Over the past seven years, no licenses had been issued in Mexico for new airline carriers. What has allowed TAR to end this spell?
TAR's concept is to develop an aviation niche that at present is not reached by the legacy carriers in the country, and what we are trying to do is open new routes to the consumer, making it possible for the various regions of the country to connect without the need to go through the nation's main aviation hubs. People living on the Gulf Coast, for example, can travel with TAR from one destination to another without transiting through Mexico City. When we presented the concept to the Ministry of Communications, we received massive support from the central government, and of course, from local governments. We have chosen to fly 50-seater jets produced for low-density routes that make them viable for the creation of a route structure and an operational structure in which we can develop business and hence opportunities that have been dormant for years. We now also have the conditions as certain major companies in Mexico are substituting such aircraft with high-density alternatives. We are currently the only company with the capability to really operate in this segment.
TAR's head office is in Queretaro. Why did you select this city?
Queretaro is well placed geographically at the center of the country, has a strong aeronautical industry, and its airport itself has considerable international operational capabilities. Queretaro is a regional capital, and is well connected by land, and ideally located for setting up operations. We also believe that when the new high-speed train is built more companies will be established around the city.
What regions have the greatest potential for expansion?
In March of 2015 we plan to open a third base in the Yucatán Peninsula to connect the Mexican Mayan world to other Caribbean destinations. I also see us expanding around the Baja and Naucalpan regions. Mar de Cortes is the natural beach destination for the southern states of the US, and currently we do not have direct flights from Phoenix, Houston, or San Diego. Our border cities in the north are not connected, so if you are in Tijuana and want to get to Matamoros, you have to come to Mexico City and then fly back up again. What we are trying to do is connect the northern border, the southern border, and the Gulf cities, such every region has a full connection. In short, there is a huge opportunity for regional aviation in Mexico and in terms of connectivity between the US and Mexico.
Could you tell us more about your plans for expansion in the Caribbean?
We are trying to establish a circuit whereby we can bring people, not only from the Mexican region of Riviera Maya, but also from Cuba, Santo Domingo, and Jamaica, to the Mexican coastal region, and that is also of major potential. The Yucatán Peninsula accounts for the majority of tourist arrivals to Mexico, but its connectivity with other Caribbean countries has still to be improved.
TAR has been operating in Mexico for a short time period but has experienced rapid growth. What is the secret behind TAR's success?
In Mexico we have a rare situation in which supply creates demand. Demand is there, but we are missing the products and so when we open new routes, demand rapidly follows. The key concept is that we should keep developing aviation products for existing demand, and fortunately for us, we have huge potential. Right now we have reached 13 destinations that make up over 40 routes, and the idea is that we should receive three additional aircraft by March, and thereby double the number of destinations. We are talking to the various airport groups in the country and each has a different marketing scenario, and also the ambition to connect the various airports. In addition, we are receiving support from local governments and in exchange can provide a good product to the consumer, with reasonable fares. We charge approximately $100 for an average one-way trip. In the past, our passengers would pay at least double that before flying with TAR, and so we bring an important element to the community by lowering their transportation costs.
Why did Grupo Mafra invest in TAR?
Grupo Mafra decided to invest in aviation once we had convinced them of the great opportunities to be exploited in this industry. We made a complete analysis of cargo, scheduled, and charter aviation, and also air taxi operations. They realized that regional aviation was the element that needed to be developed. Grupo Mafra is a local group of Queretaro and really believes that what Mexico needs is to develop opportunities in the interior of the country.
What is TAR's long-term strategy?
The idea as I see it is for TAR to become an emblematic company ever looking for local opportunities, even in the long-term. I believe that the TAR model is not only viable in Mexico, but could also work in other parts of Central and South America, and even as we discussed, in the US, to meet demand. The concept in the future should remain and evolve to different regions, but as I see it we should have at least 40 to 50 aircraft dedicated to the domestic business before thinking about expanding into other regions. We are looking to develop strategic alliances with local investors in different regions, both here in Mexico and abroad, which would depend upon how swiftly we develop these alliances. TAR needs to depend on such growth, based on strategic local alliances that expedite out expansion. That is what we are seeking, but on the other hand, we do not want to accelerate artificial growth, but to proceed on a steady course.
© The Business Year - January 2015