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Tailwinds13
Topic Author
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Uruguay in talks with AM to start MEX-MVD

Wed Jan 17, 2018 5:27 pm

Per the article, the Uruguayan government has been in talks with Aeromexico to start flights to Montevideo. The article cite’s the Uruguayan government’s eagerness to connect Uruguay with Asia via Mexico City and that they and AM are in “advantaged negotiations” to see a route launch in 2018.

Article in Spanish: https://www.elobservador.com.uy/los-desafios-uruguay-ampliar-su-conectividad-aerea-n1153674
 
superjeff
Posts: 1406
Joined: Fri Feb 05, 2010 2:14 am

Re: Uruguay in talks with AM to start MEX-MVD

Wed Jan 17, 2018 5:34 pm

Makes sense, and probably a bit faster than via Miami and XXX. I think MEX-MVD-MEX would work well with a 788, and connections using the DL joint venture would provide a bunch of other options as well.,.
 
PDPsol
Posts: 1226
Joined: Fri Feb 20, 2004 5:09 am

Re: Uruguay in talks with AM to start MEX-MVD

Wed Jan 17, 2018 6:17 pm

As much as I would love this flight, I hold VERY little faith in the current administration's ability to negotiate a viable agreement with AM, let alone develop an innovative commercial aviation strategy for the nation. The commercial strategy is completely valid: develop non-stop link to major North American metropolis developing mega-international-airport, promoting connectivity to East Asia and further North American links. HOWEVER, this administration has already proven it is indecisive, feckless/wasteful, and simply inept at even understanding basic investment principals. They failed to effectively engage with AZUL in any meaningful way following their expressed interest in developing AZUL Uruguay, completely dragging their feet. AZUL has basically given up, as far as I know, would love to hear what locals know about the situation. DINACIA, the national regulator, was 'blamed', but political leadership was required to move the project forward and that leadership failed to materialize.

AM also has had a rather weak interest in South America, failing to operate MEX-GIG for very long and succumbing to Brazil's devastating economic recession. If AM pulled GIG 'at the drop of hat', a mega-city with over 11 million metropolitan inhabitants, how focused will they be with MVD? Of course, we know AM has now stated a strategic interest in developing its South American network, following political changes in the United States, so MVD may very well be in its sights. Mexico plans to significantly expand its commercial, political, and social links throughout Latin America, and the southern cone of South America is a region presenting strong strategic interest. Argentina, Brazil, and Uruguay are the region's leading agricultural powers, so logical AM would want greater presence in the region. Nonetheless, the current F.A. administration in Montevideo is rather clueless regarding business and investment, and they may screw up these discussions.
 
LatinPlane
Posts: 2630
Joined: Mon Dec 27, 1999 11:05 am

Re: Uruguay in talks with AM to start MEX-MVD

Wed Jan 17, 2018 8:54 pm

PDPsol wrote:

AM also has had a rather weak interest in South America, failing to operate MEX-GIG for very long and succumbing to Brazil's devastating economic recession. If AM pulled GIG 'at the drop of hat', a mega-city with over 11 million metropolitan inhabitants, how focused will they be with MVD? Of course, we know AM has now stated a strategic interest in developing its South American network, following political changes in the United States, so MVD may very well be in its sights. Mexico plans to significantly expand its commercial, political, and social links throughout Latin America, and the southern cone of South America is a region presenting strong strategic interest. Argentina, Brazil, and Uruguay are the region's leading agricultural powers, so logical AM would want greater presence in the region. Nonetheless, the current F.A. administration in Montevideo is rather clueless regarding business and investment, and they may screw up these discussions.


AM's conservative business strategy is to only fly long-distance routes with a good mix of business/leisure/cargo demand. While GIG was quickly withdrawn due to lackluster results, GRU is up to 11x per week now. And yes, while the Uruguayan government has learned the hard way of the consequences of not helping to prop up air service to MVD, it seems that it wants to turn the corner at the highest levels.

