I RETURN TO-~ 1 RESTRICTED RET N To I iE. vERTS DESK| Renort No PTR-88 ._~AINrI IN IONF AP 1-

This report wos prepared for use within the Bank and its affiliated organizations. They do not accept responsibility for Public Disclosure Authorized its accuracy or completeness. The report may not be published nor may it be quoted as representing their views.

INTr8RNATIO0NAL BANK rOR RE1CONSTRUCTION ANYD DE'VE'LOPMENT ITNTER.N,ATIONAL DI VELOPMENTT ASSoCIATION Public Disclosure Authorized

THE TRANSPORT SECTOR

OF

MEXICO

(in four volumes)

VOLUME IV Public Disclosure Authorized PART A - CIVIL AVIATION PART B - URBAN TRANSPORT

May 13, 1971 Public Disclosure Authorized

Transportation Projects Department THE TRANSPORT SECTOR OF MEYICO

VOLUI-IE IV

TabUUle of Contents

MAP (IBRD 3146 - Mexico Transportation Network)

PART A - CIVII AVIATIOM

Page No.

I. INTRODUCTIONI 1

II. POLICY AND PLANNING 3

A. General 3 B. Planning

TII. TRAFFIC AND FINAiiCES 11

A. Operations 11 B. Financial Situation 13 C. Other Airlines 16 D. Aeropuertos Y Servicios Auxiliares (ASA) 16 E. Radio Aeronautica Mexicana, S.A. 18

IV. INVESTMENT 20

A. Past 20 B. Projected 21 V. RECOMMENTDATIOTS 24

A,NEX A - Civil Aviation Sector - Agencies Involved ANNEX B - Mexico - The National Airport Plan

TABLES

1. Comparative Air Traffic Statistics - Aeronaves de Mexico and Compania llexicana 2. Compania Mexicana de Aviacion. S.A.. Profit and Loss Statements 3. Aeronnves de Mexico. S A.- Profit and Loss Statements 4. Aeronaves de -Mexico,S.A., Balance Sheets

6. Empresas Alimentadoras, Statement of Profit and Loss 7. !E..presas Alimentadoras, Balance Sheets (Table of Contents Continued)

8. Aeropuertos Y Servicios Auxiliares, Profit ancd Loss Statements 9. Aeropuertos Y Servicios Auxiliares, Balance Sheets 10. Radio Aeronautica Mexicana, S.A., Profit and Loss Statements 11. Radio Aeronautie2 'Mepe..na-S.A.- Binncp Shee-f.s

PART B - URBAN TRANISPORT Page No.

I. Af.K.RrOUTJ\TD 1

A. The Fedor1 n;D-+trict /14txv- rcoCi r B. Transport and thae "Urban Problem" 1 C-. Population Growth 2 D. Public Costs of Increasing Population 5 E. Conclusion - Conseque-'es of Tlot Pl 5

TT T'M 'T ATl,DnDT SCE1ITh

A C, 4-.. 1 L41 ='--L kio Spatial fdUr-l-d Movemuents`Ld B. Traffic Growth and Congestion 8 Cj. t 9reetcars D. Autobuses 11 .I, CLdzis 14 F. The Metro (Sistema de Transporte Colectivo - SCT) 16 G. Parking 20 H. Traffic Engineering/Highway Plarning 22 I. Surf ace Railways 23

II. TRANSPCjRT PLAU;.,TNING 24

A. The Federal Governmrent and Federal District 24 B. The State of I,exico 26 C. Comision Para El Estudio del Area Iietropolitana de'l Valle de 11exico 30

IV. A PROPOSED PRCGRAMI FOR MORE COIlPREHiENSIVE PLANTNING STUDIES 32

A. General 32 B. The Size of the Metropolitan Area 33 C. The Land Use Plan: the Distribution in Space of Homes, Jobs and Other Activities 34 D. The Transport Plan 35

V. GUADALAJARA - THE CASE FOR A SUBW-AY 43 C,4Z/FORN/} t X W ss / \. j / /oRrHFR

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< ( ~~~~~HO N D LI R a S PART A - CIVIL AVIATION

I. IN1W0ODUCTION

1.01 Air transport is growing in importance in Mexico's total passenger transport system. Between 1965-69, for example, the passen.ers carried1 on the country's two main airlines (Aeronaves de Mexico - the wholly owned Government airline - and Compania Mexicana de Aviacion - a private comoany with some nominal Government shareholding) increased from 1.7 million to 2.3 million, while the seat-kms sold by the two airlines rose from about 1,800 million to 2,300 million. This increase in domestic and international travel on the Mexican airlines, together with the greater number of toLrists arriving on foreign airlines (h5`O of all tourists arriVed by air in 1969) meant larger volumes of traffic through the nation's airports. At Mexico City, for example, passenger movements rose by about 40, to 3.05 million (in and ollt) while at Guadalajara (0.45 million), AcapuJco (0.75 mnllion) and La Paz (Baia California) (0.15 million) the increases were in the 90%- 100r% range. WJith few exceptions, similar increases were experienced at the 28 other airports now onerated by the Kirnorts and Auxiliarv Services Autho- rity (ASA). The growth in traffic was made possible by, among other things, rising ineomes in both Mexico and the United States of Aimeric; fq1lino real prices of air travel as new jet powered aircraft came into greater use; .ur cps.Rfill t.rmrit.. HvPsrtAi ing cnmpnnigns! a fairlyr lihbrnl pnolicyr t.Towarrl1 charter flights, etc.

