The Business Year

Miguel Alemán Velasco

MEXICO - Transport

A Combined Passion

Chairman, Interjet

Bio

Miguel Alemán Velasco was born in 1932 and has had a long and varied career. After working in the telecommunications sector, he entered politics in 1992 first as Senator and later Governor of his home state of Veracruz. He is currently Chairman of Interjet.

"In less than five years we could make Interjet one of the best airlines in Mexico."

You have had a long and successful career in a number of industries. How did you end up in the aviation business?

It all started in 1954 when I was a law student. Around that time I fell in love with aviation—it was the new way to see the world. Since then I developed a deep interest and a combined passion for tourism and aviation. However, I was too young then to embark on such a task on my own. Also, I had to bear in mind that due to the importance of my father as a former President of Mexico, people would assume that my success was due to his strong political and economic position, and not due to my personal and professional interest. So, instead, I started a successful career in journalism. I started a magazine in partnership with a few friends that was quite successful. I eventually had to sell it. A few years later I made the transition from written journalism into television newscasts, and bought myself some stock in a newly created company. We developed a national network of TV channels and incorporated the firm Telesistema Mexicano. In less than 12 years Telesistema Mexicano became a large communications corporation that integrated TV, radio, magazines, and printed press. We covered a wide array of activities: news, musicals, sports, and entertainment for children. We also developed a strong competitive edge in soap operas. In a short span of time technology evolved fast, and we knew that investment was necessary to grow and keep up with the times and adapt to the arrival of videotape, microwaves, and satellite telecoms and the like. Also, the structure of the company evolved into Televisa as we know it today. Then, after many years of successful evolution my partner became seriously ill and died. As a precautionary move we decided that is was time to leave the company in the hands of the younger generation. It was a changing world in many ways, and new technologies changed the structure of our market, as well as some regulations. Also, my father had already passed away and I was invited into politics and took up the offer. I was in pubic office for 12 years (1992-2004). First, I was elected Senator and later Governor of my home state of Veracruz. After that, I finally went into the area I had always loved: aviation. I saw the growth of airmail and thought, why should a piece of paper have more rights to travel abroad than a human being? Why should a postcard or a letter or anything with a stamp and the label “airmail” be able to go from anywhere to China and back without problems while a passenger on a commercial flight is limited by passports, visas, vaccines, and other requirements? It was a crazy world and someday, I said, I want to be able to fly anywhere around the globe directly. The transition form turboprop to jet engine was the most significant innovation of our times. Many groups that used to build airplanes for civil aviation chose to build warplanes, so they left the projects we had. We therefore decided to establish an aircraft maintenance center in Mexico. Military planes from countries such as France, Chile, or Argentina usually flew to San Antonio Texas for repairs, so we decided to establish a similar plant in Mexico. There was an airline there called Aeronaves de Mexico, which merged with ours and began domestic and international operations, later becoming known as Aeroméxico. Additionally, another airline, Compañia Mexicana de Aviación, grew and began to develop other airline firms across Latin America and suffered from an over extension that led to its collapse. The most important lesson of an airline is that you need to stick to flying if that is your business. Restaurants should not be your business. If you want to serve food on board, a concession is the best way to go. You also must be careful not to buy too many planes if you don’t have a solid position in your market. Around that time I had job offers from a few airlines, including Aero California and Azteca, but they were on the verge of going broke. I wanted to do something new that really had a future. There were no local airlines in Mexico with jet engines and wide-bodied airplanes, so I began to study airlines all over the world from Europe to the US. They were all completely different. Some airlines were crowded, had old planes, bad maintenance, served poor quality food if any, and treated people badly. Those kind of flights are cheap, yet my idea was to offer high quality at a low price. I wanted the best airplanes with the best service and the best pilots. Starting up any business has many challenges and a new airline is an even more difficult process. We began to examine costs, including each airport’s individual taxes. If a new airline begins operations at an airport with eight or nine flights, you pay expenses on all of them. These costs are higher if the airport is new or underserved, as the costs then increase. Additional costs are not usually included in the ticket price, but I wanted everything to be included and clear. I told my colleagues I was going to avoid intermediaries and allow the customers greater flexibility to go online by themselves buy a ticket, and then change the ticket according to their needs at no further expense if necessary. This strategy began to work and all of a sudden we were doing well. The market discovered us and we discovered a new segment of the market that was not into air travel before. We later added a customer loyalty program for miles travelled based on a cash back bonus rather than the traditional model, as we realized that was more appealing to customers. Also, we provided a separate toilet for ladies in the cabin, which has been very successful. Our planes are spacious and provide plenty of legroom. If the passenger in front of you reclines, then you do not get disturbed.

