Mexicana: For the optimistic, the plane is half-full

It has been some time since the new Mexicana commenced operations and is already treading the same path as its predecessor. As if cast under the same Mayan spell, costs are accumulating, demand is waning, and the emerging picture suggests that a poorly executed idea invariably leads to poor outcomes. The company's financial data leave little to the imagination: according to an official AFAC report, its load factor for the first month of operations stands at a perilously low 49.7%, with passenger numbers around 12,000 and a market share of merely 0.26%. Consequently, a segment of the management—the portion actively striving to manage—considers transitioning to smaller aircraft to mitigate some of the expenses associated with operating planes that are, quite literally, half-empty. Lowering Expectations The question arises: What is an ideal aircraft for Mexicana? While Embraer E190s are available at a lower acquisition cost, the E1 Series of the E-Jet family is not particularly noted for its operational cost-effectiveness. Opting for the newer, more efficient 190-E2 means higher leasing costs and longer delivery waiting times, as the next-generation E190s are in short supply. This dilemma extends to the E195 Series—across both generations—yet a 150-seat aircraft does not present a significant advantage over a 180-seat A320 or 737, especially when considering empty seats. Moreover, the immediate cost of transitioning fleets could outweigh the benefits in the short term. A potentially wiser approach might involve considering regional aircraft like the Mitsubishi CRJ or even the ATR, although transitioning and operational costs would surge due to necessary flight and maintenance crew retraining or replacement. This issue is also present with a transition to E-Jets, albeit with a significantly different hiring effort required. Is There Room for the Airbus A220? Airbus' latest innovation, the A220, has struggled to penetrate the Latin American market. It has failed to secure orders for two years since the A220 toured the continent. This may be because most current A320 operators in the region adhere strictly to the Low-Cost Carrier (LCC) model, which includes maintaining a single-type fleet as one of its core principles. Legacy carriers like LATAM manage to operate a combination of A319/A320 aircraft (while maintaining interoperability with the A321), making it challenging for the A220 to gain a foothold in the region. Additionally, availability and leasing costs present significant hurdles for a state-owned airline with limited justification for substantial governmental financial injections. The Airfare Dilemma: Less Money, Mo’ Problems As if Mexicana didn't face enough challenges, ticket pricing remains a persistent issue. In President López Obrador's vision, Mexicana is intended to compete with LCCs through a low-price strategy. However, as many operators have learned, there is a vast difference between low-fare and low-cost. Can Mexicana survive with high costs, low demand, and non-competitive pricing? Are the routes with no competition profitable enough to sustain the rest of the operation? (Spoiler alert: they are not, as LCCs avoid these routes due to lack of profitability.) Short-Term Reality Versus Long-Term Strategy: Time is of the Essence Perhaps the most pressing question for Mexicana is how long it can sustain itself in the short term, given the absence of long-term viability. Should the project fail, President López Obrador's administration is more than willing to provide financial support, as the airline is a pet project of his, akin to the AIFA airport in Mexico City or the Tulum airport in the Cancun area. However, López Obrador's term will eventually end, and his party must vie for power. The airline is perilously close to becoming a convenient target for the opposition's campaign rhetoric. Once it becomes a topic of debate, calls for closure will likely increase. Mexicana's current performance is not something any politician would eagerly defend at a significant political cost—perhaps López Obrador might, but even his support has its limits. Anticipating the demise of an airline is unpleasant, given the jobs and livelihoods at stake. However, facing the truth is often challenging. Given the context of Mexico's political landscape and Mexicana's financial figures, the fall of this airline—a venture no one solicited and few will lament—is not a matter of if but when.

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