1.02 The increase in traffic and the larger, more technologically complex aircraft in use has required substan.tial nmprovements in irports and landing and route navigation aids. For example, whereas between 1953 and 1964 about Pesos 262 million was 4.nr-tr-cn in +he const"rutio.n of run. ways and air terminals, in the last six years about seven times that sum Ta= -inver-t-4 in- airfield an associated -inves+,ments. hrTtota in ve st;ment in aviation during 1965-70 by the public sector (including nearly Pesos 1 nno0million by Aeronaves) .as been about Pesos 3,200 r 'llo n r= lion):

Aviation Investment (1965-70) 1/

(Pesos Million) Total

Ministry of Communications and Transport (SCT) 165 52.2 Ministry of Public W:Jorks (SoP) 1,727 54.4 Airport and Auxiliary Services Authority (ASA) 280 8.8 Aeronaves de Mexico 976 30.7 Radio Aeronautica Mexicana (RAMSSA) 24 0.9 Total 3,172 100.0

/ TnrI mInQ 1 070 1mrl - 2 -

!iout two-thirds of the total investment was in airports by SOP and ASA; 30% by Aeronaves - mainly in aircraft anc servicing equin>aent and facili- ties; with the remaining 10` being mainly radio, navigational and other aids.

1.03 Mexico is well on into the aviation age. About 1,2CO regis- tered airfields of various types exist in the country. Of these, 75 are included in a Nlational Airport Plan and will eventually come under the control of ASA. Nine of the 75 (Acepulco, Guadalajara, La Paz, Eazatlan, i4erida, Mexico City, Monterrey, Puerto Vallarta and Tijuana) account for about three-quarters of the total passenger traffic. In 1969 over 2,400 civil aircraft were registered in the country of which about 230 were corrmercial aircraft, with the remainder being plivate general aviation machines. There were also about 280 offic al (non-military) aircraft in use. The commercial aircraft include not only those of leronaves and Mexicana but also equiDment belonging to the two seconda7ry airlines. the feeder airlines (alimentadores in which Aeronaves has a 30;1 investment) as well as the local air-taxi service opertc)raos- TrIadiri+,inn tco t.he Mpyi- can aircraft using the nation's airports there were those of the over 25 foreign carriers that serve the country together with nuimerous private visiting aircraft owned by businesses, clubs and indivi(luals in the U.S.A. - 3 -

II. POLICY AND PLANNIIG

A. General

2.01 Civil aviation in Mexico is further developed and technically more efficient than in most developing countries. In part, this is due to the large spill-over and "feed-back" effects of the U.S. aviation scene. In part, it is also due to the Govermnent's liberal policy towiards international and charter carriers so that tourism may benefit. It also, and largely, dervices from the Government's recognition that civil aviat- ion has great potential in the nation's overall development. Internation- ally, it can show the Mexican flao and generate foreign exchange as well as facilitate the movements of the growaing tourist market. Domestically, on the trunk routes it can nrov-ide oiick ervinces reonired hv hmuine_szmen_ tourists, Government officials and others who place a high value on time. Tn rtrail areas it c,n nrovide thb necessary feeprdr servn. for the inter- national and domestic trunk route services as well as assist administration, etc= Under the present dminnistration an imag natie policy has been developed and which has been generally well executed.

2.02 Like most Governments, Mexico exercises three main policy instru-

men+s,~~~~~~~~~~ink~.f adito toJJ inesr.n appovl, to%.W.~irr flLflenceL ..&il U4&Iio development: route concessions; tariff measures; charter privilege grants. negotiations with foreign Governments. These involve a fine assessment of MscX.ca poli4 Wicall ad ecMo.m-ic advant-age (ir.cluding th e f ia,ca health of Mexican carriers) and are clearly beyond the scope of this report. On

"0111CA.3ulk roUtL,es, lunder.L t i.A±gU±4I1LaW, Ul-±y Wit, LeUUU, UdU beseVrzeUc bLy olne concessionaire (i.e., airline), although recently there have been a few "ad -t depart- es from4.t1is b c rule.

.03 In general the two Mexican trunk carriers enjoy equal consideration insofar as route concessions are concerned. In 1969 Aeronaves had 34,860 unduplicated route miles (domestic and international combined) and Mexicana had 15,564. A substantial portion of the Aeronaves figure, however, is accounted for by its transatlantic flights to Spain and France. 0lexicana does not operate outside the Western Hemisphere. Both airlines serve the rinited States which is the main external market for air travel as far as '4exico is concerned. Mexicana reportedly, has been informally advised by the Government that further expansion of its international route structure .Aill not be considered for the time being, except for route adjustments in connection with existing service to the U.S. The general intent of this restriction is to allow Aeronaves to develop as the main Mexican internatdonal. earrier.l/ 1ihere a second Mexican carrier is cranted traffic rights on a domestic route (i.e. by a 'permiso' rather than a 'concesion') some restric- iuion is placed on thi s carrier as to the number of flights or add-itional stops allowed between the terninal points served. Since the construction of the domestic air +ariff is lba seed noni a N-nnrl 1nrmnln crhnra (Pesos 5O for jet aircraft) plus a fixed charge per passenger-k:m, there route restric tions have resulted in. some fare anomalies between terminal city pairs ,which may adversely affect traffic.

2.04 At the base of the domestic industry are the certificated air ta-isL In general, these are granted areas rather than point to poit cessions. As the taxi business grows route patterns emerge. 'T1hen the traffic reach'es a level regarded as suff..Licerl b,Ly tuh e Governmlent, polnt to point concessions are then granted to the feeder airlines and consider- ation given to impro-ving the particular airports involved so as to facili- tate the feeder operations. After traffic has developed still further the route may then be transferred to either a secondary or main trurnk line carrier. Assigrznent of a route to a trunc carrier takes into account the carrier s current ser-vices in tIhe area generally and the probable effecC on the competing carrier's route structure and revenues. Finally, when traf- fic reaches very high levels, both trunk carriers may be granted traffic rights between the same city pair, e.g. the Mexico City-Acapulco route is now served by both Aeronaves and Mexicana. This system of guided develop- ment has many advantageous features. It does, however, imply that Govern- ment can better judge the economics of a route, particularly the heavy routes. than the management of the airlines. This is not a self-evident assumption. The question of allowing more open routes, on a more flexibie equipment type and tariff basis, would be well worth study to assess whether there are majc., economic costs involved in the present policy.