AM reached a similar deal with the Ecuadorian government a few years ago when it launched Quito. The Ecuadorian government convinced AM to start flying to its new capital airport by subsidizing the fuel on its flights headed to MEX. Fast forward a few years now and the route operates on its own and is in the black. Last month the route reported a 77% load factor. Having said that, MEX-MVD market can be possible under the right conditions from both sides, but it would be a big win for Uruguay and its government.
Pan Am - The World's Most Experienced Airline.
 
dcajet
Posts: 4847
Joined: Sun Aug 01, 2004 9:31 am

Re: Uruguay in talks with AM to start MEX-MVD

Wed Jan 17, 2018 10:28 pm

PDPsol wrote:
As much as I would love this flight, I hold VERY little faith in the current administration's ability to negotiate a viable agreement with AM, let alone develop an innovative commercial aviation strategy for the nation. The commercial strategy is completely valid: develop non-stop link to major North American metropolis developing mega-international-airport, promoting connectivity to East Asia and further North American links. HOWEVER, this administration has already proven it is indecisive, feckless/wasteful, and simply inept at even understanding basic investment principals. They failed to effectively engage with AZUL in any meaningful way following their expressed interest in developing AZUL Uruguay, completely dragging their feet. AZUL has basically given up, as far as I know, would love to hear what locals know about the situation. DINACIA, the national regulator, was 'blamed', but political leadership was required to move the project forward and that leadership failed to materialize.


Slightly off topic, but was wondering what happened to Azul Uruguay. While I don't have any first hand information, it would seem that Uruguay's regulator takes its sweet time to move the wheels needed to let business do what they do best. It'd be really lame if Azul has had a change of mind and Uruguay blew the chance of having a modern airline in the country!

They (DINACIA) also took ages to get Alas U off the ground, but then, that project was doomed from the start for other reasons. It'd appear that after PLUNA's fiasco no politician wants to get involved in making decisions on the matter.
Keep calm and wash your hands.
 
phbfa
Posts: 22
Joined: Mon Jan 24, 2005 2:17 pm

Re: Uruguay in talks with AM to start MEX-MVD

Thu Jan 18, 2018 1:57 am

LatinPlane wrote:
PDPsol wrote:

AM also has had a rather weak interest in South America, failing to operate MEX-GIG for very long and succumbing to Brazil's devastating economic recession. If AM pulled GIG 'at the drop of hat', a mega-city with over 11 million metropolitan inhabitants, how focused will they be with MVD? Of course, we know AM has now stated a strategic interest in developing its South American network, following political changes in the United States, so MVD may very well be in its sights. Mexico plans to significantly expand its commercial, political, and social links throughout Latin America, and the southern cone of South America is a region presenting strong strategic interest. Argentina, Brazil, and Uruguay are the region's leading agricultural powers, so logical AM would want greater presence in the region. Nonetheless, the current F.A. administration in Montevideo is rather clueless regarding business and investment, and they may screw up these discussions.


AM's conservative business strategy is to only fly long-distance routes with a good mix of business/leisure/cargo demand. While GIG was quickly withdrawn due to lackluster results, GRU is up to 11x per week now. And yes, while the Uruguayan government has learned the hard way of the consequences of not helping to prop up air service to MVD, it seems that it wants to turn the corner at the highest levels.

AM reached a similar deal with the Ecuadorian government a few years ago when it launched Quito. The Ecuadorian government convinced AM to start flying to its new capital airport by subsidizing the fuel on its flights headed to MEX. Fast forward a few years now and the route operates on its own and is in the black. Last month the route reported a 77% load factor. Having said that, MEX-MVD market can be possible under the right conditions from both sides, but it would be a big win for Uruguay and its government.


AM was having positive results at GIG with good loads and yields. Shortly before pulling from GIG, AM even announced a date for the upgrade form the 762 to the 788 on that particular route. GIG was dropped when AM removed the 762 from service hastly. The messy approach simply scrapped what was planned beforehand: when they antecipated the retirement of the 762 they did not have enough 788s to serve GIG so they had no choice other than pulling out.

