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On Tuesday, Ethos Asset Management Inc., USA, announced a new long-term financing partnership with Transportes Aéreos Regionales (TAR Aerolíneas), a regional Mexican carrier with a fleet of nine Embraer E145LR aircraft operating to 18 domestic destinations and having charter services covering the US and the Caribbean.
A new financing partnership
Ethos Asset Management is committed to providing significant capital infusion that will continue for several years. The US-based company believes there is a strong opportunity to develop the domestic regional market in Mexico, as it is underserved and difficult for operators to access.
Neither company disclosed the amount to be invested by Ethos Asset Management in TAR Aerolíneas. Nonetheless, Carlos Santos, Chief Executive Officer (CEO) of the US company, said,
“It’s an absolute honor to be partnering with an innovative company from Mexico’s aviation industry, where the domestic regional market presents a double-digit growth opportunity. With little competition in the domestic regional market, the regional market is attractive, underserved, and difficult for other operators to access.”
He added that the gap between supply and demand in the regional market is large and has widened as a result of the pandemic. In February 2023, the largest regional airline in Mexico, Aeromar, ceased operations. The remaining players are well below pre-pandemic traffic levels.
Nonetheless, the largest carriers in the country, Volaris, Viva Aerobus, and Aeromexico, have over 150-seat aircraft on average and a highly concentrated market based in the country’s largest hubs. This leaves a gap that regional airlines can fill.
What is TAR saying?
Ricardo Bastón, CEO of TAR Aerolíneas, said the company is pleased to be partnering with a solid financial entity such as Ethos Asset Management, addressing the opportunity that the Mexican regional aviation market presents via a loan facility that will enable TAR to strengthen its market position and providing the financial resources to expand its footprint in the market.
According to data from Mexican authorities, TAR carried 112,527 passengers between January and May 2023. It is the country’s fourth-largest carrier, although pretty behind Viva Aerobus (which is third), a company that had 8.66 million passengers in the first five months of the year. Nonetheless, compared to the same period in 2019, prior to the COVID-19 pandemic, TAR has only recovered 47% of its pre-pandemic traffic levels. As of July 2023, TAR operates about 256 weekly flights making 12,800 seats available per week.
Finally, Roberto Suárez Espinoza, Associate of Ethos Asset Management in Mexico, said the Mexican airline industry needs a consolidated fourth player to engage in further competition and bring greater health to a starved market. In the last three years, the country has lost two airlines, Interjet in December 2020 and Aeromar this year.
