The Interview
Dr. Ricardo S Chief Financial Officer
Boeing sells planes to Aeromexico Q
Can you give an overview of Aeromexico and its organizational
structure?
Grupo Aeromexico is the holding company of two airlines: Aeromexico (the mainline carrier) and Aeromexico Connect (our network extender), and several ancillary business units, including Aeromexico Cargo, Aeromexico MRO and PLM, which manages the loyalty program Club Premier. We operate nearly 600 daily flights with a fleet of Boeing 777, 767& 737 families and with Embraer 145, 170 and 190. We fly to 44 domestic destinations and 31 international destinations that cover North America, Europe, Asia, South America, Central America and the Caribbean. This year we expect to transport around 16 million passengers and maintain close to a 40% market share in the domestic market and 14% in the international market. Aeromexico is a founding member of SkyTeam.
Q
What are the main areas of Aeromexico’s expertise?
Aeromexico is Mexico’s premium revenue carrier. We are the only airline in Mexico focused on the business passengers. Our network is designed to meet the needs of this market: the key drivers are coverage, daily frequencies, product availability, increased connectivity and service. We offer our passengers the possibility of travelling on a modern fleet from Mexico City to any other city in Mexico and many short haul international destinations and come back on the same day. Our passengers can reach global coverage through Delta or Skyteam.
We are the only Mexican carrier providing two different classes of services, business class (Clase
Premier) and coach. Our business passengers can access our network of 11 VIP lounges in Mexico, as well as several other VIP lounges in diverse countries through Skyteam or other alliances. Additionally, our loyalty program Club Premier allows our passengers to obtain rewards for flying with us and also offers co-brand cards by which they can accelerate their accumulation of miles and carry out redemptions for flight tickets and many other non-air prizes.
Q
Aeromexico have recently agreed to purchase 100 airplanes from Boeing. Can you discuss the transaction?
We are very excited about this transaction. The order consists of up to 90 B737MAX and up to 10 B787-9 Dreamliners. This is the biggest investment in the history of Mexican commercial aviation.
The order will allow us to have one of the youngest and most efficient fleets worldwide, thus significantly reducing our fuel consumption and our environmental footprint. It will also allow us to offer the best product to our customers and consolidate Aeromexico’s mainline carrier fleet in only two types of aircraft. These efficiencies could translate, everything else constant, into 3-4 additional percentage points of operating margin, and will have a positive impact on the environment as a result of significant reduction of emissions and noise, in full alignment with our social responsibility policy.
The transaction is structured in such a way that it provides us with important flexibility to adapt our growth during the next decade to prevailing market conditions. If the market environment in
the future is complicated the order would allow us to replace our current fleet by 2024; if the market environment is positive our seat supply can grow around 5-6% annually in the period 2012-2024, incorporating the most efficient aircraft available in the industry. In this context we think that the structure of the order is conservative and flexible to make sure that Aeromexico operates a modern and efficient fleet. This is our commitment as Mexico’s premium revenue carrier.
Q
Were there any challenges that needed to be overcome?
Yes there were a few challenges. Let me start by saying that, in order to make the correct decision, we conducted a comprehensive competitive bidding process for aircraft and engine manufacturers lasting more than 10 months.
On the technical aspect, a relevant consideration was the fact that our main hub in Mexico City is located at an altitude of over 2,200 meters and with high temperature conditions for the most part of the year. This forces us to be particularly careful with aircraft performance. Acquiring aircraft still in the concept stage, like the B737 Max and the B787-9, always poses the risk of the actual aircraft not delivering its promised parameters in terms of fuel consumption and/or range capabilities. However, a small miss in performance can get magnified under our operating environment. To tackle this we undertook deep technical analyses and placed significant emphasis on performance guarantees and remedies tied to the manufacturer’s specifications. At the end, it became a key decision driver.
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