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Wednesday, June 17, 2009
Flights To Mexico Cost State
By Dan McKay
Journal Staff Writer
Ay Chihuahua!
That's the slogan on billboards advertising the new nonstop flights from Albuquerque to Chihuahua City, Mexico.
But the billboards, it seems, haven't done much to fill seats on the AeroMexico planes, which run about 80 percent empty.
And that's costing the state money — $90,000 so far in subsidies to offset the airline's losses. The subsidy could grow. Bills for operations since May haven't come in and the state is working to extend the agreement through August.
"We are not pleased with the results so far," New Mexico Economic Development Secretary Fred Mondragón said in an interview Tuesday.
But he said the flights deserve a little more time to show whether they will work. A "perfect storm" involving the swine flu, drug violence, the recession, currency fluctuations and other factors have hurt flights this year, Mondragón said.
Albuquerque City Councilor Michael Cadigan showed less patience Tuesday, voting with the minority against a lease for AeroMexico at the Sunport.
He called the subsidy "another example of a taxpayer-funded bailout for a foreign corporation."
The direct airline service is part of a deal signed last fall by Gov. Bill Richardson, Albuquerque Mayor Martin Chávez, Chihuahua Gov. Jose Reyes and other New Mexico and Chihuahua officials.
The flights are part of an effort to promote tourism and business activity in New Mexico — as well as live up to the "international" in Albuquerque International Sunport. New Mexico had been the only border state without direct air service to Mexico.
Some flights have been up to 85 percent empty, state officials estimate.
Cadigan wasn't the only city councilor unhappy with the subsidy, although it comes from state coffers and the city will be getting paid about $12,000 a month by the airline to lease space.
The lease came up in a City Council meeting on Monday because the city runs the airport, and the lease was on the agenda.
Councilors narrowly approved it after they were told the subsidy was part of separate agreements. But they weren't happy about it.
"I just think it was a bad business decision for the state," said Councilor Ken Sanchez. Councilor Rey Garduño said that while an initial subsidy might have been appropriate, continuing to pay the airline runs counter to free-market principles.
"It's starting to sound to me like it's not sustainable," he said.
Those three joined Isaac Benton in voting against the lease. It was approved by five other councilors: Sally Mayer, Debbie O'Malley, Brad Winter, Trudy Jones and Don Harris.
The subsidy is paid out of a $340,000 appropriation from the state Legislature. The state agreed to provide funding as part of a deal to help the airline avoid losses if not enough people fly to and from Chihuahua. That agreement expired last week, but officials are trying to extend it through August.
Mondragón said the effort is worthwhile. Several trade and student groups have come in, and Mexican leaders are interested in doing business in New Mexico — especially if they don't have to fly to Houston or Dallas for connecting flights, he said.
There's also the possibility of getting flights to beach cities in Mexico for vacationers.
State spokeswoman Toni Balzano said the Chihuahua flights just need "a fair shake. ... We'd like to give it a couple of good months to see how it goes."
The 52-seat AeroMexico planes typically need about 23 seats filled to avoid losing money. Failing to meet that target has triggered the $90,000 subsidy covering the months of February, March and April, a city official said.
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