Recently AM switched their schedule to GRU increasing frequencies to 11x weekly. The GIG market is still there and is not small however it is being channeled by AM from GRU and other players such as AV and CM.
Faire le ciel le plus bel endroit de la terre est impossible sans le Concorde.
 
EddieDude
Posts: 7048
Joined: Fri Nov 14, 2003 10:19 am

Re: Uruguay in talks with AM to start MEX-MVD

Thu Jan 18, 2018 2:59 am

phbfa wrote:
AM was having positive results at GIG with good loads and yields. Shortly before pulling from GIG, AM even announced a date for the upgrade form the 762 to the 788 on that particular route. GIG was dropped when AM removed the 762 from service hastly. The messy approach simply scrapped what was planned beforehand: when they antecipated the retirement of the 762 they did not have enough 788s to serve GIG so they had no choice other than pulling out.

Recently AM switched their schedule to GRU increasing frequencies to 11x weekly. The GIG market is still there and is not small however it is being channeled by AM from GRU and other players such as AV and CM.

Very interesting post. I honestly think that AM will not land at MVD this year... or next. The local market is quite small, and I do not think the business component is high enough. Based on what you have mentioned, phbfa, I think it would be more likely for AM to relaunch GIG (788) as more Dreamliners arrive. I have not read AM's reports in many, many quarters, but as far as I remember Brazil has always been a good source of profits for AM, so I would not be surprised that as the Brazilian economy improves and AM receives more widebodies, GIG is relaunched.
Upcoming flights:
April/May: AM MEX-SCL 788 (J), AM EZE-MEX 789 (J).
 
abrelosojos
Posts: 4323
Joined: Sun May 29, 2005 6:48 am

Re: Uruguay in talks with AM to start MEX-MVD

Thu Jan 18, 2018 5:41 am

LatinPlane wrote:
PDPsol wrote:

AM reached a similar deal with the Ecuadorian government a few years ago when it launched Quito. The Ecuadorian government convinced AM to start flying to its new capital airport by subsidizing the fuel on its flights headed to MEX. Fast forward a few years now and the route operates on its own and is in the black. Last month the route reported a 77% load factor. Having said that, MEX-MVD market can be possible under the right conditions from both sides, but it would be a big win for Uruguay and its government.


= I am curious. How can I find the load factors on MEX-UIO market and that fuel was subsidized? Isn't MVD pretty tiny of a market though?

Saludos,
Alex
Live, and let live.
 
LatinPlane
Posts: 2630
Joined: Mon Dec 27, 1999 11:05 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 7:14 am

phbfa wrote:
LatinPlane wrote:
PDPsol wrote:

AM was having positive results at GIG with good loads and yields. Shortly before pulling from GIG, AM even announced a date for the upgrade form the 762 to the 788 on that particular route. GIG was dropped when AM removed the 762 from service hastly. The messy approach simply scrapped what was planned beforehand: when they antecipated the retirement of the 762 they did not have enough 788s to serve GIG so they had no choice other than pulling out.

Recently AM switched their schedule to GRU increasing frequencies to 11x weekly. The GIG market is still there and is not small however it is being channeled by AM from GRU and other players such as AV and CM.


You are correct in that AM had already announced their introduction of 787 service to GIG when they suddenly pulled the plug. The route was flown for a little over a year when they decided to withdraw at a time when Brazil went from boom to bust. The route was started under the impression that Petrobras (based in Rio) regarded as the once shinning example of a Latin American energy superstar was the highly favored candidate to invest and provide its technical know-how to Pemex. This just as Mexico was privatizing its petroleum industry. Under such idealistic notion of a Brazilian-Mexican energy cooperation would make everyone live happily ever after! Then life happened and everything fell apart in Brazil as Petrobras erupted in scandal and the price of the oil barrel plummeted thanks to the U.S. shale boon.

