VZCZCXRO9502
RR RUEHCD RUEHGD RUEHHO RUEHNG RUEHNL RUEHRD RUEHRS RUEHTM
DE RUEHMC #0122/01 0470021
ZNR UUUUU ZZH
R 160021Z FEB 07
FM AMCONSUL MONTERREY
TO RUEHME/AMEMBASSY MEXICO 2508
RUEHC/SECSTATE WASHDC 1697
INFO RUEHXC/ALL US CONSULATES IN MEXICO COLLECTIVE
RUEANHA/FAA NATIONAL HQ WASHINGTON DC
RUCPDOC/DEPT OF COMMERCE WASHINGTON DC
RULSDMK/DEPT OF TRANSPORTATION WASHINGTON DC
RUEHMC/AMCONSUL MONTERREY 6756

UNCLAS SECTION 01 OF 03 MONTERREY 000122 
 
SIPDIS 
 
SENSITIVE 
SIPDIS 
 
DEPARTMENT FOR EB/TRA/AVP 
 
E.O. 12958: N/A 
TAGS: EAIR ECON EINT BTIO MX
SUBJECT: COMMERCIALIZING MONTERREY'S PRIVATE AIRPORT: A 
HIGHLY-POLITICIZED VENTURE 
 
REF: MONTERREY 076 
 
MONTERREY 00000122  001.2 OF 003 
 
 
¶1. (SBU)  SUMMARY.  With an influx of new airlines, Monterrey's 
International Airport has built new passenger and cargo 
terminals in a bid to become a regional and international 
aviation hub.  However, this expansion may be limited by 
Monterrey's high aviation fees and limited number of runways. 
Moreover, the Monterrey International Airport faces potential 
competition from Monterrey's private Aeropuerto del Norte.  This 
small, private airport is owned and managed by a member-owned 
cooperative that for over thirty years has utilized the airport 
for the benefit of Monterrey's largest and most influential 
companies.  Although there has been a move to open the airport 
to commercial carrier and shipping operations, the move has 
apparently been blocked by an influential member of the airport. 
 This backroom maneuvering demonstrates how deals are made in 
the clubby Monterrey business world, and how private interests 
could limit Monterrey's aviation ambitions.  END SUMMARY. 
 
--------------------------------------------- ----------------- 
MONTERREY'S AIRPORT SEEKS TO EXPAND 
--------------------------------------------- ---------------- 
 
¶2. (U)  Aeropuerto Internacional de Monterrey (AIM), formally 
known as General Mariano Escobedo International Airport, is 
touted as one of the most modern in North America, but is also 
one of the most expensive.  Built in the early 1970s, it came 
under the control of Grupo Aerportuario Centro Norte S.A. (OMA) 
in 1998 after the Mexican airport system was deregulated and 
opened up to private investment.  OMA operates and manages 
thirteen international airports in northern and central Mexico, 
the largest of which is Monterrey.   According to the airlines, 
OMA made a very expensive bid to control the Monterrey 
International Airport, far higher than its competitors, and OMA 
has sought to recoup its investment through expensive landing 
fees and other aviation services. 
 
¶3. (U)  According to OMA Airport Administrator Raul Zabre, AIM 
serviced over 5.5 million passengers flew in 2006, the highest 
number on record, but still far lower than the airport's 7.5 
million passenger capacity.  Eighty percent of Monterrey's 
flights are for domestic travel, while the other 20% are headed 
for U.S. destinations.  Overall, domestic traffic was up 18% in 
2006, but December saw a 31% increase in domestic passengers 
over December 2005.  This growth reflects nine new domestic 
routes offered by the new Monterrey-based low-cost airline, 
VivaAerobus, which began operating on November 30, 2006 
(reftel), as well as several other new carriers, and may well 
reflect a trend of substantially increasing domestic travel due 
to increased aviation competition. 
 
¶4. (SBU)  According to Zabre, OMA is trying to further develop 
the airport's capacity to handle the inevitable increase in 
demand as Monterrey becomes an international hub for Mexico. 
The airport is scheduled to open a new passenger terminal in 
2008, which will increase AIM's capacity by 2 million. 
Similarly, OMA built a new 60,000 square meter cargo facility in 
¶2004.  However, less than half of that space is currently being 
utilized, according to UPS Monterrey's General Manager, in part 
due to high aviation costs.  To date, only FedEx and UPS have 
leased any part of the cargo terminal.  OMA is negotiating with 
AeroMexico to move the airline's maintenance facility from 
Guadalajara to Monterrey, and if the deal goes through, 
AeroMexico maintenance will utilize a majority of the new cargo 
facility.  However, AIM's plans appear constrained by a lack of 
runways.  AIM only has two runways and, according to airline 
directors, they are close to capacity.  They believe that AIM 
needs to build at least one more runway to become an 
international passenger and cargo hub.  OMA disagrees on the 
need for more runways, and Airport Administrator Zabre stated 
that OMA does not currently plan to build any. 
 
--------------------------------------------- ------ 
ANOTHER COMMERCIAL AIRPORT? 
--------------------------------------------- ------ 
 
¶5. (SBU)  Just thirty miles from AIM lies Aeropuerto del Norte 
(ADN), a private facility that originally served as Monterrey's 
commercial airport until the early 1970s.  Since then, ADN has 
been owned by a cooperative ("cooperativa") of private 
individuals, most of whom represent Monterrey's largest and most 
influential companies.  The co-op is democratically controlled 
and returns any margins or profits to members on the basis of 
patronage.  EconOff met with Gabriel Cavazos, a former official 
from the Nuevo Leon state Secretariat for Economic Development 
(SEDEC), who worked closely with the ADN co-op in 2006.  As 
 
MONTERREY 00000122  002.2 OF 003 
 
 
Cavazos explained, co-ops in Mexico are plentiful, but most are 
formed with a social agenda in mind.  According to him, this 
co-op was established in order to avoid the high taxes normally 
levied on both private and commercial airports.  "It has become 
a running joke in Monterrey," lamented Cavazos, "Its nickname is 
the 'cooperativa for golfers'". 
 