2.05 Some Mexican airline and tourist officials question whether the present International Air Transport Association (IAA) fare structure and procedures for scheduling flights may not be inhibiting the needed growth

1/ hi.Ls raises th1ie ±interes-ing ques-LL,on as to whethJer a C J i Mexico's position can afford two international carriers. In the present circumstances, howiever, hLis is largely thleoretical. Thie Government±ba Js r' kely to don Aeronaves to the private sector, no matter, as shown below, how serious is its overall financial positioln. Nor is it likely to contemplate taking over Mexicana to unify it with the offical national airline. Accordingly, every effort (as also indicated later) must be made to ensure that, in 'Le natictIV. interest, each operates as efficiently as possible. A case can well be made for allowing a private airline to compete effectively against the national airline to spur it to greater efficiency. il torismn MeY dsp+JteAo, thle use of off-seaason and ex--4 on fares. 2hese officials recognize, and the mission agrees, there is no easy way out other th-an by s0o m-d e^or.v.-4J"c an1a,lysis of 4the relativ-e coss and bene- -- ~ - ~ ~ s.~~, ~rn ~~~~~ILLL. ~ ~ LQ W.J. VLI± .L r..Ld.LUJ. V~ costU - u)LiA±U~ fits and the use of steady bargaining pressures since any fare reductiorL on scheduled us IDghse approac-- -hed cautiously I 4 7 e ico,'-0s oT-w.c>rLr are to become viable operations. IWith the current world-wide emphasis on +~~~~~~~~~~~~ - 1 l -'I - n4no.1r - -b - - - 4. _. wr-- t5 A __ A4-1_ tourism, however, and partJLicularly t1he com{PetiUtLi ve lature oV1 tO UU±U-i 1iiA the Caribbean and Hawaiian islands, the potential dangers to Mexico canncot bDe over"look..JedU.

2.06 The M"exiU LuiiLuities fully recognize that tourism can be increased by encouraging charter flights. As a result, the former restrict ve policy on air charters, particularly between the North American markets and Mexican tourist points, has been eased considerably. Althoutgh the position is not yet one of 'open skies', the number of charter authc'- rizations currently exceeds the number of charter flights being operated. To some degree this may reflect present economic conditions, but it may also be a consequence of alleged 'red-tape' delays in obtaining from the iMexican authorities multiple flight charter authorizations or authorizations some years in advance of projected major conferences, etc. '^Thether current administrative procedures are diverting possible tourist traffic needs examination.

B. Planning

2.07 The most critical shortcoming of the Mexican aviation scene is the lack of a single, wiell-defined, entity with full authority and responsi- bility for coordinating the activities of the more than 20 Ministries, public, semi-public and private organiz?tpions that have an interest in aviation policy and its implementation..J The concerns of these agencies can be broadly grouped into three categories: infrastructure planning and investment approval; flight operations activities; and regulatory aspects.

(i) Infrastructure

a) Ministry of Public lWorks (SOP) b) Airports and Auxiliary Services (ASA) c) Radio Aeronautica Mexicana, S.A. (RAMSA) d) Ministry of the Presidency

(ii) Flight Operations

a) Aeronaves de Mexico. S.A. (Aeronaves) b) Compania Mlexicana de Aviacion, S.A. (Mexicana)

1/ Annex A lists the orgn zations having Adrect -nterestsin ci-vil av.ation. -6-

c) Secondary and Feeder Air lines d) Foreign Airlines e) Tourists Agencies

(iiij Regulatory

a) Ministry of Communications and Transport (SCT) (i) Department of Civil Aviation (Aeronautica) (ii) Department of Tariffs (Tarifas) b) Tourist Agencies

2.08 The Ministry of the Presidency (Presidencia) has to act as a coordinator of the groups most directly involved or responsible for the functioning of the civil aviation sector through its investment approving role. Because of limitations on its manpower in terms of numbers and experience and its many other competing responsibilities, its coordinating effort is, at best, nominal in that it is more concentrated on investment ,cecisions than on operating efficiency or pricing policies and practices as -ways of improving efficiency or investment decisions.

(i) Infrastructure

2.09 The present excellent system of airports and related communications and navigational aid networks has been created within the framework of a lational civil aviation program (Programa iJacional de Aeronautica), wJithin which a 1lational Airport Plan was the primary instrument. In 1965, the Governm.ent, recognizing the need for a coordinated infrastructure develop- :nent program, established a 11ational Airport Plan in which 75 airports were initially selected for development (Annex B). Selection was based on the following factors:

(a) the inflaence of air transDort on the socio-economic activities in particular areas;

(b) the potential role of aviation in international com- mui C.cations;

(c) actu1a1 stnatistAcs nor the nirmbhPr off air pngcz rs;

(d) the numTlr and nature of e:sting routes and the prospects for establishing new links;

(e) a balanced geographic distribution of ai^rports; amd,

(f) the general economic development possibilities of each

, ThUe firstOU sua8tg eL uoithe PjLdlLLLIJqn VJwas prUoJpLy desrLgnedU LU Coll- centrate on the country's main airports. By this means all jet-trunk route3 - 7 -

uere establishec irnth a net;ork of efPfi9iPnt fPi-eerdr sePrvirpes into t1he trin route structure. The airports selected were divided into thiree categorie!S long rangne (essenti; lv fnr qsPring international mdium nc and short range.

