In 2020, passenger traffic worldwide fell almost 60% compared to 2019, and in Mexico the drop was just over 50%. This unleashed in the industry a series of measures focused on surviving in the face of the drop in demand, even reaching restructurings such as that of Aeroméxico.
Although the recovery of the industry has been slow, in Mexico it has been faster. In 2021, the number of passengers worldwide was half that of 2019, while in Mexico it was 22% lower. This is due to the recovery of the domestic market, mainly family travel and tourism, as well as the proximity to the United States market. This dynamic favored low-cost airlines, Volaris and Viva Aerobus, which positioned themselves as number one and two in the domestic market, also benefiting from the departure of Interjet in December 2020.
However, the industry still needs the reactivation of two markets to have a sustained recovery: the first, the international market, which still has restrictions or is even closed, as is the case with some countries or destinations in Asia; the second, the recovery of the business traveler market, which from my point of view is key to having an industry with healthy dynamics, in which traditional and low-cost airlines can coexist.
If we do not see a normalization of these markets in the short term, the industry could face periods of volatility with increased operational and financial risks.
In this scenario, where we are already seeing a recovery in traffic, and in Mexico we have a market with three players that accounted for 97% of domestic traffic in 2021 (Volaris, Viva Aerobus and Aeromexico), new challenges appear that will be on the list of priorities of the industry during 2022.
The first and most relevant is the price of jet fuel. The main input of the industry, which has historically represented about 30% of operating expenses, rose 61% in dollars during 2021 and 107% during the first quarter of 2022. This leads us to expect more expensive flights during 2022, situation that is already evident so far this year. According to information from the Mexican Institute of Transportation, the average rate for domestic flights has risen an average of 45% during the first four months of the year and 63% for international destinations.
Although the price of jet fuel is not expected to remain at these levels, it is difficult to estimate when it will adjust and at what level it will stabilize, so we anticipate a year in which average rates will remain high.
However, the increase in the price of jet fuel may be partially offset by companies with increases in rates and the incorporation of aircraft with more efficient engines and with more efficient configurations. But the magnitude of the increase will have an impact on the profitability of the industry, so the levels recorded in 2021 will not be sustainable.