AMLO’s Plan to Revive Mexicana Airline Inches Closer in Congress

Maya Averbuch and Andrea Navarro
·4 min read
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(Bloomberg) -- A bill that will allow the Mexican government to operate its own airline is likely to be approved by congress this week, Senate majority leader Ricardo Monreal said in an interview.

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The legislation would give President Andres Manuel Lopez Obrador a chance to revive defunct carrier Mexicana de Aviacion to, as he has said, lower ticket prices and increase competition in the sector.

The bill is the most likely to sail through before congress’s multimonth recess starts in May and also includes a provision that would allow the government to operate airports. That would mean the army could operate both an airline and the airport into which it would fly, creating a conflict of interest and potentially unfair market practices for other airlines. The legislation also modifies the structure of the Mexican aviation authority, AFAC, one of the requirements for the country to recover its air-safety rating from the US Federal Aviation Administration.

A more controversial mining reform and a “mega” administrative reform that would allow the government to end contracts without compensating companies may have to wait until September, Monreal said.

The aerospace legislation could affect existing airport operators Grupo Aeroportuario del Centro Norte, Grupo Aeroportuario del Pacifico and Grupo Aeroportuario del Sureste, which control the majority of the country’s hubs. But lawmakers will seek to meet with them before drafting the bill’s bylaws to avoid lawsuits and court battles, Monreal, the leader of the Morena ruling party in the Senate, said.

Recovering the country’s so-called Category 1 rating is important for Mexican airlines, which haven’t been able to add routes or flights to the US since the downgrade in 2021.

“The intent is to reorganize all of the airspace and to review the related contracts, which means reordering everything,” Monreal said during the interview Monday. “In the transitory period, we’ll seek to avoid damages or that they can seek injunctions or turn to the judiciary. The idea is that the law should be consensual to avoid damages to any person.”

The president has said he intends to revive the defunct Mexicana de Aviacion in December 2023. The airline, which would retain the name, would begin flying with 10 jets, he said Feb. 16 and will be operated by the army.

“We’re going to create a new Mexicana de Aviacion to balance the industry and lower the cost of ticket prices,” he said during his regular morning press conference Feb. 7.

Lopez Obrador has put the army in charge of the Felipe Angeles airport near Mexico City and the hubs in Chetumal and Campeche. The government also plans for the army to operate the airport being built in Tulum.

“The changes are not necessarily targeted at airport concessions,” Itau BBA analysts wrote in a note April 19. “We believe that many of the changes are more related to giving the government greater flexibility.”

Legislative Blitz

Other pending legislation that has a chance of making it through a vote by the end of this week include one to reform the stock market to facilitate listings. A controversial bill that would reduce the number of years that companies are allowed to hold mining concessions and another that would allow the cancellation of contracts need more time to be discussed, Monreal said.

AMLO’s government is pushing to expedite legislation to give the state an increased role over several industries before political parties start focusing on the general election next year. The senator, one of the most senior lawmakers in Mexico’s congress, said he would like to extend the voting period by allowing for an extraordinary session during May, but had not yet gained the support of other parties.

Read More: Mexico to Submit Stock Market Reform Bill Soon, Yorio Says

The mining proposal originally put forward by Lopez Obrador would have drastically cut down the maximum concession period from the current 100 years, on top of other changes that had alarmed private companies. But the version approved by the lower house of congress last week whittled it down to only 80 years through multiple extensions, daily El Financiero reported.

“I’m from a mining state, and I am concerned with how to make mining orderly and I would like to review it in detail, not rush the voting, though I know that there were agreements made with major mining companies,” Monreal said, listing said agreements as a reason the bill had passed the lower house.

The Senate leader has said he wants to run for president in 2024, but he would participate in the Morena surveys to determine who should be its candidate only if the party allows an external poll to confirm the results. He accused his competitors in the race, even from his own party, of overspending on their unofficial campaigns.

--With assistance from Michael O'Boyle.

(Updates with details of the government’s airline plans starting in second paragraph)

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