Government's Business Competition Commission Accuses Airline Holding Company Cintra of Monopolistic Practices

SourceMex Economic News & Analysis on Mexico, October 13, 1999 | Go to article overview

Government's Business Competition Commission Accuses Airline Holding Company Cintra of Monopolistic Practices


The government's anti-monopoly commission (Comision Federal de Competencia, CFC) has filed a series of lawsuits against Mexico's airline holding company Corporacion Internacional de Transporte (Cintra) for anti-competitive practices.

The commission alleges that Cintra, the parent company of Aeromexico and Mexicana, has raised prices 30% by eliminating flights from some markets. Most eliminated routes have involved Mexicana flights, the complaint said.

"What we are seeing are very high profits in areas where there is no competition, the profit of a monopoly," CFC president Fernando Sanchez Ugarte said in early October.

The CFC complaints are directed primarily at the Aeromexico and Mexicana operations, even though Cintra also owns regional carriers Aeroliteral, Aerocaribe, and Aerocozumel, and cargo airline Aeromexpress Cargo.

Cintra was created by Mexican creditor banks in 1995 to replace bankrupt Aerovias de Mexico as the parent company for Aeromexico and Mexicana. The financial troubles of Aerovias were blamed partially on mismanagement by former chairman Gerardo de Prevoisin, who is accused of embezzling US$61 million from Mexicana. De Prevoisin fled the country in 1994, but was arrested in Switzerland earlier this year and extradited to Mexico in September (see SourceMex, 1999-09-29).

De Prevoisin alleges that some of the embezzled funds were channeled into the campaigns of Ernesto Zedillo and other candidates on orders from former president Carlos Salinas de Gortari (see SourceMex, 1998-08-26).

High domestic fares said to affect tourism industry The commission took the legal actions against Cintra on behalf of the Asociacion Mexicana de Agentes de Viaje (AMAV), the Consejo Nacional de Turismo (CNT), and other tourism- industry organizations, which claim that excessive air fares have contributed to a decline in domestic tourism at popular resorts like Cozumel, Hautulco, Ixtapa, and Puerto Escondido.

The groups accuse Cintra of overcharging domestic passengers to subsidize international routes.

Cintra spokesman Luis Villegas acknowledged that some flights have been discontinued, but he said this was mainly because of a drop in passengers. He also adamantly denied CFC allegations that Cintra is operating Mexicana and Aeromexico as a single company to enhance profitability. "Both airlines are separate and viable businesses," Villegas told The New York Times.

The airline industry chamber (Camara Nacional de Aerotransportes, CANAERO) has acknowledged that some might consider Cintra's operations a monopoly but says the situation would not differ much from other countries. "It is true that Mexicana and Aeromexico control at least 75% of the market," said CANAERO president Juan Ignacio Steta. "But I challenge you to look at the share of the domestic market controlled by British Airways in England, Air France in France, and Lufthansa in Germany."

The Mexican pilots union (Asociacion Sindical de Pilotos Aviadores, ASPA) has taken a mixed position regarding the government actions against Cintra. In February, ASPA filed a complaint with the CFC accusing then Cintra chairman Ernesto Martens of profiting from traffic growth while neglecting to develop routes and acquire new aircraft. …

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