2.11 As indicated above, implementation of this progran has involved CGoverir.ent ex^penditures Or some Pesos 2.0 billion (UJ$160 mrllion) by SQOI and ASA between 1965-70. Roughly, the same amount, Pesos 2.0 .oillion out of a total for thee sector of Pesos 3. ilin as 'been ter.tat-ive-lypr- grammed for the period 1971-75. The implications of this are discussed later below. Corsideration is now b-eng given to the developm--ent of a rural airport system to provide access to remote areas pending development 4 suffic-.Lri dlemar.d to warra nthe construct'L.tof rodsU under W1 rL road program. This is still in the conceptual stage and, therefore, no budget has been developed. The idea is definitely worThy of further consideration.

2 .12 The 1965 National Airport 'lan which established the framework for airport development was prepared by the 'Comision de Planeacion de Aeropuertos. ' This Commission is a joint agency with SCT and SOP parti- cipation. Unfortunately it has been moribund since the preparation of the National Plan. Since there is a need to re-examine the Plan in the highl; of experience and progress to date, and to take account changing trends, this Commission should be re-activated.

2.13 Legally, airports are to be designed and constructed by the SOP, in accordance wTith general planning ideas established by SCT. ASA is, with a few major exceptions, responsible for the operation of federally- owmed airports. Recently, however, ASA was specifically authorized by political decision to design and construct some airport facilities. Jir.- port assets (new fields, runways, terninal buildings, etc.,) are transferred to ASA on their completion by SOP and are taken on to its "books" at construction cost. Those constructed directly by ASA itself are added to its capital assets in the same manner. User charges are set to cover ASAI's operating costs as a whole (above half of the airports administered by ASA made an operating profit in 1969, the rest incurred losses). It earned a rate of return of 6.8'; on its average net fixed assets in 1969. The air- port facilities are transferred to ASA "free and clear" as a Government contribution on which no dividends or interest are to be paid. As a result, it has accumulated large surpluses wJhich have been reinvested in securitie>. There is no apparent reason why ASA should not pay the Government a reason- able return on the taxpayers' investment in this profitable agency or, as an alternative, why it should not be set free to operate as a "commercial" enterprise to generate the funds required internally for its airport invest- ment program without drawing on the Government budget. In this way, ASA could play a role comparable to that envisaged elsewhere in the reDort for the railways and, ultimately, by the proposed National Ports Council. - 8 -

2.14 Other agencies exist within the present goverriment framew?ork whose "atribuciones" (terms of reference) require their par+icipation ;r the coordinating and planning side of the civil aviation sector. Among these. for general conrdrnqtion and planning and inter-sector coorrinntion is the 'Comision Tecnica Consultiva de Vias Generales de CoRunicaciones.' Its termns of refPrente nllelw it.T+. to+4 participate in +Ine sty r a _ - '~~~~~~~~~~.' - V-~- - ~ . LJ LL.Y e -e.T n planning of all phases of civil aviation, including regulatory, infra- stmltur, flghtopentios ad, n ad+io, -rsononel train -for 4he sector. Except in a general way within the mandate of the "Comision

TeronicnaConIsultiv t, o4oth- A _er _ PA _singe -_ - - - - v v V.1i AI4 D | *sr C; a6alluj LO J UbU1L ;VU.LUJ "a1aLvg.L the activities of the groups responsible for providing flight services domestical'~'y and4int e rr.a4- nal'I-

(-ii =V4 a Uions

,L.n n r, ThernL_ two1__ I runiK_ _s carriers, Aeronaves and Iviexicana, operate modern jet aircraft over domestic and international networks. There are two secondary carriers wnich, at present, are of only minor influence in tne domestic air transport scene. Nevertheless, Servicios Aereos Especiales (SAE), which operates some fixed schedule services, may well develop further and, more importantly, is the chosen instrunent of Aeronaves for the eventual development of domestic and international charter services to ensure that a MIexican carrier obtains a reasonable share of this growi--g field. It would be outside 1ATA, of which Aeronaves is a member. The other secondary airline, Aerocarga, S.A., has not yet developed any real potential in the air cargo field. In fact, this very important sub-sector of air transportation is being sadly neglected in Mexico and is worthy of considerable more attention than it is now receiving. Mexico has fruits, flowers and other perishables which could well be marketed abroad. Development of this business which is already under way, e.g. straw- berries to Germany, will require proper production, packaging and marketing planning and controls. A study of the potential for air freight of Mexican products is of priority.

2.16 Next in the air transport chain are the "alimentadores" or feedez airlines. Under a recent and well conceived reorganization of this sub- sector the rnuber of feeder airlines was reduced. Aeronaves has substantial holdings in most of the feeder airlines and exercises considerable administrative and operational control over the group. rThe feeder airlines are particularly important in the aviation sector as they provide 'on-the-job' training for flight crews dhile simultaneously developing marginal traffic routes to the point where they can be economically serviced by the secondary or trunk airlines. The final 'link in the chain is composed of the air taxi services. There are a large number of individunl air taxi comnnanies with fromi one to s; rn more single and twin-engined propellor aircraft. The taxis provide a needed service but Tminh grentes' usie could be made of them in developing comnnications .r+h isolated areas of Mexico which are not served only by foot or animal by pVnrn4vrn In'a docrtor'd andngvA othI^e serc-1 - 9 -

2 .6o EtUiA 'Radio Aeronautrica tIexicana, S.*A.) is an important agency with primary responsibilities in the operational area of civil aviation, especially its safety aspects. It is a private company but with major Government participation and is responsible for air traffic control, ae:ro-- nautical meteorological services, cormunications and navigational aids. The Government's share in RU.MSA will be increased by the value of the two major contracts for equipment now being carried out. RANISA's user charges, as established by SCT's Tariff Department, are based on recovering "out-of-pocket" operating costs and maintenance charges but not depre- ciation. The users, including foreign airlines, are accordingly subsidized. A review of the basis of such charges is recommended, especially in view of the groving volume of funds that will be needed as technology develops and safety requirements increase.

