Mexico’s President Pushes Cabotage To ‘Open’ Domestic Competition

Andrés Manuel López Obrado said Mexico’s airlines charge too high fares while serving too few cities in the country.

Credit: Alex Dalton/eyepix/ZUMA Press Wire/Alamy

Saying air fares in Mexico are too high, President Andrés Manuel López Obrador has suggested the country could “solve” the issue by allowing cabotage, specifically pointing to European and US airlines as ideal for operating domestic routes within Mexico.

Mexico’s president said during a press conference in late October that he would like to “open up aviation,” according to reports from Mexico. He added: “Let's open it up to competition. That's democracy. Let foreign airlines come in, from Europe and the United States, to operate flights inside the country.”

Implementing such a policy would be a departure from most of the world, with cabotage—which allows foreign airlines to operate routes between domestic points—widely rejected. 

To Mexico’s north, the concept has long been a nonstarter for US aviation policymakers and lawmakers.

The European Union does allow cabotage within the EU. Irish ULCC Ryanair, for example, operates numerous domestic routes in Italy.

It is unclear if the proposal is more than just an idea being floated by López Obrador. It was the second time in October the president discussed commercial aviation. Earlier in the month, he raised the prospect of establishing a state-owned airline in Mexico, saying too many domestic cities are not adequately served.

López Obrado's expressed concerns over fare levels come even as the low-cost sector is growing fast in Mexico. ULCC Viva Aerobus holds around 30% share of the Mexican domestic market and is seeking to form an antitrust-immunized transborder joint venture (JV) with US ULCC Allegiant Air

Mexico has approved the JV, while the US Transportation Department (DOT) is still evaluating the planned partnership. Delta Air Lines operates a transborder JV with Aeromexico.    

ULCC Volaris has the largest domestic market share in Mexico at around 40%, while Aeromexico holds around a 25% share. 

Volaris, like other Mexican airlines, is hopeful the US FAA will reverse the country’s safety downgrade, which has prevented Mexican airlines from starting new service to the US. The carrier hopes to add new US routes at some point in 2023.