Mexican budget carriers in a strategy shift

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After years of expansion and launching start up airlines, the Mexican aviation market is showing its first signs of strain, with airlines reducing capacity, changing their business model and industry leaders calling for consolidation.

Mexico's largest independent regional carrier Aerolineas Mesoamericanas (ALMA), launched during Mexico's

2005 airline startup rush, has dropped the "low cost" label from its marketing claim, repositioning itself as a standard regional airline.

ALMA is streamlining its network as well as slowing down its growth, deferring all new CRJ leases planned for 2008 to "at least 2009", a company source says, adding, “nineteen regional aircraft gives us the necessary critical mass in the market in which we now need to consolidate our position."

Aviacsa's announcement to abandon four destinations, Culiacan, Leon, Morelia and Mexicali, in an attempt to restructure its network to focus on routes which can be flown profitably with the current high fuel prices, has only been the latest of several similar measures announced by its fellow low-cost carriers. Aviacsa has been trimming its network over the last few months.

Avolar, created in 2005 by Jorge Nehme, is undergoing an even deeper restructuring process, including the incorporation of financial investors Sergio Chedraui and Olver Fernandez as the airline's new controlling shareholders. The airline’s new Director General is Jose Antonio Fernandez.

It remains unclear if Avolar will stick to its previous intention to order 20 Boeing 737-700 aircraft.

Airbus A320 family operator Volaris, another 2005 startup with strong local financial backing and Taca's operational know-how behind it, sees itself in a better position. "Of course high fuel prices are bad for the industry, but fortunately our fleet is composed of very fuel efficient, new generation jets", an airline spokesman says, indicating that it has no plans neither to delay deliveries of new aircraft nor to cut back routes.

Volaris has just opened a new route in traditional Avolar stronghold Tijuana-Oaxaca, and expects to grow its A319 fleet from17 to 21 aircraft before the end of this year.

A source at the Mexican Secretary of Communications and Transport admits that the government is "concerned about the situation of the national airline industry". While he insists that "in an open market the government will not intervene", he also says that his institution would consider "a potential consolidation process" as a "positive sign for the maturity of the airline industry".