Mexico's federal competition commission, the CFC, says it could approve a merger of Aeromexico and Mexicana if they will amalgamate their two main airline subsidiaries into a single, strengthened domestic carrier that is separately owned.

This preliminary approval, which could change the face of Mexican aviation, is the result of talks initiated by Rogelio Gasca Neri, president of Cintra, the 88% government-owned holding company for Aeromexico and Mexicana. Gasca approached Eduardo Perez Motta, new head of the CFC, to see under what circumstances the commission might reconsider its 2000 ruling that whenever Cintra sells Aeromexico and Mexicana, it must sell them separately. With market conditions improving, Cintra hopes to float the two carriers in May 2005.

The CFC's governing board agreed that Aeromexico and Mexicana may merge if Cintra also merges regional carriers Aerolitoral and Aerocaribe into a separate entity and sells them to owners other than whoever buys the mainline airlines. The CFC also says Cintra must boost the strength of the regionals, most likely through a transfer of aircraft, staff, and domestic routes before selling the new spin-off.

The specifics are left to Cintra, but it has plenty of incentive to ensure that an integrated Aerocaribe and Aerolitoral becomes a viable domestic carrier. The CFC has not said that a merged Aeromexico-Mexicana must abandon domestic routes, but the commission has stressed that its main concern is domestic competition. It seems more likely to approve a merger if Aerocaribe-Aerolitoral have a strong domestic presence and Aeromexico-Mexicana focuses on international routes.

Cintra is now preparing to restructure the four airlines into two new entities as outlined. Aeronacional is the probable new name for Aerocaribe-Aerolitoral. No name has been announced yet for the integrated carrier emerging from Aeromexico-Mexicana. Decisions are expected towards the end of the year about what assets will be reallocated to Aeronacional. Local observers suggest it will be easier for Aerolitoral to assume a wider role because it already has a larger fleet and greater presence than Aerocaribe in the national markets the two of them would be likely to serve.

Source: Airline Business