I beg to differ when it comes to the MEX-GIG being deemed a positive route. While the route had great load factors in economy it was was a low-yielding one lacking much premium demand. AM pulled the plug as the numbers just didn't add up. It now flies 11x directly to GRU, which is the same frequencies on the Brazilian market at the time it flew to both GRU and GIG. The difference as you know is that GRU is a true business hub while GIG is a very nice place to visit.

AM's 767 at GIG.
Image

When it comes to AM's route planning, it's strategy seems to be (not their words): Either you live to expectations, or you're out! We're here to do business, not for cheap prestige. (Especially now that the overlords from ATL are all up in our business!) :lol:
Pan Am - The World's Most Experienced Airline.
 
LatinPlane
Posts: 2630
Joined: Mon Dec 27, 1999 11:05 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 7:26 am

abrelosojos wrote:
LatinPlane wrote:
PDPsol wrote:

AM reached a similar deal with the Ecuadorian government a few years ago when it launched Quito. The Ecuadorian government convinced AM to start flying to its new capital airport by subsidizing the fuel on its flights headed to MEX. Fast forward a few years now and the route operates on its own and is in the black. Last month the route reported a 77% load factor. Having said that, MEX-MVD market can be possible under the right conditions from both sides, but it would be a big win for Uruguay and its government.


= I am curious. How can I find the load factors on MEX-UIO market and that fuel was subsidized? Isn't MVD pretty tiny of a market though?

Saludos,
Alex


Abrelosojos:

You can google it, but for your ease, click here: http://www.elcomercio.com/actualidad/negocios/tame-y-aeromexico-subsidio.html

Route passenger information is published monthly by Mexico's Civil Aeronautics Board.

http://www.sct.gob.mx/transporte-y-medicina-preventiva/aeronautica-civil/inicio/

You can go in and look up data and do the math, which can be fun, but if you don't have time the Mexican commercial aviation enthusiast will gladly provide you with their pretty accurate guesstimate research:

http://www.flyapm.com/foro/viewtopic.php?f=2&t=257
Pan Am - The World's Most Experienced Airline.
 
PDPsol
Posts: 1226
Joined: Fri Feb 20, 2004 5:09 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 1:31 pm

dcajet wrote:
PDPsol wrote:
As much as I would love this flight, I hold VERY little faith in the current administration's ability to negotiate a viable agreement with AM, let alone develop an innovative commercial aviation strategy for the nation. The commercial strategy is completely valid: develop non-stop link to major North American metropolis developing mega-international-airport, promoting connectivity to East Asia and further North American links. HOWEVER, this administration has already proven it is indecisive, feckless/wasteful, and simply inept at even understanding basic investment principals. They failed to effectively engage with AZUL in any meaningful way following their expressed interest in developing AZUL Uruguay, completely dragging their feet. AZUL has basically given up, as far as I know, would love to hear what locals know about the situation. DINACIA, the national regulator, was 'blamed', but political leadership was required to move the project forward and that leadership failed to materialize.


Slightly off topic, but was wondering what happened to Azul Uruguay. While I don't have any first hand information, it would seem that Uruguay's regulator takes its sweet time to move the wheels needed to let business do what they do best. It'd be really lame if Azul has had a change of mind and Uruguay blew the chance of having a modern airline in the country!

They (DINACIA) also took ages to get Alas U off the ground, but then, that project was doomed from the start for other reasons. It'd appear that after PLUNA's fiasco no politician wants to get involved in making decisions on the matter.


They (F.A.) have a dreadful reputation with the commercial aviation sector, with failed state-led efforts to develop the industry. The PLUNA loan guarantees were a dreadful policy decision, as any objective analyst would have concluded. AM is an important, and growing, carrier with strategic ownership by DL, and commercial agreements with international carriers worldwide. A MEX-MVD AM non-stop would complement the daily AA MIA-MVD, and the daily CM PTY-MVD, offering additional connectivity to North America and, in the case of MEX, even East Asia. Uruguay would certainly welcome the international traffic an AM flight would create.

