An Incomplete Turnaround: Aeroméxico has come far. But not quite far enough.

Air Canada, as discussed in last week’s Airline Weekly cover story, is among the airline industry’s marquee turnaround stories, joining others like the U.S. Big Three and Japan Airlines. Another airline that might seem worthy of the list: Aeroméxico, no doubt vastly stronger and better-run today than it was a decade earlier. It’s consistently profitable too.

But Aeroméxico is not yet where it wants to be, having gone from weak to strong, yes, but not yet to the highest levels of industry profitability, nor even all that close. Gone are the days of government ownership, gross inefficiencies, limited access to credit and massive losses sustainable only with taxpayer largesse. But since emerging from its last crisis in 2009, when Mexico’s airline industry was battered by both the global financial crisis and the H1N1 epidemic, Aeroméxico’s annual operating margins have averaged just 7%. That’s certainly not bad, and in fact not much different from Air Canada’s figure over those same seven years starting in 2010. But there’s at least one big difference: While Air Canada spent the first few years of the decade struggling, only to surge to double-digit margins in recent years, Aeroméxico has traveled the opposite path, bursting out of its 2009 doldrums with double-digit operating margins in 2010 and 2011—thanks in large part to the death of its chief rival Mexicana—but then drifting steadily downward to just 4% in 2014. Only then did it begin a modest revival to 6% in 2015 and 7% last year. So far this year, however, earnings have taken another turn for the worse, barely breaking even at the operating level in the first half. (Its three domestic rivals, the low-cost carriers Volaris, Interjet and VivaAerobus, did even worse; only VivaAerobus managed to join Aeroméxico in breaking even, while the y/y decline for all three LCCs was far steeper than that of Aeroméxico.)

Can Mexico’s largest airline (if not quite its largest domestic airline anymore by some measures) convince investors that its success can extend beyond just modest profitability? That’s exactly what it tried to do last week, in a deep-dive discussion of its strategic plan. Its ultimate goal, executives said, is achieving sustainable double-digit operating margins.

Presenting at its investor day event was none other than Delta CEO Ed Bastian, his presence a not-so-subtle clue about what lies at the center of Aeroméxico’s plan to go from good…

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