Mexico’s Aeromar defers delivery of first ATR 72

Mexico City
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Mexican ATR 42 operator Aeromar has deferred the delivery of its first ATR 72, but it remains committed to the type and is considering acquiring at least three more.

Aeromar, which currently operates 10 ATR 42-500s and four ATR 42-320s, in 2007 ordered two ATR 72-500s for delivery in June and September of 2009. Executive VP and CFO Ami Lindenberg says the carrier recently decided it will defer at least the first delivery due to the economic crisis but it has not yet determined exactly when would be the best time to start taking the larger turboprop.

"For June I'm sure we won't comply. In September we'll see what happens," Lindenberg told ATI in an interview last week at Aeromar's Mexico City headquarters.

"In a crazy environment you can't act like a normal person. If you add capacity you need to make sure you can do it profitably."

Lindenberg adds Aeromar remains committed to taking both ATR 72s on order but will wait until it is clear market conditions are improving before finalising a delivery date. "We don't know the impact yet of the global crisis on Aeromar," he says.

He says Aeromar, which was the launch customer for the ATR 42-500, has a good relationship with ATR and the manufacturer has agreed to postpone the delivery.

"ATR is flexible to a certain point," Lindenberg says. "We find ATR to be an excellent ally for understanding the customer. We're really trying to go on with the project, which will be beneficial to both parties."

Lindenberg says the two ATR 72s, when they are delivered, will replace two ATR 42-320s Aeromar sold last September. While Aeromar has only ordered two ATR 72-500s and does not hold any options for additional aircraft, Lindenberg envisions acquiring at least three more ATR 72s within the next three years.

"If everything goes well we'll order more," he adds. "Our aim is to substitute the two ATR 42s sold last year with the -72s [already ordered]. After that we'll replace the remaining -320s with more -72s."

In 2005 and 2006 Aeromar was looking at replacing its remaining ATR 42-320s with ATR 42-500s but Lindenberg says the carrier, after struggling to find ATR 42-500s, decided to stick with the ATR 42-320s for a few more years. "The last couple of years there's been few ATR 42-500s for sale or available for lease, if any at all," he says.

Lindenberg also reveals Aeromar is looking at the new ATR 72-600, which will be available from 2011. He says Aeromar is not sure yet if it wants a mixed fleet of ATR 72-500s and ATR 72-600s, whether it should take only ATR 72-500s or if it should wait until 2011 to take its first ATR 72 so that it can only have ATR 72-600s. "That's something that can happen," he says.

Lindenberg says Aeromar requires larger turboprops for its busiest routes from its Mexico City hub, especially during peak hours. He says it also is important for Aeromar to upgrade to 70-seat turboprops to lower its cost per seat.

While this requirement still stands, Lindenberg says now is simply not a prudent time to add capacity because Mexico's domestic market is already oversaturated. He says there has been "a complete crash in the market" since 2006, when several new domestic carriers were launched. While capacity has come down over the last several months as a few of these carriers have ceased services, capacity is still about 30% above 2006 levels.

"We've come back a little in capacity but I still believe we have about 3,000 to 4,000 seats daily that aren't currently needed in the domestic market," Lindenberg says.

He adds "financing at this point is not an issue" for Aeromar's ATR 72 acquisition because the carrier has been offered ECA financing in case financing deals it is now negotiating with banks cannot be finalized. Lindenberg says Aeromar has already decided to go with ATR's in-flight entertainment (IFE) system option.