MVD does offer significant potential, but it is not a mega-city with 10+ million metro inhabitants, that is the role Buenos Aires plays nearby. On the other hand, MVD has seen its already-robust professional services sector expand very quickly over the past few years, with accountants, lawyers, consultants, financial advisors, software developers, and 'off-shore' customer support centers growing significantly. Plus, the city's logistical capabilities, linking its port, the River Plate basin, and the agricultural heartland are also being developed. In addition, tourism is a significant driver of traffic, and interest from 'new' markets outside of region is growing.
 
phbfa
Posts: 22
Joined: Mon Jan 24, 2005 2:17 pm

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 2:15 pm

LatinPlane wrote:
phbfa wrote:
LatinPlane wrote:


You are correct in that AM had already announced their introduction of 787 service to GIG when they suddenly pulled the plug. The route was flown for a little over a year when they decided to withdraw at a time when Brazil went from boom to bust. The route was started under the impression that Petrobras (based in Rio) regarded as the once shinning example of a Latin American energy superstar was the highly favored candidate to invest and provide its technical know-how to Pemex. This just as Mexico was privatizing its petroleum industry. Under such idealistic notion of a Brazilian-Mexican energy cooperation would make everyone live happily ever after! Then life happened and everything fell apart in Brazil as Petrobras erupted in scandal and the price of the oil barrel plummeted thanks to the U.S. shale boon.

I beg to differ when it comes to the MEX-GIG being deemed a positive route. While the route had great load factors in economy it was was a low-yielding one lacking much premium demand. AM pulled the plug as the numbers just didn't add up. It now flies 11x directly to GRU, which is the same frequencies on the Brazilian market at the time it flew to both GRU and GIG. The difference as you know is that GRU is a true business hub while GIG is a very nice place to visit.

AM's 767 at GIG.
Image

When it comes to AM's route planning, it's strategy seems to be (not their words): Either you live to expectations, or you're out! We're here to do business, not for cheap prestige. (Especially now that the overlords from ATL are all up in our business!) :lol:


It is kinda difficult to get higher yield traffic with the awful product AM had in their 762. It was like US when they flew their own 762. I worked at Rio back then and I see from what was corporate practice at the time: avoid AM simply because of the hard product. AM knew that and that`s why they planned to get rid of the 767 on that route. However the hasty phaseout of the aircraft without any replacement of a compatible size made the route inviable. Also the GIG flight made immediate impact on the GRU service hurting loads and yields there so pulling out of Rio also served to protect their SP service.

Indeed Petrobras was one of the reasons AM decided to come however Rio is not only about them FEMSA for instance has very large operations there among other companies. The power of São Paulo is not questionable however it does not mean that Rio cannot sustain its own service to MEX. The wrong and old fashioned idea that Rio only has oil and beaches is long standing however there are other strong industries there an in its catchment area such as pharma, automotive, marine among others. AM is upgrading GRU to 11x for two reasons: moving the flight from the 77E to the 789 would mean a capacity drop and MEXGRU has always been a good flight to AM. And AM has always made seasonal upgrades to GRU even when it was served by the 77E now with the switch do a 787 station the seasonal upgrades are not seasonal anymore.

Now AM has the right aircraft to fly MEXGIG: the 788 and GIG became a stronger hub for Gol, a connecting partner that they use at GRU that could help the feed as well in Rio. However I really doubt that AM will resume flights to GIG in the next 18/24 months, hope I'm wrong. In the meantime GIG-MEX pax are funneled through GRU, PTY, BOG and even IAH and MIA as they have been most of the decade.
Faire le ciel le plus bel endroit de la terre est impossible sans le Concorde.
 
dfdubflyer
Posts: 200
Joined: Mon Oct 15, 2012 4:01 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 4:05 pm

Does AM serve Montevideo at all currently? I wonder if they're interested in one-stop connections to Asia if they wouldn't just be better served by providing a subsidy to American to either LAX or DFW to be timed with their flights onward to East Asia rather than trying to attract an entirely new carrier. I assume O&D though to MVD from either of those places would be pittance compared to Mexico City.
 
