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Latin America Investment News on Viva Tropical

Mexico Pledges $5 Billion for Airport Expansion

Article Summary:

Mexico is considering an expansion to its congested Mexico City airport, the busiest in Latin America, to government-owned land east of the capital.

Photo Credit: Bloomburg

Original Article Text From Bloomburg:

Mexico Open to Airport Expansion as $5 Billion Cost Seen

President Enrique Pena Nieto may expand the congested Mexico City airport, the busiest in Latin America, on government-owned land east of the capital, his top transportation official said.

Construction could begin as soon as 2014, Communications and Transportation Minister Gerardo Ruiz Esparza told reporters yesterday in Mexico City. Investment in Benito Juarez International Airport would amount to about $5 billion, according to an estimate by Luis Zarate, head of a trade group for builders.

Even without a firm commitment, Ruiz Esparza’s comments were the most detailed yet from the Pena Nieto administration about its aims after studying airport options for months and forcing airlines to move some flights to non-peak times. The airport surpassed its hourly takeoff and landing limits an average of once a week last year, according to the ministry.

“The fact that the government is talking about projects of this size is good news, it means public investment is going to go up,” Alonso Quintana, chief executive officer of Empresas ICA SAB (ICA*), Mexico’s largest construction company, said yesterday in a telephone interview.

ICA would be interested in bidding for airport building contracts as part of a group, Quintana said. ICA shares have tumbled 20 percent in 2013, the second-biggest drop on the benchmark IPC index of 35 Mexican stocks, as public-works spending declined earlier this year.

Possible Upgrades

Pena Nieto, who was elected in 2012, floated the idea of airport expansion during a June interview in which he also raised the prospect of replacing the existing facility and upgrading airports near Mexico City to create an alternative to Benito Juarez International. He gave no details then.

“The saturation we’ve had for several years in the Mexico City airport keeps us from having more tourism, more investment, more business in the capital,” Ruiz Esparza said, according to an e-mailed transcript of his remarks. “It’s something that should be resolved as soon as possible.”

Ruiz Esparza said yesterday that in addition to expanding Benito Juarez International, Mexico also may build a second runway at the airport in Toluca, 40 miles (64 kilometers) west of downtown Mexico City, to handle rising airline traffic. The plans were recommended by outside consultants, he said.

“We’ve received the recommendation to expand the operational capacity on lands located on the eastern side of the airport,” said Ruiz Esparza, referring to the Mexico City plan. He didn’t identify the “specialized companies” hired by the government to study the airport projects.

Building Timetable

Those companies are still working on detailed proposals covering engineering, architecture, design, hydrology and airspace, Ruiz Esparza said. They’re also studying the relationship between the existing airport and the expanded facilities.

Comparable projects in other countries have taken as long as 12 years to complete, Ruiz Esparza said. Financing sources for the Mexico City expansion may include airport revenue and taxpayer money, he said.

“This is an airport that would have to be built in stages and perhaps the first stage would be ready in five years,” Fernando Gomez, an independent aviation analyst in Mexico City, said in a telephone interview. “The important thing is that the project would start next year.”

Record Passengers

Grupo Aeromexico SAB (AEROMEX*) and low-cost carriers Volaris (VOLARA) and Interjet are pushing aircraft orders to a record, and Mexico airline passengers rose 8 percent during the first 10 months of the year after 2012’s all-time high of 56.8 million, according to data compiled by Ruiz Esparza’s ministry.

Mexico City’s airport handled a record 29.5 million passengers last year, more than twice the traffic at Cancun airport, the nation’s second-biggest by passengers.

Measured by takeoffs and landings, the Mexico City airport’s 36,391 aircraft movements in August ranked 22nd in the world, between Jakarta’s Soekarno-Hatta airport and New Jersey’s Newark Liberty International, according to Airports Council International.

One of Pena Nieto’s predecessors, former President Vicente Fox, proposed a $3 billion airport project in a different area east of Mexico City. Fox abandoned the project in 2002 amid opposition from machete-wielding farmers who lived in the area. Ruiz Esparza said the government already owns the land on which the latest expansion plan would be located.

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From Bloomburg

Latin America Investment News on Viva Tropical