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Mexican Airline Industry

Antitrust regulator: No problems with potential AeroMexico - Mexicana merger

May 03, 2010

Mexico's two largest airlines, AeroMexico and Mexicana, could merge without hurting competition, Federal Competition Commission Chairman Eduardo Perez Motta said on Monday.

While it would take a careful evaluation of each route the airlines serve, antitrust concerns could be overcome, Perez Motta said in comments to the Reuters Latin American Investment Summit in Mexico City.

"What is important is to see route by route whether there is concentration," he said.

The two Mexican airlines face concerns about high fuel costs and overcapacity, similar to those of U.S. carriers like United Airlines parent UAL Corp and Continental Airlines, which said on Monday that they agreed to merge. The $3.17 billion deal, if approved by regulators, would form the world's largest airline.

While the United-Continental merger was not seen as an impetus for airline mergers around the world, Mexicana and AeroMexico have talked of a tie-up for years. Both airlines had previously been controlled by the Mexican government but operated separately.

Perez Motta said an airline merger is not being formally discussed at this time, despite media speculation last year that a deal was in the works as a way for the airlines to survive a decline in tourism and the difficult economic climate.

"There always was (the possibility of a deal)," Perez Motta said on Monday. "What has happened is that they have never reached a point where they complied with the specific conditions."

AeroMexico was sold to an investor group led by Citigroup's Mexican unit Banamex in 2007, while hotel chain Grupo Posadas bought the controlling stake in Mexicana in 2005.

The airlines have historically had different routes, with AeroMexico focusing on Europe and Brazil while Mexicana served routes to Canada, Central America and Argentina. Overlaps have mostly occurred on routes to popular U.S. cities like New York, Los Angeles and Las Vegas.

When AeroMexico came up for sale in 2007, Mexicana submitted a bid, but its offer was blocked by the Federal Competition Commission due to antitrust concerns.

In 2004, however, the Commission had given preliminary approval for an AeroMexico and Mexicana merger, but it never came to fruition.

Antitrust regulator: No problems with potential AeroMexico - Mexicana merger
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