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CIR

Mexico prospers and drives strong growth in Central America

Central America has been key to growth in the Americas region in recent years. While falling short of its North American counterpart in actual passenger numbers by some margin, it has consistently topped the table in terms of growth over the last five years, registering almost a double-digit compound annual growth rate since 2013.

Key to growth in Central America has been the recent surge in international traffic at Mexican airports, its largest source market by some margin accounting for around 60% of air traffic. The country saw an impressive +13.2% uplift in international PAX at its airports in 2017, representing an acceleration versus the already significant +9.5% growth achieved in the previous year.

Low cost travel driving growth

Fundamental to the country’s growth in recent years has been the explosion in popularity of low cost travel. Of the top airlines operating out of Mexico in 2017, four were budget carriers: Volaris, InterJet, Southwest Airlines and JetBlue, with each of these airlines hitting double-digit growth. Overall PAX departing Mexico on LCCs was +19.9% in 2017, twice as high as that of regular scheduled airlines (+9.7%). Continued growth of this nature over the course of the last few years has seen the low cost market in Mexico grow its share of traffic from 18% in 2013 to around 27% last year.

Cancun and Mexico City dominate air traffic

Handling almost 15.8 million international passengers each in 2017, at growths of +8.4% and +11.3% respectively, Cancun and Mexico City remain the dominant airports in Mexico by some margin. Guadalajara, which ended the year as third busiest, handled just a fraction of their totals (3.8 million). In fact, these two airports achieved the number one and two spots in the whole of Latin America in 2017, toppling 2016 leader Panama City Tocumen which was positioned third in 2017, with Sao Paulo Guarulhos (number one in 2015 before the Brazilian recession) and Chile’s Santiago fourth and fifth busiest.

USA the number source market…

Unsurprisingly given its proximity, the USA is the top source market for flights into Mexico. With an increasing number of American citizens owning passports, neighbouring Mexico is a convenient first international port of call for budding travellers. What’s more, while the peso has strengthened against the dollar recently, Mexico – long a reasonably priced destination for Americans – remains inexpensive, further boosting the influx of arrivals. A mammoth 68% of inbound flights to Mexico originate in the USA, with the result that over 47% of departing international passengers at Mexican airports are American, more than the Mexicans themselves. Other key source markets include Canada and fellow Latin American countries of Cuba, Colombia and Panama, with the UK, Spain, France and Germany also featuring in the top ten.

…however Mexico is gaining popularity among APAC nations

Although only currently accounting for a small amount of inbound seats, Mexico is also gaining popularity as a destination among APAC nations. The country currently welcomes direct flights from Japan, China and South Korea, however in 2016 there was just two direct links between Asia and Mexico, via Aeromexico’s services from Mexico City to Tokyo Narita and Shanghai, the latter transferring through Tijuana. In 2017 this rose to four when Japan-based ANA launched a competing service from Narita into Mexico City, and Aeromexico began its third transpacific route out of Mexico City, this time to Seoul Incheon. The Mexican flag carrier has recently amended its Mexico City-Tijuana-Shanghai service to be direct from Mexico City to Shanghai.

Now, later this month, Mexico will gain its second non-stop service to China when Hainan Airlines begins its Beijing-Tijuana-Mexico City route, increasing overall capacity from China to Mexico by +77% between April and August this year versus 2017. This will be the first domestic Chinese carrier to offer a direct route into Mexico, although China Southern actually became the first to enter the Latin American nation when it flew from Guangzhou to Mexico City last year, a route, however, which it operates via Vancouver in both directions. With the addition of the new Hainan service from China, inbound capacity to Mexico from APAC is currently +55% in the first eight months of 2018.

Mexico is certainly growing in popularity, and has positioned itself as the main Latin American destination for Chinese tourists: in 2017 a reported 120,000 Chinese tourists visited Mexico, and with this additional direct link this total is sure to continue on an upward trajectory.

Mexico City and Cancun should remain the focus locations

Looking forward into 2018, Mexico City and Cancun will continue to dominate the country’s air traffic, however if double-digit capacity growth of +10% at MEX continues for the remainder of the year, versus a more moderate increase of +5% at Cancun, the capital city airport could take top spot for the first time since 2009.

While we are seeing some impressive international capacity growths at several smaller Mexican airports such as Tijuana (+123%), Morelia (+33%%), Querétaro (+23%) and Del Bajío International Airport in León, Guanajuato (+16%), in the grand scheme of things these represent relatively small potential increases in passenger numbers. Of the 1.4m additional international seats available on flights departing Mexican airports in the first eight months of 2018, 50% are out of Mexico City, with almost a further quarter out of Cancun.

“While the smaller airports are certainly ones to keep on the watch list, present focus should be on the two key international hubs,” says CiR President Garry Stasiulevicius. “Through activity at these two airports brands and retailers should be able to target the lion’s share of international passengers. What’s more, with a growing intrigue from the Far East and improved air connectivity, Mexico could present retailers with good opportunities to target some of the industry’s top spenders, such as the Chinese and Koreans, in the not so distant future.”