Fitch negative on Mexico airport trust as hub hit by flight cuts

Fitch Ratings revised the Mexico City Airport Trust's outlook to negative from stable on Tuesday, citing concerns about the Mexico City International Airport's (AICM) ability to address maintenance needs and government-instated flight cuts. The trust manages two bonds, of which some $4.2 billion is outstanding, which were used to finance the construction of another capital airport project that was abandoned several years ago after about a third of it was built.

Fitch Ratings revised the Mexico City Airport Trust's outlook to negative from stable on Tuesday, citing concerns about the Mexico City International Airport's (AICM) ability to address maintenance needs and government-instated flight cuts.

The trust manages two bonds, of which some $4.2 billion is outstanding, which were used to finance the construction of another capital airport project that was abandoned several years ago after about a third of it was built. President Andres Manuel Lopez Obrador canceled the Texcoco airport project upon his election in 2018, slamming it as too costly and riddled with corruption. Since then, the usage tax from the AICM has been used to pay off the bonds.

Lopez Obrador instead opted to build the further-away Felipe Angeles International Airport (AIFA) north of the capital on an active military base as an alternative to the busy AICM. In August, his administration

again capped flights at the AICM , a move which the industry criticized.

"It is uncertain to what extent (airlines) will be able to manage a second cut or how they will do it," Fitch said in a statement released on Tuesday. "If airlines' strategy to maintain their volumes involves transferring flights to the AIFA, it will mean less revenues for (the AICM) and for the issuer trust as well," Fitch added.

The ratings agency also cited recent flooding at the AICM as cause for concern: "The damages suffered by the infrastructure reveal its poor condition and pressing need for adequate maintenance."