equal terms in relation to population and therefore 2 major airlines can definately survive in the country of Mexico.

Yes, Mexico's population is much larger than Canada's, but how does the size of the airline market in Mexico compare with Canada? I believe Canada's is larger. Do AM and MX carry more passengers than AC? I don't think so. AC carried roughly 33 million passengers in 2007 (including their Jazz regional operation). I can't find AM's passenger traffic data but MX shows 6 million passengers on their website and I doubt AM is larger.

My point was that considering the relative market sizes of Canada and Mexico where you also have to consider income levels, how many people can afford to fly etc., I think Mexico would have a stronger national carrier if AM and MX merged. Individually they are each still too small to compete effectively the many much larger airlines serving Mexico.

There would still be opportunities for competition from the various other domestic carriers, just just like WestJet which only started service in Canada in 1996 is now a major carrier with a fleet similar in size to MX or AM and close to 4 million passengers annually.


User currently offlineNAVEGA From United States of America, joined Nov 1999, 741 posts, RR: 0
Reply 14, posted (5 years 7 months 2 days 17 hours ago) and read 2472 times:



Quoting Viscount724 (Reply 13):

Mexicana carried about 10 million in 2007 and expected same in 2008. I really do not know how many Aeromexico carried. My figures come from past posted forums on Passengers carried by MX. Combined, I do not believe they come close to what you say Air Canada carried in 2007 however I ask for the opinion of the experts in Mexico on this matter. My observations where based on the population of Mexico vs that of Canada exclusively but I do see the point you are making.

It seems to me that AC has a sort of Monopoy in Canada ?? Am I correct in this??


User currently offlineViscount724 From Switzerland, joined Oct 2006, 24817 posts, RR: 22
Reply 15, posted (5 years 7 months 2 days 16 hours ago) and read 2464 times:



Quoting NAVEGA (Reply 14):
It seems to me that AC has a sort of Monopoly in Canada ?? Am I correct in this??

On most major domestic routes between the larger cities, WestJet is now a strong competitor and is growing faster than AC. Where AC may be the only carrier in smaller markets there probably isn't room for a second carrier to operate profitably. And on international routes AC has many competitors.


User currently offlineGhost77 From Mexico, joined Mar 2000, 5215 posts, RR: 51
Reply 16, posted (5 years 7 months 2 days 15 hours ago) and read 2415 times:



Quoting Viscount724 (Reply 10):
I disagree. Canada had the same problem when it had two major airlines, Air Canada and Canadian (previously CP Air). They were both signifcantly larger than both AM and MX but spent so much time fighting with each other for market share on routes where they competed when they should have been devoting those resources to competing with their major international competitors.

Mexico is very similar to Brazil. Mexico can support 2 majors even 3 (but not going long haul, just inside Latam)... and that will be Volaris as they continue to growth and expansion to the US is coming in this 2009.

Mexico had MX, AM and GD/JR/6A making the 3rd carrier.

Later, MX, AM, and JR/6A.

Today we have MX, AM, Y4 (Volaris), IJ (Interjet), 6A, and VivaAerobús. Volaris is to start flights to the US in 2009, Viva is already flying and Interjet sooner or later might start flights too.

Thing is that GD, JR were badly managed and 6A is not the best, nor the worse, but they know some things about this business.

Quoting Viscount724 (Reply 13):
Yes, Mexico's population is much larger than Canada's, but how does the size of the airline market in Mexico compare with Canada? I believe Canada's is larger.

What's Canada's market??? Here, Mexican carriers + International carriers move 62 million pax a year in Mexico. Is Canada's bigger?

Quoting Viscount724 (Reply 13):
Do AM and MX carry more passengers than AC? I don't think so. AC carried roughly 33 million passengers in 2007 (including their Jazz regional operation). I can't find AM's passenger traffic data but MX shows 6 million passengers on their website and I doubt AM is larger.

If all Mexican carriers were merged, they would be carrying over 30 million pax and if there was a REAL MEXICAN carrier in CUN they could even reach 35M.

Last year, MX moved 11M, AM was near 9.5 that makes 20.5. If you add all other carriers, that flew in 2007,

ALMA
AeroCalifornia
VivaAerobús
Avolar
Interjet
Volaris
Magnicharers
Aladia
RepublicAir
Global Air
Líneas Aéreas Azteca
Aviacsa

There you go, you got your 30m passengers.

If Mexico had just one carrier, like Canada, it would be similar to Air Canada's size.

Mexico's airport system is coming closer to 64 million this year, by 2015 it's estimated to reach 80 million pax a year, so there's a lot of growth potential here.

g77



Ricardo Morales - flyAPM - ¡No es que maneje rapido, solo estoy volando lento!
User currently offlineNAVEGA From United States of America, joined Nov 1999, 741 posts, RR: 0
Reply 17, posted (5 years 7 months 2 days 13 hours ago) and read 2368 times:



Quoting Ghost77 (Reply 16):

Thanks for the interesting information Ghost77.

Very, Very interesting indeed.


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