2.17 Personnel training for the civil aviation sector is generally carried out by CIAAC (Centro Internacionale de Adiestramiento de Aviacion Civil) which at present is operated by the Government, although with financial assistance through scholarships arranged by the International Civil Aviation Organization (ICAO). The school provides flight training programs for Mexicans as well as instruction in non-flving activities sulch as aircraft maintenance, conmunications, air traffic control, etc., for both Mexican and other Latin American nationals. ICAO participates onl;y in the non-flying side. Discussions have been going on for some time with the constructive idea of expanding the school's activities and establishing it as a true Latin American civil aviation training center, somewhat a-Long the lines of the regional school in Beirut nonrated by ICAO.

2.18 Mexico's civil aviation sector is, to a large extent, developing with a bhri3 mnnivimim onf ouitsirle t,-bhnir'_1 anrl nnnYr_toAn-as n or advice. General assistance is received from ICA0 whose lIorth American Regional Office is located n Inexico City; from ATrr, whose Reg onal Representative is located in Rio de Janeiro, and from the U. S. Federal Aviation Av'nev's Tonhn-icnl A i.t.nro nff-ir'n Fnrorin fonqilt.nt.m are rarely used. Because of this independent effort there is a limited experience aboult the tecnical and plarnirng lessons gained on s?Iilar problems in other areas, and this is reflected in some of the development work now t_1,ing place For ex-ple, the facilI4ties for handling depar1ing passengers' baggage do not anticipate modern trends which are moving to-rwazrd containerizOd. hLWnding; sJizingO of UA11LL. uildings a-ea is not fully related to passenger traffic studies and aircraft movement forecasts, withL resU.J% t' JancA.'. J.vos. . 1nbalBasi c di ar. operating procedures are based on ICAO and FAA reouirements but these, in t1hicanselves. establish 0,.l1Iy stan

2.19 The twio major airlines, the secondary airlines and most of the feeder airlines have a com0oTimOn arid stOrlg air crew uniion (ASPAI). Main- tenance and ground services for the two trunk carriers are manned by - 10 - mem'bers of separate unions but,t n general, there is no sharing of maintenance or ground service facilities or equipment. This wculd offer economies in some instances and should be studied.

2.20 In sum, the general framework of operation is soundly conceived and is developing logically. The deficiencies that exist are more those of ensuring efficiency in operations than that of an inlappropriate structure.

(iii) Regulatory

2.21 Primary responsibility for regulation and statutory ccatrol of all civil aviation activities, including safety, lies with the SCT. Within the SCT, the Department of Civil Aviation is thei general regulatory and licensing agency. It is well staffed and has a strong influence on infrastructure planning. Both domestic air fares and airport user charges (including landing fees, concession rents) are established by SCT's Tariff Department. It does not, however, appear to use its pricing powers as a coordination or efficiency searching instrument. In the mission's views a thorough re-examination of both airline pricing for domestic services and the role of the SCT vis-a-vis ASA in airport pricing should be undertaken, with the objection of coordination and efficiency in mind. - 11 -

III. TRAFFIC AUMD FNITdICES

A Onprnati nns

(i OerationsandEfficiency

3.0)1 Attached as Table 1 are traffic statistics For the tw,o major air- lines, Aeronaves de i5exico and ComTpania Mexicana for the years 1965 through 1 rThe a t of Aeronves in terms oZ a.1ailable se-Lm incrare by 65% and that of i-eeicana by 49%. Seat-km sold however, increased by 48!jo Por Aeonve and / forT--xcana.-P-- As a resu"t, ave-ae load factors de- clined from 58.4% to 52.2% for Aeronaves and from 63.5% to 56.8% for Heiricana. These, hoUwever-, ar-eL)Lfcst .t-Iith1 Lisienmar-y oLLer a4r'inesLe in ids and should result in a break-even or better position for the type of aircraft In use.

3.02 The number of passengers carried orn Aeronraves uincreased by 290; from 0.85 million to 1.09 million, and from 0.83 million to 1.19 million (a 4.3 increase) in the case of i4exicana. The average distance floujn per passenger increased from 1,130 to 1,305 len on Aeron<--ves Tnis is heavily influenced however by its open-ng of routes to Europe. On l4exicana the average fell from 1,017 krn to 982 lkn, reflecting an increase in its short haul domestic traffic. Cargo traffic increased less rapic;ly- 21% for Aeronaves and 11% for 1,exicana.

3.03 From the preceeding figures it can be seen that the two airlines are of roughly comparable size in terms of numbers of passengers carried, although Aeronaves is slightly larger in terras of carrying capacity. Wnfith planned changes in Mexicana's fleet (phasing out of DC-6's and Comets and additions of 8 Boeing 727-200's) this dispari-ty will substantially disappea. Passenger traffic over the period increased fairly rapidly for both airlines! 10.5% p.a. [or Aeronaves and 8.5% p.a. for Tiexicana.

3.04 To give some idea of the relative efficiency of the two airlines their 1968 operating expenses per ton-km produced are sumnarized below to- gether vith comparable figures for Wgestern Airlines, a regional U.S. carrier which flies to Mexico City and Acapulco. - 12 -

Costs per available ton-kIi Airline Aeronaves H4exi-canaa & rC&ern (Pesos) Flight Operations .726 .774 .4h1 Maintenance .321 .443 .290 Service to planes and traffic .232 .369 .356 Sales and publicity .455 .316 .264 Passenger services .217 .187 .203 General and administrative .151 .128 .112 Depreciation .182 .248 .241

Total 2.284 2.464 1.947

Available ton-km 248,786 177,090 2,346,900 Number of employees 3,575 2,973 8,919 Available ton-km per employee 69,590 59,566 263,130

