Up in the Air

A new Air Transport Agreement

between Mexico and the US went into effect in the second half of 2016. Secretary of Communications and Transport, Gerardo Ruiz Esparza, and former US Secretary of Transportation, Anthony Foxx, signed a deal that will remove restrictions on commercial air travel between both countries. The agreement has Mexico’s tourism sector scrambling to prepare for more visitors than ever before.

The new agreement will usher in a whole new era of air travel between the two neighbors. Before the measures went into effect, only three airlines from each country were allowed to service any given US-Mexico route. Many airlines were shut out of markets, resulting in local oligopolies for a lucky few that naturally inflated prices. Now that these restrictions have been tossed out, unlimited market access is allowed to almost all cities in both countries, which translates directly into cheaper flights and a boost in new visitors from increased competition.

While this noticeably excludes Mexico City, it is still phenomenal news for a Mexican tourism sector that has been growing rapidly in recent years. In the first half of 2016, Mexico received 47 million international visitors, 17 million of which were tourists, an 8.6% increase on the year before. Cancún International Airport received the most foreign visitors in 2015, some 3.7 million passengers, even more than Mexico City. From Cancún, travelers can access popular destinations such as Cozumel, Riviera Maya, Playa del Carmen, and much of the Yucatan. Even more significant is the fact that 60% of Mexico’s vacationers are from the US. With surging demand and plummeting ticket prices, the sector’s growth has a bright future indeed. American, Delta, Southwest, Interjet, and Frontier have been among the first to announce dozens of new routes, most noticeably to service the huge Cancún market. But many airlines are adding new routes all over the country, including other popular resort towns such as Puerto Vallarta and Los Cabos. Most of these are slated to begin in December, just in time for a Christmas vacation on the beach. This news comes after Secretary of Tourism, Enrique de la Madrid Cordero, announced that US tourist arrivals by air had already increased 22.6% in 1Q2016 compared with 1Q2015.

The implications for the broader Mexican economy are huge. In 2015, the tourism sector accounted for 6.8% of GDP, some USD79.7 billion, making Mexico’s the seventh largest tourism economy in the world. More telling are the employment numbers attributed to the sector. In 2015, 3.8 million jobs—7.5% of total employment—were directly related to the industry. That is not to mention the employment indirectly supported by tourism, from construction and marketing to restaurants and cleaning services. Were these included, that number would stretch to 8 million jobs, or 15.9% of total employment. Moreover, the World Travel and Tourism Council predicts that tourism will create another 2 million in Mexico in the next decade alone.

The easing of restrictions will also allow Mexicans to travel more affordably to the US. And since the agreement also applies to cargo airlines, new supply chain hubs are expected to spring up all across Mexico. These new measures exemplify the movement away from protectionist policies and towards the integration of the Mexican and American economies. The enhanced freedom of movement will mean a greater influx of people coming into Mexico, not to mention the savings from reduced airline fairs that will find its way into many different sectors of the Mexican economy. Now that the skies are unrestricted, Mexico will be able to flaunt its beauty as never before.