Airlines are trimming flights to Mexican resort areas as demand softens after reports of tourist blackouts

Joe Taschler | Milwaukee Journal Sentinel

Some of the largest U.S. airlines say their bookings to resort areas of Mexico have fallen in recent months, with travel to that region being singled out as one of the few weak spots in an overall robust global air travel market.

In transcripts of conference calls to discuss quarterly earnings with financial analysts, executives from United, Delta, American and Spirit all mentioned Mexico specifically as a weak spot in their flight networks.

Several said they either have or will consider reducing service to Mexican resort areas.

The reductions come after an ongoing Milwaukee Journal Sentinel investigation into reports of alcohol-related blackouts by American tourists in Mexico.

"Unit revenues increased by 1 percent in Latin (America) as this region faced the most headwinds during the quarter," said Glen Hauenstein, president of Delta Air Lines. "Weak demand to Mexican beaches and currency devaluations were offset by strength in Central America and the Caribbean."

Compare that slight increase to Hauenstein's description of Delta's overall results for the quarter ended in June: "Our revenues grew 10 percent to $11.8 billion, a record level for the June quarter."

While Mexican tourism officials insist the country's resort areas are safe, the U.S. State Department has noted, "Violent crime, such as homicide, kidnapping, carjacking, and robbery, is widespread" in Mexico.

A Journal Sentinel investigation, launched in July 2017, identified the problems with alcohol-related blackouts at resorts in Mexico. In all, more than 170 travelers have described injuries, illnesses and deaths after drinking alcohol at resorts and in tourist towns in Mexico.

FULL COVERAGE: Mexico resorts investigation

INTERACTIVE: The victims

FORM: Tell us about your Mexico resort blackout experience

Travelers have reported blacking out after drinking small and moderate amounts of alcohol — in some cases, one drink — and regaining consciousness to find they were robbed, assaulted, hospitalized or taken to jail.

Many reported encountering unhelpful or hostile resort workers, hospital staffers and police officers. And many said the U.S. Department of State offered little to no help. And when tourists tried to warn others about what happened using the popular website TripAdvisor, the Journal Sentinel found TripAdvisor had deleted dozens of their posts.

The Journal Sentinel's investigation also exposed how travel agencies failed to warn tourists about troubles in Mexico when they booked their trips.

RELATED: TripAdvisor removed warnings about rapes and injuries at Mexico resorts, tourists say

RELATED: Travel agents and popular sites didn’t share the risks with those booking travel to Mexico resorts

RELATED: Updated: What we know about Mexico resort blackouts and tainted alcohol

Those stories and the State Department's travel warnings appear to be having an impact on the number of people traveling to Mexican resorts.

“Our Latin entity trailed the Atlantic and Pacific in performance and was the only region with negative revenue performance being down 2.9 percent in the quarter," Andrew Nocella, United’s executive vice president and chief commercial officer, said on a call with analysts.

United's overall revenue was up 7.7 percent in the quarter.

"While the region is more challenged than others, flights to Mexico, these destinations in particular, had pretty severe demand weakness due to increased supply and travel warnings," Nocella said.

American Airlines also singled out Mexico as a drag on its business.

The airline's Latin America business showed "strength across the board, with the exception of Mexico pleasure markets," Robert Isom, president of American Airlines, said on a call with analysts.

Ultra low fare carrier Spirit Airlines was even more direct in its assessment of the situation.

“While our international region is performing well overall, we started to see signs of softness in Cancun in the second quarter," Matt Klein, Spirit's senior vice president and chief commercial officer, said during its call with analysts.

While that "softness" had only a slight impact on Spirit's latest quarterly results, Klein said he expects the impact to be more pronounced going forward, with the situation in Mexico knocking a full percentage point off total revenue per available seat mile in the July-September quarter.

In the business model of the airline industry these days, if there aren't enough people filling the available seats, those seats are moved quickly to where demand is strongest.

"We have made select capacity trims to Cancun beginning in the fall and have postponed some new additions to Cancun," Klein said. "We continue to monitor the travel advisory situation, which started to become an issue earlier this year, its impact on our demand for travel to Cancun, and we will review further adjustments as necessary.

"There's been a lot of travel advisories for Cancun and other Mexican destinations," Klein added. "But, for us, the most impactful is Cancun for sure. And those travel advisories have been out there all year. They've been updated up and down.

"It continues to be an issue for us and it's something that we think will eventually resolve itself, but it is that much of a drag on our third quarter expectations," Klein said.

Spirit isn't the only one tinkering with its Mexico service.

"We made adjustments to capacity in this region and we continue to monitor our capacity levels in the region going forward," United's Nocella said. "We expect that Latin performance will trail other regions for the remainder of 2018."

Same with Delta.

"We are reducing capacity to match demand in the impacted markets," Hauenstein said.

Milwaukee numbers down

The number of available seats to Mexico beach destinations from Mitchell International Airport has fallen sharply, according to data from OAG, a global air travel data consultancy based in the United Kingdom.

For summer 2016, there were 5,353 airline seats available from Milwaukee to beach destinations in Mexico, according to OAG. By summer 2018, that had dropped to 869.

For winter 2016, there were 5,293 seats available from Milwaukee. So far for 2018, there are 2,355 seats available, according to OAG.

Overall, "The coming winter capacity data would indicate that there will be less capacity than last year at the moment, which may change in the next month or so as airlines finalize schedules for the (February-March) period when some additional capacity could be added," John Grant, senior analyst with OAG, said in an email.

Not every airport has seen a decrease. Atlanta, Chicago O'Hare and New York JFK all had more seats in summer 2018 than they did for the same period in 2017 and 2016.

Among other airlines, Alaska and Southwest say they have not seen the same softness in Mexican destinations.

"In June, we offered 27 departures from Cancun on Saturdays to destinations across the U.S.," Dan Landson, a spokesman for Southwest, said in an email. "That was our biggest schedule ever from Cancun."

Southwest has recently added international flights to its network.

Alaska Airlines also flies to Mexico.

"It's a pretty small amount of our network today, so it doesn't have a major impact on results," Brad Tilden, chairman and CEO of Alaska Airlines Group, said in its conference call with analysts. "There is some softness in Mexico beach cities. I think, you've heard other folks talk about that, but nothing materially concerning," he said.

Travelers aware

At least one travel agent in Wisconsin says there is heightened awareness about Mexico among potential travelers.

"We get people who call all the time and say, 'We're looking to take the family on vacation next year. We'll go anywhere but Mexico.' They literally just say it," said Peggy Fischer, president and owner of Shooting Star Travels in West Bend.

The flip side of the softening demand is that a Mexico resort vacation is fairly cheap these days compared with other travel options, Fischer said.

"They'll say, 'We're very price conscious.' And I tell them, 'Honestly, the best bet for price is Mexico,'" Fischer said. "'Nope. We don't want to do Mexico.' OK, then your price will be affected."

Among other options, travelers are looking at Europe, Fischer said.

"Italy, Ireland, Scotland, London, oh my gosh, all of those are huge. I bet I've sent 150 people to Ireland in the past two to three months," she said.

That echoes what Delta executives told analysts.

"...Business traffic to and from the UK on Delta and our partners is at record levels," Hauenstein said. "Similarly, in continental Europe, we're seeing record revenues in terms of yields and in terms of traffic into Continental Europe. So it is a relatively robust business environment and very, very strong leisure demand."