Aeromexico Chief Executive Officer, Andres Conesa, says patience was vital in the airline’s turnaround and is a key to success for any carrier
How is 2017 looking for the airline?
We had a difficult start to the year. There was the economic challenge of the exchange rate and the uncertainty about the change in the US administration.
Nobody knew how things would evolve. But the year is starting to get better, the summer looks good, and we’re confident we’re going to have a good year.
What are the factors in the year starting to take a positive turn?
The change in the US administration was the main challenge we faced.
We didn’t know how it would affect the relationship between the two countries. But actually, there are plenty of positives.
The peso has improved as a result so the exchange rate is better. That leaves us to predict a far better year than we anticipated at the outset. Of course, there is the recent increase in oil prices but that has affected everybody.
How is the joint venture with Delta developing?
We are very enthusiastic about this relationship. Delta and Aeromexico have been partners for many years and started SkyTeam together.
But this particular deal goes back to 2011 when Delta took a small percentage in Aeromexico. That equity stake has now increased to 49%.
Delta is our most important partner in our most important market, so it made sense to go to a JV
Additionally, we are working on a unique joint venture (JV) because it involves narrowbody aircraft.
Normally, JVs have been across the North Atlantic or across the Pacific and involved widebody aircraft. It’s interesting to be working on something that is the first in its class.
The deal is going to be good for the consumers, good for the airlines and their employees, and good for the two countries.
What does it mean for SkyTeam and alliance partners?
Alliances are still important. They provide a good value proposition for consumers and airlines. As an airline, an alliance makes it easier to have codeshares, to share frequent flyer programs, to provide lounge access.
A JV represents the next logical step in this approach, especially when you consider the many ownership limitations that exist in aviation.
Even a JV isn’t easy though. It’s hard to make the case with regulators that it’s good for the consumer even when the benefits are clear.
That’s why you don’t have too many JVs out there. But, for us, it was an obvious move. Delta is our most important partner in our most important market, so it made sense to go to a JV.
It is different relationship than we have with other SkyTeam partners but those partners are still important.
Where do you see growth for Aeromexico in the future?
The airline now has its largest-ever widebody fleet. By the end of 2017, we will have 15 Boeing 787s.
On top of that, we have been working on simplifying our fleet for more than a decade. Ten years ago, we had eight different types of aircraft. By the end of the year, we will have just three types of aircraft.
There is a growing middle class and there are real opportunities for growth
We will have Embraer regional jets, 737s and 787s. Up-gauging the fleet and flying the planes more, together with the simplification, means the airline will have much better productivity.
Mexico is still underdeveloped in terms of air travel. There is a growing middle class and there are real opportunities for growth.
Infrastructure is a challenge but, by having the widebody fleet, we can strengthen in the markets where we already fly.
So, London is going to a daily service, as is Paris, Amsterdam, and Tokyo. Madrid will be served 12 times a week rather than 10 times a week. And there is a plan to open up a new destination in Asia on top of Tokyo, Shanghai and Seoul.
What are your hopes for the new Mexico City airport?
We are working very closely with the authorities to not only make it the most beautiful in the region but the most efficient in terms of operation too. The new airport will have connection times that are best in class.
The authorities have been open to what we are saying, and they have listened. As an airline, we are the ones that will be using the facilities so it is right that we have input.
Once the new airport opens, it will be much better for our consumers. We will finally have a world-class airport
We appreciate that building an airport is not easy. But I understand the project is on time and we are expecting it to be ready at the end of the second quarter, 2020.
The new airport shares the same airspace as the current airport so it will be a case of closing one and turning the switch to open the other. So, we need to be very prepared for that transition.
Once the new airport opens, it will be much better for our consumers. We will finally have a world-class airport. The current one has been operating for more than 60 years and is outdated.
What do you see as the main challenges or trends regionally?
I think that we’ll see that consolidation continues. A decade or so ago, there wasn’t an Avianca group, and LAN and TAM were separate.
This trend of working together to provide better value for consumers will continue. We will have less players but stronger players.
The outlook for the next couple of years is more promising than it has been and Aeromexico will look to expand its network throughout Central and South America.
With Delta, we have an opportunity to provide better connectivity for the region.
Mexico is a great bridge between Central and South America and the United States, and particularly the west coast of the United States. That’s what we’ll be working on.
Is the re-emergence of Cuba changing the regional map?
Aeromexico has a significant presence in Cuba. We had a good market connecting US passengers because we fly direct from many different Mexican cities.
When Cuba’s relationship with the United States was re-established, there is no doubt that capacity in the market increased.
We are confident that the market will hold steady and even grow for us
But that market has stabilized for the moment, and we are confident that the market will hold steady and even grow for us.
So, Cuba’s re-emergence had an impact at the beginning but it is less important now.
What are the main lessons you’ve learned during your time as Aeromexico CEO?
There are many lessons learned! I will highlight three important ones.
First, it is very important to be flexible. Conditions always change, be it exchange rates, oil prices or a downturn in the local or global economy.
You have to manage your fleet and manage your risks. But always be prepared to adjust your thinking. Don’t expect the world to adjust to you.
Second, people are extremely important. In aviation, there are many specialists and so they rarely leave the industry. It is crucial for an airline to attract the best talent it can.
Third, you need patience. You cannot think that a strategy will bring immediate benefits. It takes 5–10 years at least.
As mentioned, we have been working on our fleet for over a decade and it isn’t finished yet. But if you have a good plan, then keep going and you will reap the benefits in the end.
Aeromexico was nearly bankrupt 10–12 years ago. We are in good shape now, but there is still a long way to go. You have to play the long game.
What needs to be discussed at the IATA AGM in Cancun?
IATA has a broad agenda. Safety, security, and sustainability discussions must continue.
The industry must work with governments to enhance security to combat the threats that are emerging, for example.
The AGM in Cancun provides a great opportunity for us to showcase our country
Then there are new issues, such as the restrictions to travel. That will certainly be on the agenda. And I hope we also discuss Mexico.
This is a great time for the AGM to be in Cancun and it provides a great opportunity for us to showcase our country.
Mexico is very relevant to aviation. There are 120 million people in the country and it is a very young population, with an average age of 26. It is a well-educated population too.
More than 100,000 new engineers graduate every year. And the truth is the economic relationship with the United States could not be stronger.
Trade between the countries is worth $600 billion per year. That equates to about $1 million a second.
The United States, in fact, exports more to Mexico than to China, Japan, and Germany combined.
Overall, it’s important that we convey the message that airlines want to be part of the solution, and that the aviation industry can continue to contribute to growth and development.