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Airports in Mexico show fuel inefficiencies

The fuel access scheme at Mexico‘s airports presents several inefficiencies for airlines, as a consequence of the exclusive participation of a distributor (ASA), Aeroméxico highlighted.

On March 14, 2018, the Federal Economic Competition Commission (Cofece) issued an opinion on the advisability of eliminating ASA’s exclusivity in the provision of storage, commercialization and sale of aircraft fuel services in the country’s airports.

The reason? The regime that allows the unitary participation of ASA directly affects the conditions of fuel supply at competitive prices, which translates into a detriment for airlines and passengers.

According to the information provided by IATA, Mexico registers the most expensive supply prices in the region, especially at the Mexico City International Airport.

On October 31, 2019, Cofece published in the Official Gazette of the Federation the extract of the Agreement to initiate the investigation corresponding to the IEBC-002-2019 file, through which the Investigative Authority of Cofece declared the initiation of the investigation. investigation to determine the possible existence of barriers to competition and free competition or essential inputs, in various activities related to the commercialization of jet fuel in Mexico.

By the same means, the existence of elements that suggest the absence of effective competition conditions in the national market for aircraft fuels, which includes production, import, storage, transportation, distribution, marketing, sale and related services, was noted.

Airports

The supply of jet fuel (also known as gas aircraft) is one of the essential airport services for the air transport service.

For the provision of this service, ASA, exclusively, currently enters into contracts with the airport concessionaires that determine the applicable terms and conditions for the provision of these services.

Aeroméxico considers that this exclusive distribution regime prevents the entry of new bidders in this market and affects the possibility of negotiating conditions that effectively reflect the price of products in international markets.

Competition

In accordance with what was observed by Cofece itself in an analysis of the information presented by IATA, ATAALC and ALTA, jet fuel is the main input for the provision of air transport, as it represents an operating expense that translates into a margin that ranges between 25 and 30% of the total of the aforementioned total operating expenses for the operation of a flight, therefore, it is considered the main input for the air transport of goods.

More competition in the marketing of this fuel could translate into a favorable impact on air transport prices for consumers.

As a natural consequence of the foregoing, air carriers face high prices due to the absence of suppliers in the value chain related to fuel marketing.

Consequently, the Investigative Authority of Cofece during 2021 was developing an investigation related to the structural conditions and commercial practices of the economic agents that participate in the markets subject to the investigation, in order to determine if there are conditions of effective competition.

Although it is true, during 2021 Cofece did not issue the definitive measures that could correct the conditions of competition in the markets subject to the investigation, it is possible that there is no substantial change in the conditions of supply and demand of the fuel, therefore , Aeroméxico indicated that participants continue to be exposed to inefficiencies in the current fuel access markets that may negatively affect the structure of costs and access to fuel.

 

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