LatinPlane
Posts: 2630
Joined: Mon Dec 27, 1999 11:05 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 4:30 pm

phbfa wrote:
ong standing however there are other strong industries there an in its catchment area such as pharma, automotive, marine among others. AM is upgrading GRU to 11x for two reasons: moving the flight from the 77E to the 789 would mean a capacity drop and MEXGRU has always been a good flight to AM. And AM has always made seasonal upgrades to GRU even when it was served by the 77E now with the switch do a 787 station the seasonal upgrades are not seasonal anymore.

Now AM has the right aircraft to fly MEXGIG: the 788 and GIG became a stronger hub for Gol, a connecting partner that they use at GRU that could help the feed as well in Rio. However I really doubt that AM will resume flights to GIG in the next 18/24 months, hope I'm wrong. In the meantime GIG-MEX pax are funneled through GRU, PTY, BOG and even IAH and MIA as they have been most of the decade.


Yes indeed. At times, GRU has been AM's most profitable route. Here is AM's first 789 on its maiden flight to GRU.

https://www.youtube.com/watch?v=vuAWD-pPzRo

The Latin America network is probably the most profitable division for the company. I tend to think rather than resume Rio, they will instead open another Brazilian destination to a place such Brasilia (hub) or Manaus (focus city) where they can feed from GOL. It may even be that it is GOL doing the flying as they are so eager to fly their new 737-MAX's to North America. Delta is definitely encouraging more cooperation between AM and GOL.
Pan Am - The World's Most Experienced Airline.
 
EddieDude
Posts: 7048
Joined: Fri Nov 14, 2003 10:19 am

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 5:55 pm

phbfa wrote:
AM is upgrading GRU to 11x for two reasons: moving the flight from the 77E to the 789 would mean a capacity drop and MEXGRU has always been a good flight to AM. And AM has always made seasonal upgrades to GRU even when it was served by the 77E now with the switch do a 787 station the seasonal upgrades are not seasonal anymore.

Now AM has the right aircraft to fly MEXGIG: the 788 and GIG became a stronger hub for Gol, a connecting partner that they use at GRU that could help the feed as well in Rio. However I really doubt that AM will resume flights to GIG in the next 18/24 months, hope I'm wrong. In the meantime GIG-MEX pax are funneled through GRU, PTY, BOG and even IAH and MIA as they have been most of the decade.

The drop in capacity from the 77E to the 789 is what? Like 3 seats? That is negligible. Yes, the main cabin has a small drop of seats, the business cabin has a drop of seats as well, and AM Plus (Y+) has an increase, but that is actually a good move for yield management. More paying pax (i.e., less award/upgrade pax) in J, and more Y passengers paying a surcharge for added legroom and recline. The increase in frequencies surely has nothing to do with the loss of three seats, but rather with the fact that things in Brazil are improving.

I really hope to see GIG back on the AM network. Outside of leisure, VFR and oil, there is also telecoms no? América Móvil's Brazil HQs are in Rio, and there probably are other businesses in Rio with ties to Mexico.

dfdubflyer wrote:
Does AM serve Montevideo at all currently?

No.

LatinPlane wrote:
Delta is definitely encouraging more cooperation between AM and GOL.

As it should be. More cooperation with VS, KE and 9W is also needed.
Upcoming flights:
April/May: AM MEX-SCL 788 (J), AM EZE-MEX 789 (J).
 
TATLTALE
Posts: 31
Joined: Tue Oct 31, 2017 8:30 pm

Re: Uruguay in talks with AM to start MEX-MVD

Fri Jan 19, 2018 7:00 pm

All politics aside, if they can make this work it would be terrific to have more options to Uruguay (Montevideo is one of my favorite cities, and certainly one of the best in S.America). I can't answer for the business/commercial end, since I only know it from tourism, but having more options for folks from North America, not just Americans but those connecting from Canada as well, would be terrific. On my last trip I had a pretty odd roundabout via ATL and EZE, mostly because of being wedded to Skyteam.
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