Guillermo Heredia: Tapping into Mexico’s market potential with ALMA

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Former Aeromexico president and chief operating officer, Guillermo Heredia, has spent the last 18 months running Mexican regional carrier ALMA, one of a number of low-cost start-ups which are making life difficult for his former employer

Heredia is convinced there is enough potential in the Mexican market to enable the low fares Bombardier CRJ200 operator to succeed where airlines such as Independence Air in the USA failed. Washington Dulles-based Independence Air, which emerged from the ashes of former United Express carrier Atlantic Coast Airlines, launched independent low-cost services with a fleet of CRJ200s in June 2004. However, the carrier was unable to make the model work and filed for Chapter 11 bankruptcy protection in November 2005, before shutting down two months later.

“We named ourselves a ‘New Generation’ carrier rather than a low-cost carrier because companies that tried to have a low-cost carrier model with regional jets had an epitaph written already,” he says. “That’s why we operate a hybrid model. We adopted five or six characteristics of a low-cost carrier, such as using one type of equipment and having an 11hr aircraft utilisation, to bring down $1,000 fares on 300mi [483km] city pairs by 50-60%.”

Heredia believes high frequencies are just as important, if not more important, than low fares because of the convenience factor, particularly for those travelling on business who want to fly to and from a destination in the space of one day. “Frequencies are the most competitive tool we have,” he says.

ALMA launched operations from its Guadalajara base in June 2006, using a pair of CRJ200s. It currently operates 17 leased CRJ200s and will next year add a further 12 of the 50-seat jets, along with two larger CRJ900s. Heredia says the carrier will reach the one million passenger mark in 2007, will achieve $200 million in revenues, and will be profitable “on a net and operating level”.

But the Mexican market is becoming increasingly competitive, something Heredia acknowledges but is prepared for. “In the first six to eight months of operations, 73% of our routes were not being served,” he says. “We now serve 26 cities and as the company grew and added new routes, other carriers started operating those routes. But our ability to move and move fast has provided us with an advantage, and our cost per available seat kilometre is the lowest in the world of regional jets.”

Market potential
Heredia sees great potential for future growth because only 3-5% of Mexican people use air travel, and says the challenge will be to convince them to fly: “In Mexico, 25 million passengers a year fly domestically and another 25 million fly internationally. But two billion a year go by bus, and 100 million of those pay the same fare by bus as by plane. The challenge is to get them to use air transport and to do that we have to be an easy company to do business with. We’ve got to make it easy.”

ALMA is in the process of applying for the rights to expand internationally and operate services to the USA. Once it receives permission from the US FAA and Department of Transportation, ALMA “will then find the right time to move across the northern border and operate to southern US cities, from San Antonio to San Jose”, says Heredia.

The carrier is also planning to open two more bases; one in northern Mexico and one in the south of the country. Cities under consideration in the north include Culiacan, Hermosillo and Monterrey, while possible southern bases include Merida, Tuxtla and Villahermosa.

ALMA recently began interlining with Mexicana and may eventually enter a codeshare deal with the flag carrier, according to ALMA’s executive commercial director Jorge de Lara. “We’re the biggest carrier at Guadalajara and the second biggest is Mexicana, so it’s a very natural alliance because we feed them from central Mexico,” he says.

ALMA is 75%-owned by Mexican businessman Carlos Peralta Quintero; the remaining 25% is held by the carrier’s employees.