This is one way of keeping the middle class on the ground

[D'kian]

Years ago mexico had two airlines, Aeromexico and Mexicana. The former was owned by the government, the latter was private. By the mid 80s, the government took over Mexicana in a combo bankruptcy and bailout maneuver. Then it formed a holding company, called Cintra, to operate the two airlines as "separate" entities. Rates were sky high (no pun intended) in all domestic routes. In international routes, rates were comparable to those of foreign airlines, namley US airlines like Continental, delta, American, etc.

By the late 90s Cintra sold off Mexicana, new airlines were given permission to operate. Rates, incredibly enough, went down in domestic routes. By the mid-2000s low-cost airlines appeared and aeromexico, too, was sold to private investors. Domestic rates plummeted to the point that, on some routes, they were lower or just a little higher than bus rates.

Then there came the oil price bubble, which knowcked out some of the low costs, and forced the survicors to increase rates and to switch business models. Bottom line, rates are quite high again. To compare:

A two way air trip Mexico City to Monterrey, lasting 75 minutes each way, costs about $269 US. A round trip LA to Las Vegas, of comparable duration, goes for about $120.

So what now? Well, now the Mexican government, headed by the allegedly pro-business, right-wing, National Action Party, is suggesting Mexicana and Aeromexico should merge, in order to give the country a single flagship airline.

Why?

Call me crazy, but I'm beginning to think it's a conspiracy, or at least a conscious decision to keep the middle class poor.

Here's why:

Over the past five years, the govenrment has closed down three airlines: Aerolineas Azteca, Aviacsa and Aerocalifornia. The first two were shut down for not complying with some safety and maintenance regulations, and then, when they either passed the buereaucratic tests or got judicial relief, because they owed money to the government in air navigation services fees. Aerocalifornia was shut down on fees alone.

Now, whether governemnt should offer such services is a different question. If that's the law and you want to run an airline, you have to play by the rules. So then the government can withold service if you don't pay, thus shutting you down. Well and good. But it's self-evident that an airline engaged in business has a chance to pay you back, while one that's out of bussiness won't ever be able to. No revenue, no money to pay debts, right? Of course there are limits, but At least Aviacsa and Azteca were doing ok at the time they got shit down (Aerocalifornia suffered from an old, inefficient fleet, too few aircraft and poor service).

Also there was much criticism about the low-cost airlines at their peak. The government was concerned they might take too much market share from the two big airlines. Indeed both of them created their own low-cost affiliates (Click Mexicana and Aeromexico Connect), the better to comepte against the low-costs. Meanwhile those who traveled were delighted at the low, low prices.

So now rates are high, less people are flying, and the governemnt wants the two big airlines to merge. If they did, rates would go higher still. So what about the low-costs? Well, they might stay at the level they are now, still being cheaper than the new big boy, or they may also raise rates again still being cheaper.

The new mega-airline could also engage in an all-out fare war to drive the low-costs out of business, and then enjoy its monopoly and riase rates as high as it wanted.

It probably won't happen. Too many of us remember the Cintra times, when the people called for an open-skies policy (this emans letting foreign airlines compete in the Mexican domestic market). already a few state governors and CEOs in the tourism industry are caling for open-skies again, with rates as high as they are now.

Open-skies is an interesting idea, BTW, very similar to open immigration. More on that later.

Teh purpose of keepign air fares high is to keep them out of the reach of most of the middle class. Why? So they will turn to the government for support. As it is, with the growth of the past 15 years, minus the current crisis, the middle class was getting bigger and far less people were dependent on governmnet hand outs. You tell me how a government will keep power if people are not tied to it for their livelyhood.