Demand for jet fuel in central Mexico may gradually shift from Mexico City's international airport (AICM) to the Felipe Angeles international airport (AIFA) starting next year, on the country's return to the top aviation safety rating and the reduction of flights at AICM.
The AICM has long been the country's main airport, accounting for a significant proportion of jet fuel sales nationwide.
From January to August, jet fuel sales at AICM amounted to 30,100 b/d, or 32pc of the total 93,700 b/d jet fuel sales at Mexico's 63 main airports, according to Argus calculations based on Airports and Auxiliary Services (ASA) data.
But AICM may see jet fuel demand drop next year, as its hourly operations will decrease to 43 landings and takeoffs from 52/hour starting 8 January, according to a resolution from Mexico's civil aviation authority (AFAC) and the transportation ministry (SICT) issued on 6 September.
President Andres Manuel Lopez Obrador's administration has claimed that the AICM is congested, but some market sources think that the latest resolution is part of the government's strategy to increase passenger traffic at the AIFA — its flagship project — as the airport has not taken off since its inauguration 18 months ago because it is about 35 miles from Mexico City and lacks proper transportation and highway infrastructure.
Still, traffic is expected to remain high at AICM because "passengers do not fly where the government dictates, not even with cheaper flights," Gerardo Alonso, spokesman of Mexico's pilot union ASPA, told Argus.
In August, AICM carried 4.31mn passengers, more than 16 times the 267,000-passenger traffic recorded at AIFA that month. AICM consumed an average of 29,100 b/d in August, 8.5 times higher than 3,400 b/d at AIFA. Still, fuel demand has risen at AIFA since May, largely prompted by the relocation there of cargo-only airlines from AICM, a move orchestrated by the government to bring business to the newer airport. (See graphic).
The migration of all 18 cargo-dedicated airlines to AIFA was completed on 7 September and is expected to keep boosting its jet fuel consumption.
Additionally, Mexico regained its top aviation rating last week, allowing Mexican airlines to expand new routes to the US.
Mexican carriers are already working to open new routes from AIFA to the US, attracting more traffic to the new airport, one commercial pilot told Argus.
AIFA has a nominal storage capacity of 21mn l of jet fuel (130,000 bl), the second largest among Mexican airports behind AICM's 24mn l storage capacity.
AICM's jet fuel storage tanks are at 75pc capacity, while AIFA is only using about 9pc of its capacity, according to ASA data.
AIFA has held a jet fuel storage permit since its inauguration, but Mexico's energy regulator (CRE) granted the airport a jet fuel commercialization permit in June to enable the airport's administrators, the Mexican army, to directly supply jet fuel to airlines operating at its facilities at lower prices.
In contrast, reduced demand at AICM could lead state-owned companies Pemex and ASA to raise jet fuel prices at that airport, Alonso said.
Jet fuel prices are primarily influenced by global crude prices and regional supply-demand dynamics, including refining capacities and transportation costs, in addition to seasonal demand fluctuations, particularly increased travel during peak vacation times.
Pemex produces roughly 40pc of the jet fuel sold in Mexico, while the state-owned company imports the rest, mainly from the US.
The average price of jet fuel delivered to Mexico's east coast has increased so far in September by 4pc to Ps14.33/l ($3.14/USG) from Ps13.71/l the prior month, but has declined by 19pc compared with September 2022, according to Argus assessments.
For the week of 19-26 September, retail jet fuel prices into plane or tank truck at AIFA stand at Ps14.76/l, the lowest price among Mexico's airports and 4pc lower than prices at AICM, according to ASA.
Jet fuel business a monopoly in Mexico
Jet fuel was the last oil product market opened to more competition in Mexico after constitutional changes in 2014, and progress stalled under the current administration, which opposed the reforms.
ASA and Pemex continue to supply most of the market, with indirect participation of other companies.
In March, competition watchdog Cofece issued a series of recommendations to eliminate the monopoly held by ASA as the main jet fuel retailer in Mexico, calling the energy ministry (Sener) to issue more permits for private-sector companies to import jet fuel. But so far, the only two companies with importing permits issued by Sener are Valero and Pemex.
The jet fuel market in Mexico could open up to private-sector investment in the near future, as Lopez Obrador's tenure ends on 1 October 2024.
But the governing Morena party's candidate Claudia Sheinbaum — who is expected to continue with Lopez Obrador's statist energy policy — is nine points ahead the opposition presidential candidate, senator Xochitl Galvez, according to a 6 September poll by El Financiero.