3.05 Total costs per available ton-km are very similar for Aeronaves and Mexicana although maintenance costs, services to planes and traffic and depreciation are significantly lower for Aeronaves than comparable Mexicana costs. Depreciation rates are lower on Aeronaves than on both Mexicana and on U.S. airlines generally A!. Aeronaves depreciates its DG-8 aircraft over 12 years and its DC-91s over 15 years (20'5 during the first five years, 3C% in the second five and LOS' during the last five vears?i. 1W1hereas Mexicana depreciates its jet aircraft over a ten year period. As mentioned elsewhere in this rpnort. cl3n tn t.hp fi nnnci;l nnn- t.i n of' Aprmnnave nePdrd er-nentii tair- to improve maintenance equipment and facilities held back through a shortag3 of' fiinds. This, at least, to some extent expnlains the sm.aller expnenn i +.ivrve by Aeronaves on maintenance and services to planes and traffic. On the other hand, as the national flag carrier Aeronaves tends to spend more on ZnTc ao.-; publicity than Mexicana and indeed spends proportionately more than a number of U.S. tru-nk carriers w_hich operate internationaMl routes. ofsT q + lln t; a-n^4+<+^1-^qfi - A4 T;

3.06 ~ ThLoallv ot e aalbetnl n Iesi Alr Lines are -less than both the Mexican carriers. To some extent this is due to economies of --al 4i ls a-out- 'en t4me lage tha4eAicar the- co,,Haie 'though---- relatively small as compared -with the major U.S. companies) - particularly in the case OLf maintenance and general and administrative expenses. The most significant differences occur, however, in the costs of flight opera- tlons and is due mainly to the difIerent types of equipment flown. For

1/ The CAB proposes the following amortization periods:

DC-8 (12 yrs. (non-fan) -, (14 yrs. (fan) l5, residual DC-9 14 ys. 15°5 B-727 14 yrs. 15% example, ]4exicana operated Boeing 727's, Comets and DC-6's in 1968, lWesltern Air-nes operated' Boeing 7's,0 7 720's, 737's Ad -0--bnnA Electra.- cA. Average costs per passenger seat-km made available were considerably higher 4 LA +he Mexicana equdip,,ent +thant-hat of nlester. A-;r l-ines due to so.e -- +,n '~LAV~1c i U1L U~~U '~ VQUI &AJJI~AUA d LJLAi . %AULA u WIA~ 1~%~L 1 to the greater average capacity and speed of the equipment of the latter

.AJUlldIkY *

nfl .l -3< - I. t 3.u0 *o achie-ve surite ecunorvres ol scale imrmeeiQaeely, thali1 wiuhoau waiting to obtain them via traffic growth, consideration should be given to com,bining the maintenance department and possibly some of the ground serviee. of Aeronaves and lexicana.

(ii) Operating Results

3.08 Attached as Tables 2 and 3 are Profit and Loss Statements for the years 1965-69 for the two airlines. Net operating revenues of both have improved since 1965. The operating ratio has improved from 95.3% to 91.626 in the case of Aeronaves and from 89.7% to 92.9% in the case of Mexicana. Despite increases in domestic air fares, however, Aeronaves gross revenue per ton-km produced has declined from Pesos 2.596 to Pesos 2.422, reflecting lower lead factors. Nevertheless, net operating revenues per ton-km produ-;,-' have increased from Pesos .121 to Pesos.203 as operating expenses, particu- larly maintenance and administrative and sales promotion expenses, have actually declined per ton-km produced. 1Iexicana's net operating revenuas increased from Pesos .033 to Pesos .185 per ton-km produced, reflecting boU increased revenues and reduced expenses per unit of capacity made available. In the case of both airlines this has largely been due to the phasing out of propeller equipment and its replacement by more economical jet aircraf-X.

3.09 J3oth airlines have borrowed heavily to finance the acquisitiola of expensive iet aircraft. Interest expenses in 1969 amounted to Pesos 103.2 million for Aeronaves. The heavy interest costs it has incurred turned earnings from operations into net losses in 1965, 1966, 1968 and 1969 (in 1967 there was an operating loss before interest charges).

3.10 Interest expenses of Mexicana are nuch less - for reasons discusse:. below - and amounted to Pesos 14.9 million in 1969. A non-recurring profit of Pesos 2:L.7 million on the retirement of equipment improved the operating results of iNIexicana in 1969.

B. Financ.al Situation

(i) Tariff Policv

3.11 Domestic air fares are based on a fixped termin21 cost per passenr-- (Pesos 50 for jet aircraft) plus a charge per passenger-km (about Pesos 0.6). This nrodurces snme anomalies. For example, the Nwve,xicana jet fare frorm 4ey o City to Cozumel via Merida is US$65.o4 while the Aeronaves fare via Acapulco, 0Oaxaca anci ;eri A is T s *6.& The raticonale of -Ad-:n two .,or sector lengths to give the higher Aeronaves fare is clear. It does mean however

liha. passerngers whillo gu Lit,-, jbejjdCU tIA-.d lo dt.)LtaU±i lonIger U.ILme .LVI alCfo terminal to terminal fare cannot do so. It is also possible that such ana-

,,.oLLu f of which --ere areLmany, re-sL 's -i- le load fac tor7_.

t3.1 sw.uai'r 'ares average Pesos 00440 per pdssenger-iu[i for Aero naves (December 1969 rate) whereas, international rates (i.e. IATA agreed) averaged rPesoes 4.4) per passenger-kma. Average LaUres fur rIe.LcanLa iLL Ly(j, were Pesos 0.425 per passenger-km. Passenger load factors were '2.2,O6 for Aeronaves and 56.3%'fer Hexicana in 1969. These are fare levels and rates of utilization which should perm-it both airlines to be v-iable operations. Average fares for tne Mexican airlines are about the same as comparable U.S. fares, e.g. Pesos 0.425 equivalent for Western Airlines and Pesos 0.429 equivalent for American Airlines in 1969.

