Thursday, 16 July 2020

Mexico sets a date for the inauguration of its ‘new capital city airport’

President threatens to stop using his name if it doesn’t open on time

Only a short time ago, a headline like that above would have referred to the opening of a brand new purpose-built airport in Mexico City, a beacon for the country and a benchmark for other Latin American countries to aim at. Work had indeed started on it.

Mexico’s President Andrés Obrador, or AMLO as he refers to himself

But in his wisdom, Mexico’s President Andrés Obrador, or AMLO as he refers to himself based on the initial letters of his name, abandoned that US$13 billion dollar project in favor of upgrades to the existing Benito Juárez airport, some tinkering with the secondary Toluca Airport and the transformation of a military airbase at Santa Lucia into a commercial facility by adding two runways (while retaining one for the military). In other words what has been described as an inefficient three-airport operation when centralization into one had previously been planned.

This headline now refers to Santa Lucia. The President affirmed that the Santa Lucia Airbase construction will be inaugurated on March 21, 2022. Obrador said, “I will stop calling myself Andrés Obrador if we do not inaugurate the airport on 21-Mar-2022”. In Jul-2019, Obrador had announced the construction would be completed by June 2021.

- paying the bills -

The cost of the construction was announced at around US$1 billion in 2018, then increased to US$3.6 billion in February 2019 and further increased to US$4.7 billion in August 2019, almost five times the original estimate in a year. The project was classified as a secret by Obrador and no further costs have been updated. SEDENA (Mexico’s Defence Department) claims that making such details public could “harm the project.”

That US$4.7 billion (which is probably more now) is significant. A previous The Blue Swan Daily article in August 2019 pointed out that the cost is preciously close to the US$5 billion that had already been invested in the proposed new six-runway airport AMLO stopped in October 2018 and which was effectively written off. The same article went on to say that the costs of the three-airport system were stacking up and that they would soon approach what had been the budget for the new one.

Now it seems as if that budget could even be exceeded. Recent estimates have it that the cost of canceling the new airport project, including written-off construction costs and an estimate of the settlement of legal claims by contractors and bondholders, are as high as USD9 billion. Add that to the expenditure on Santa Lucia and it adds up to US$13.7 billion and counting.

So by that calculation, the country is already US$700 million out of pocket as well as going without a brand new airport. Sometimes it can be worth sticking with the ‘Taj Mahals’. And to that might be added the value of the land at the Juárez airport had it been closed and sold, or even used as a functioning location for alternative activities. It is owned by Grupo Aeroportuario de la Ciudad de México (GACM), and operated by Aeropuertos y Servicios Auxiliares, which are respectively partly and wholly-owned state organizations.

- paying the bills -

CHART – Traffic growth has slowed in recent years at Mexico City Juarez International Airport with lack of capacity an important factor. Source: CAPA – Center for Aviation and Mexico City Juarez International Airport reports

While Santa Lucia is being converted (presumably that won’t be abandoned as well but stranger things have happened), responsibility for handling the capital’s growing air traffic rests with the Juárez and Toledo airports and mainly Juárez.

Toledo, some distance from ‘downtown’ but in a heavily commercialized area, is a bit-part player with passenger traffic around the half-million per annum mark. Juárez is quite different, being the busiest passenger airport in the whole of Latin America.

It is more than a sympathy vote for the government which has prompted Aeroméxico to announce that it wants to invest in the (re-)construction of the Juárez airport’s terminal 3. The project is expected to commence construction in 2H2020.

Aeroméxico is the country’s largest airline, the flag carrier, and it has 36% of scheduled capacity at Juárez. In Jun-2015, Aeroméxico was reported to be considering becoming a shareholder of the new Mexico City International Airport, provided changes were made to the criteria for carrier participation in airports.

It is profitable (at least at the operating level), privately-owned and operated, and well-funded, with assets exceeding liabilities by almost US$12 billion in 2018. If the man that may have no name knows what is good for the country Aeroméxico should actively be encouraged to provide whatever assistance it reasonably can in Mexico City’s airport infrastructure plans.

Q Costa Rica
Q Costa Rica
Reports by QCR staff

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