Monday Insight – January 9, 2023

Mexico As A Vacation Destination.
Warm Sun… Or Hot Lead?

The latest BGI Touch & Go Insight Newsletter included a review of the potential air service fallout from the violence experienced in Sinaloa state cities of Mazatlán, Culiacan and others.

It is not comforting for the US airline industry.

The hard reality is that drug cartels essentially now control parts of Mexico.

Reports from Culiacan describe situations where even the Mexican army was held at bay, including two attack helicopters shot down, and drug forces shooting at airliners at Culiacan airport. Plus stories of tourists huddled in hotels as drug hoodlums surrounded the buildings with burning automobiles.

These are vile people, with no compunction about killing anyone. Fully armed, including machine guns mounted on roving pick-up trucks. Heavy firepower.

The point is that this was not just a skirmish between good guys and black hats. The wider question is how safe the rest of Mexico may be. The answer is likely positive, as the drug cartel leadership is focused at specific cities, even though they do business literally across the world.

That notwithstanding, the image of a cartel taking terror control of a city isn’t going to engender a lot of eagerness to travel to Mexico, regardless of the destination. Plus, this latest event has dredged up the stories of how the Mexican authorities were literally defeated in 2019 by the cartels when they attempted to capture the same kingpin they were after this time.

Not to be alarmist, but US carriers may see a material decline in Mexico-USA travel demand. These cartels have no respect for human rights and this event has severely damaged the image of Mexico as a leisure destination.

Traditionally, travelers visit Mexico for great beaches, superior resorts and globe-beating hospitality.

But in the aftermath of the events in Sinaloa, It’s a fair bet they are not particularly interested in becoming extras in a re-enactment of the film Blackhawk Down.

Not pleasant, but it is an issue that could demolish this traffic sector. Stand by.

(By the way, for those not on the subscription list for the BGI Touch & Go Insight Letter, just drop us an email to join the over 500 aviation leaders who get it every week.)


The Latest AA Small Market Reductions –
It’s About Economics, Not Pilots.

American has announced it is ceasing service to Long Beach, Columbus GA, and Del Rio Texas.

The official reasons were given as “pilot shortage” and low traffic.

In the case of the two smaller airports – Columbus and Del Rio – there is a message that is going to continue to get louder as we progress into the New Year: The raw and increasing expense of connecting many smaller airports is exceeding the revenues that these communities can generate.

It’s not pilots – it’s the increasing cost of pilots. And fuel. And maintenance. Both Del Rio and Columbus were barely generating 60% to 65% load factors, and the basics of highest and best use of resources are in play.

Point: there will be an increasing number of such airports getting air service pink slips in coming months. All the king’s horses and all the king’s “true market studies” won’t change this. It is now incumbent on communities such as Del Rio to re-think the role of the local airport, including attracting economic investment.

There are no mystery airlines out there. Alternative secondary air access may be a potential. But booking a trip to the next speed-date air service convention won’t do diddly to find a network carrier to replace American.

The economics don’t work, anymore.