(ii) Balance Sheets

3.13 Balance Sheets of the two airlines are summnarized in Tables 4 and 5. The balance sheet of Aeronaves is clearly that of a bankrupt. The short-- term note holders, hoTwever, are mainly the i\iacional Financiera and the Govei- ment both of which have accepted short-term note;s from Aeronaves in return for paying its past debts to otlhers (e.g. Export-Import 13ank) as they came due. The result has been a steady increase in the short--term debt of Aero- naves. The large interest charges that Aeronaves nOVT carries make it un- likely that it will become profitable. Apart from the effect on the morale of top management, it has meant that ex-penditures needed to obtain the beie- fits of improved maintenance equipment, for example, have either been delaycd or reduced because of the shortage of funds. It has also meant that the degree of financial autonomy ijhich the able management of Aeronaves could reasonably expect in a profitable enterprise is lacking.

3.14 Aeronaves needs to be recapitalized. This could be done by cancelling the existing short-term notes, iwith the obligations being assumcd by Government. The balance sheet of Aeronaves (December 31, 1969 figures) would then be as follows:

Assets (lihllion Pesos)

Current Assets 213.3 Current Liabilities 68.2 145.1 Fixed Assets - net 761.9 Deferred Chlarges 142.2

1,A09.2 - 15 -

Liabilities and Capital (Ilillion Pesos)

Long-term Debt 574.5 Other Liabilities 70.9 Government Equity h03.o

1,049.2

Debt/Equity Ratio 59:41

3.15 On this basis, Aeronaves could repay its debts without Government assistance and build uD. reserves for future investments. On the basis or 1969 operating results, earning figures would be as follows.

Million Pesos

Net Operating Revenue 61.2 Tntprest 'Expenses 16.0

Net InCome h5e2

Its cash f'low would be as follows:

Net Operating Revenue 61.2 Add: Depreciation 52.3 113.5 Less: Debt Service 75.0

Cash surplus for reinvestment or dividends 38.5

Times debt service covered 1.5 times

3.16 The Balance Sheet of Mexicana is somewvhat stronger than Aeronaves, although it has just beeen through a period in. vwhich payments to creditors were suspended (September 1967 to August 1969). The Company also has a hiea.r-y LeLbj LibL LLenJ TheLIA. deb,/equ iyU/LL.±necratio as 0f -U.Der3. 'L.1 19696J, wvas 7I- 2:28 and loans of Pesos 265.6 million have been recently arranged in order to acq%uireuthre Bo-n 7e-20I aijrcra°t-'-. A-ll. are -Iive year lIoan-Ls so tha.t- U-. future debt burden zill be very heavy. The 1969 debt burden was covered as follows: - 16 -

Niet Income 39.6 Add: Interest expense 1I.9 Depreciation 43y

98.4 Debt Ser-w.ice 70.1

Cash Surplus 27.3

Times debt service covered 1.4 times

C. Other Airlines

3.17 Attached as Tables 6 and 7 are Profit and Lcs.- Stat,-:a,ints for 1969 and Balance Sheets as of the end of 1)69 for the five Ali.¶entadoracAprcn-s (feeder Airlines). Each became an independent financial undertaking in 1,969 starting -rith an initial capital of 3 million pesos. lach incurred signifi- cant losses in 1969 although Aeronaves absorbed part of the operating defi- cits for each line. Net losses totalled Pesos 12.1 million during the year- reducing the consolida,ted enu4tv of the five lines fron Pesos 15 million to 3 million. Working capital at the end of 1969 wTas negative (Pesos 7.3 million of current. nset less Peson 9.1 million of current liabilities) and long-term debt for aircraft acquired totalled Pesos o.3 million. Long-terr debt waS 73nof total canpitalization an.tver-end. Sinc Government financial support will be needed, presumably for some time, for these lines a full nsz,icza,ric,n+. nf' +.'hpi" ; nnPtn T.rMilrl sepe m

D. Aeropuertos Y Servjicios Auiliares (ASA)

~.4../ ~ LA 'S . . . . ports. Airport assets (new fields, runways, terminal buildings, etc.) are

.44. is4. 4 UVto.)- ULIon [o etooL constructiLon andu are record - ±L1inASUU M accounts at construction cost. Those built by ASA itself are added to its capltal assets lnrithe- sae m_aH_. Theairpor- facilit.-iX are transferred to ASA as a Government contribution on which no dividends or interest are oaid. IA-A !S cf-ar

(ii) Cperations

3.19 Profit and Loss Statements for ASA for the years 1965 through 1969 are given in Table 8. Excluding 1965 w'hen operations were just getting undex- way, ASA has generated and retained significant earnings which have been re- invested in securities and produced significant interest income: - 17 -

(?TIillions of Pesos) 1965 19666 1967 1968 1969

Operating Revenues 4.9 61.1 81.1 94.1 122.5 Operating Expenses 1.2 37.0 57.3 66.9 78.5

Net Operating Revenue 3.7 24.1 23.8 27.2 44.0

Interest and Other Income _ 1.1 13.8 5.5 7.5

Net Income 3.7 25.2 37.6 32.8 51.5

In 1969 about one half of the ASA airports operated at a profit.

(iii) Tariff Policy

3.20 The major source of revenue for ASA is from landing fees and other chi-iarges on air cr afLt. Tmihe Lo'llo-Vin[g p re d-es arue fLolledi in ASA1t1t.L charges:

(i) Total operating costs including depreciation are determined.

(ii) iHypothetical rates are set to recover these costs byr a variable charge on aircraft based on the average flight distance and number of seats on the aircraft. hates for each wTeight class of aircraft are calculated so that each seat-kilometer would generate roughly the same revenue.

(iii) These hypothetical rates are then compared with similar fees in other airports and adjustments are made so as not to be out of line - this is the reason for the doubling of rates whi'ch is to take place in stages between 1969 and 1972.