What has been the strategy behind providing a quality product while adopting a low-cost, low-fare business model?

First, we bought new planes to lessen maintenance costs. However, we developed our own maintenance center in Toluca City, which can service a wide variety of planes from Boeings to small warplanes, too. We are now working to team up with Lufthansa as a partner in this maintenance hub. I admire Lufthansa in the way it maintains its aircraft and I think this venture would be very interesting for us. The business is doing well, and today we are servicing planes from Argentina, the US, and some Central American countries. We are happy with our progress as the business has grown as large as the airline itself. It is a good fit, and it saves us money in the long run. We have also recently selected a new sort of airplane for short distance flight—the Sukhoi Superjet-100. It is a combination of European technologies that is originally a Russian airplane with a wide body it’s a capacity for 100 passengers. Its engines are made in France and the US, and all its technical and navigation instruments are from the US and Europe. The interior decoration was designed by Pininfarina in Italy. The performance is fantastic. Its engines consume nearly 15% less fuel and it lowers carbon emissions into the atmosphere by 80%, which is very good news. It creates less noise and can fly into any airport. We are going to use it for short flights from Mexico City to Querétaro, Acapulco, Puebla, and other nearby routes.

“In less than five years we could make Interjet one of the best airlines in Mexico.”

How do you intend to expand on the successful introduction of international routes at the end of 2012?

After making comparisons of several routes, we decided to fly to Orange County in the US. Besides local demand, it is only 40 minutes from Los Angeles. It is also 50 minutes to Disneyland and five minutes to Costa Mesa, which has the largest mall in the US and is a place where Mexicans and passengers from other Latin American countries love to shop. I think we will have a good reception there. Our Las Vegas route is popular at the weekend for many people from Mexico. We also run flights to Central America, South America, and the Caribbean. We are not going to go to Europe for a couple of years, but Canada is in our plans.

The year 2011 was described as a break out year for Interjet. What characterized the success?

We have to be very careful with timing, and it requires vision to know when to make the right moves. That is why we chose that year to really expand our frontiers and go international. That was before Mexicana had serious problems and collapsed into a legal labor and financial impasse. However, in support of the needs of our local market and with the authorization of our civil aviation authorities, we have been serving passengers on some of its routes. At some point Mexicana will have to be handed back to private investors to attempt once again to make a successful comeback, but it will take some time recover customer confidence and fly as many passengers as we do. That is why we are trying to consolidate our position in the local market as much as possible. I do not worry about being the biggest. For us, quality is far more important. This has always been the core goal of our strategy.

What is your long-term vision for Interjet? Where would you like to see the company in five years?

It has been a hard job to start up. In less than five years we could make Interjet one of the best airlines in Mexico. First, we have to make it a reality in our own country before can compete with others internationally. The main problem has been communications in Mexico because the topography of the country is very complex. Nevertheless, it can be done. Italy succeeded in building tunnels and bridges, and something similar needs to be done here, too. Air travel is free of most security concerns, and the country now needs more airports and much better road and transport infrastructure and services. Through airports you can get where you are going faster and more safely. This is one way aviation has proven to assist in the development of the country.

© The Business Year – November 2012

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