SkyTeam member Aeromexico is back in the black after a challenging 2009 and a restructuring which included a series of capacity, fleet and job cuts.

Aeromexico CEO Andres Conesa says the carrier has been profitable through the first half of 2010 and is off "to the best start of the year in maybe 10 years".

Almost every Mexican carrier has been in the red the last couple of years due to intense competition driven partly by rapid growth in the country's low-cost sector. Last year was particularly bad as the economic downturn and the H1N1 outbreak drove down traffic and yields.

"Last year we obviously had a very hard time like everyone else," Conesa says.

But he adds it also made some key decisions which have positioned the company better for the future. These decisions are already paying dividends as the carrier is back in the black and financially performing "very, very good".

Conesa says one of the biggest and most difficult decisions was to reduce the size of Aeromexico's fleet. He says the group ended 2009 with 94 aircraft, or 11 fewer aircraft than originally planned, allowing Aeromexico to reduce fixed costs.

He adds the carrier's cost base was further reduced by negotiating with unions, laying off some non-unionised workers and re-negotiating contracts with suppliers. "We are in much better shape today than before the crisis started last year," Conesa says.

With the fleet reduction, Aeromexico cut capacity, including nearly 20% on routes to the US. But capacity elsewhere, including to Central and South America, has increased and Aeromexico has been able to partly offset the reduction in fleet size by increasing utilisation of its remaining aircraft.

For example, while Aeromexico's 737 fleet shrunk in size, Conesa says average aircraft utilisation for the 737 increased from just over 10 hours to 12.5 hours per day.

Aeromexico also decided to take a hiatus in expanding its mainline fleet, but Conesa says new aircraft deliveries will resume late next year. Conesa says Aeromexico is now scheduled to receive its next mainline aircraft, a Boeing 737, in late 2011. In 2012 the carrier will take a batch of 737s as well as its first batch of Boeing 787-8s.

Conesa says the additional 737s will be used to replace the three Boeing MD-80s at leisure unit Aeromexico Travel or for mainline growth. Aeromexico now uses most of its 737s on short to medium-haul international services throughout the Americas. Aeromexico's mainline division last year retired its last MD-80 and with the exception of select frequencies on trunk routes has handed domestic flying to Embraer ERJ-145 and E-190 operator Aeromexico Connect.

"The new 737s would be for [Aeromexico Travel] or to grow if we can get better conditions from the [mainline] pilot's union," Conesa explains. "We are negotiating with them and if we can get an agreement with them we would probably grow the 737s. If not it's unlikely we'd use a new fleet to grow in Aeromexico."

Conesa says the first of five 787-8s will arrive in the third quarter of 2012 and be used to replace its Boeing 767s on services to Barcelona, Paris, Santiago and Tokyo. He says for now the carrier plans to keep its Boeing 777s for services to Madrid, Shanghai and Sao Paulo but it will later consider replacing these aircraft with 787-9s.

"We're waiting to see how the -9 of the 787 performs, to see if it makes sense to grow with the 777 or wait for the -9 to replace the 777. That will depend on the behaviour of the developments of the engine for the -9," Conesa explains.

He adds that Boeing has indicated it will be able to provide more information on the 787-9 next year, in particular operating specs for departures from high-altitude airports such as Mexico City. "Right now obviously all the Boeing development efforts are focussed on the -8. We don't know what will happen to the -9," Conesa says.

He says the airline is also now investing heavily in a new integrated reservation and revenue management systems from Sabre. Conesa says the carrier plans to switch to Sabre from EDS next year.

While capacity is still down compared to pre-crisis levels, in particular in the US market, Aeromexico says it has started adding back some flights. To the US, Conesa says some capacity was added back in May with additional flights to Chicago, Houston, Los Angeles and New York.

"We're adding capacity slowly and gradually," he says.

Source: Air Transport Intelligence news