¶6. (SBU)  While almost every airport in Mexico has been granted 
a concession by the Mexican civil aviation authority (DGAC) to 
operate legally, ADN only has a simple, highly restrictive 
"authorization" from the DGAC.  Under a simple authorization 
scheme, only members of the ADN co-op can utilize the existing 
hangars and store their private planes at the airport.  However, 
over the last thirty years, various co-op members have been 
collecting fees from third parties who rent hangar space, but 
haven't paid any taxes on the income.  According to Cavazos, the 
Mexican federal government has "turned a blind eye" to the 
co-op's obvious tax evasion because its members are such 
influential businessmen. 
 
¶7. (SBU)  When new low-cost airlines began emerging in Mexico in 
2005, seven members of the cooperativa, each of whom own tracts 
of land that surround ADN, agreed that the airport was worth a 
lot of money if opened up to commercial aviation.  These seven 
members privately commissioned Lufthansa Consulting to conduct a 
preliminary survey on the potential for opening up Aeropuerto 
del Norte to commercial aviation.  Lufthansa concluded that 
there was an enormous potential for ADN to act as Monterrey's 
second international airport, particularly if opened up to 
low-cost carriers and cargo operators.  Their report also found 
that, with the proper investment in infrastructure, ADN could 
successfully compete with Laredo, Texas, for cargo traffic. 
NOTE.  According to SEDEC statistics, more Monterrey-bound cargo 
goes through Laredo airport and is trucked in to Monterrey than 
arrives directly to AIM.  The historical reason for this is the 
high cost associated with flying cargo planes into 
OMA-controlled AIM.  END NOTE. 
 
¶8. (SBU)  When the seven co-op members suggested opening the 
airport to commercial traffic, they met with fierce resistance 
from the other members of the cooperative.  According to one of 
the seven members supporting the airport, the others "were 
against it because they would lose their thirty year-long 
privileges and because they have a narrow minded mercantilist 
perspective."  The seven co-op members then approached the Nuevo 
Leon state government directly and asked them to dissolve the 
cooperativa to make way for a new, invigorated airport.  The 
other members of the cooperative complained to Nuevo Leon that 
the seven co-op members pushing the change were not simply 
altruistic public citizens, but would financially benefit 
because they owned the surrounding land that the airport would 
acquire.  After initial resistance, the Nuevo Leon state 
government persuaded the cooperative members to support opening 
the airport to commercial traffic by guaranteeing that the 
members' personal access privileges would not be infringed if 
they agreed to give up control of the airport.  According to 
Mexican federal law, a state or municipal government must form a 
corporation in which they hold the majority stake in order to 
obtain a DGAC concession to operate an airport.  As such, the 
government of Nuevo Leon incorporated a new public agency in 
March 2006 called the Corporation for Strategic Projects (CSP). 
NOTE.  The legal engineering for CSP was based on the City of 
Toluca's experience with Licenciado Adolfo Lopez Mateos 
International Airport outside of Mexico City.  END NOTE. 
 
¶9. (SBU)  Nuevo Leon applied for an airport operator's 
concession with the Mexican Ministry of Communications and 
Transport (SCT) shortly following CSP's incorporation.  To date, 
SCT has not rendered a decision on the application because, as 
Cavazos explained, Nuevo Leon Governor Natividad Gonzalez Paras 
"suddenly put the brakes on the whole thing" in late 2006. 
Several industry insiders told EconOff that, although SEDEC had 
engineered an agreement with the members of the Aeropuerto del 
Norte cooperativa, one of the co-op's most influential members 
backed out of the agreement in mid-2006.  It is rumored that 
this particular member, the co-owner of Monterrey's leading 
newspaper El Norte, threatened the Governor with intense 
scrutiny and journalistic retribution should the plan go 
forward.  It is then that Governor Gonzalez Paras, who has 
Presidential aspirations, withdrew his support. 
 
--------------------------------- 
COMMENT & ANALYSIS 
---------------------------------- 
 
 
MONTERREY 00000122  003.2 OF 003 
 
 
¶10. (SBU)  Comment.  Although Nuevo Leon has made development of 
the aviation industry a strategic goal, its opportunity has been 
undercut by other decisions.  Nuevo Leon received a very high 
price when it contracted with OMA to run the international 
airport, but now OMA's high fees have discouraged aviation 
development in Nuevo Leon.  Nuevo Leon also persuaded 
VivaAerobus, the latest RyanAir family venture, to make 
Monterrey its hub (see reftel), but although OMA is expanding 
the airline terminals, OMA has no plans to increase the number 
of runways, which may hamper further growth.  Finally, although 
Nuevo Leon would benefit as a whole if Aeropuerto del Norte 
expanded commercial and cargo operations, the threat of negative 
newspaper publicity on the Governor may well doom the whole 
project.  We expect the Mexican aviation industry to take off 
with new airlines and more competition, but Nuevo Leon's 
aspirations to become a regional aviation hub may be stunted if 
it cannot overcome parochial interests.  End Comment. 
MORENO