3.21 ls a result of the 1969 and proposed future increases, ASA will generate large surpluses in the ne.--t few years which will be available .or investment, presumably in new airport facilities. On the basis of the air- ports in operation at the end of 1969, some rough estimates were made cf ASA's operating results for the years 1970, 1971 and 1972 taking into account scheduled increases in charges: (riif-lions of Pesos) Actual possibie

1969 1970 1971 1972

Operating Revenues 122.5 1L4.8 167.7 190.7 Operatilng Expenses 78.5 86.6 95.8 106.5 '

Net Operating Revenue 44.0 58.2 71.9 84.2

Interest and Other Income (net) 7.5 7.5 7.5 76 /5

TJP+. Tnrnrnp ~~~~7. . .. INet Income 51 5 65 7 7, 91 . 7

( i v) Baln1snnoc' Shets

3.22 Blance Sheets o~f ASA givern in Table 9 shnows that. its. financnial position at the end of 1969 was very strong. Working capital amounted to Pesos 167 rlllion (Tj`'$13.3 rillion eqivalent). Tinvest+.nts amounted to Pesos 103 million (US&'8.2 million equivalent), and there is no long-term A l,1'. 4-

V JI L1I~~

*. L XlIU !I1t ;:i2: U cl U<-All ;:>C::: 10 .. t L t'llA' lIl L OlUL L iV - V. v -vV ment a reasonable return on the taxpayers' investment in airport facilities. As an al te-rnative lASAficouLdU be required tLo oje rate on a codamerci _L basis t generate the funds internally and borrow uhere necessary -to finance its airport investment buuget. Based on the roughll estiImUates of ear-nings for 1971-1972 shown above, ASA would generate some Pesos 215 million in this period whnich Would finance about 40 of the airport development program in these years on a cash basis. Using borrowed funds it is probable ASA could be still self-supporting, though this w-ould need examLination in detail -

E. Radio Aeronautica lIexicana, S.A.

(i) GeneraL

3.24 R.adio Aeronautica 'iexicana S.A. (RAwISA) is oTmed by airLines and the Government. In 1969 it received certain assets which until then had been operated by ASA. It is presently operating in 17 airports but has a

2/ Increases assumed in consonance with past experience.

2/ Investments financed by borrowing are not expected to increase on tne asslJption. surplus i4.yiII ha reinvested in airport facite - 19 - prograr. to operae in 321. F'ladio Co=,w,nica-Hons eqipmlentJ co,-ting abvout-, I-'esos 50 million and radio beacons costing approxirmately Pesos 35 ,nillion is cur- rently being installed at the 32 airports. T'4- wr i e_ finished tlais year and the ownership will be transferred to RAMTSA by Govern- ment in exchange for additional RA-SA stockL, after uwhich thae Government wi U own over 90% of RAMSA's outstanding shares.

(ii) Income Statements

3.25 Profit and Loss Statements for R.A:NSA for 1968 and 1969 are given ln Table 10). Results for years prior to 1965 were not given - operations then were conducted on a break-even basis for the benefit of the owner- users. Ne-t income in 1968 was Pesos 4.2 million and in 1L969 Pesos 5.2 million. In the future, RA'SA will set its charges to cov3-. out of pocket operating and maintenance costs but not depreciation on t,:o .- ;,iumption that equipment would be replaced as necessary by the stockhoIlders. Thle users will therefore be subsidized to some extent and RAMSA will not have the resources *to renew or replace its equipment as it becomes obsolete or wears out. The need for major replacement is not expected to occur for ten years but the rate of obsolescence for such equipment is high.

(iii) Balance Sheets

3.26 Balance Sheets for RAMSA are given in Table 11. At the end of 196'' working capital was a healthy Pesos 8.4 million. Thle debt equity ratio was 11:89 and this will improve further as additional equity investment is made by Government in the form of the additional equipment referred to above.

(iv) Recommendations

3.27 As in the case of ASA, there is no reason why RAMSA should not operate on a commercial basis and earn a reasonable return on the Govern- ment's investment (905i0 ownership) in the company. These earnings coulcd be reinvested in new equipment when it is required. - 20 -

IV. IWVESTEhNT

A. Past

4.01 During the period 1965-70 public federal investment in the aV;tio.n sector, T.7i be abou Pesos 318A r.11iion (TTU ,), ,milin)

(Pesos Million)

Source 1965 1966 1967 1?23 *-)a

SCT 5.3 7.4 9.9 23.4 314.3 68.3

SOP 30.2 131.0 351.8 377.4 371.7 464.8

ASA - 6.4 23.1 28.3 34.4 188.1

Aeronaves 11.2 191.2 256.0 392.8 61.1 63.4

RAMA - - - 3.2 5.5 15.6

Total 46.7 336.0 640.8 825.1 507.0 816.7

About Pesos 825 million (US$66 million) of the above has been financed bv external loans; with about 8';% heing for Aeronav.es. A further Pesos 1 ,350 million was financed by internal loans, with almost all of it being fo-r SOP's airport nonstruetion aptivities. This hewvv recent investment has been a major factor in Ilexico's advanced state of aviation.

I / ,._ --- I't F.aV |u sv - 21 -

B. Projected

4.02 The following figures show the Presidency's tenta1 ie programming of public funds to the civil aviation sector fo- the period l97l-1975 to complete the moderi zation process:

Civil Aviation - Proposed Investment by Agency f(IQ71 -7c:)

('Pesos 1ail±icn)

Fiscal Self-Gnern+edInterra1].nr 1- Resources Funds loans L.ans7 Tot3):

SOP 84 - 1,286 - 1,370

SCT - - - 254 254

ASA _ 382 - 281 663

Aeronaves - 120 - 948 1,068

RA1YA - 43 - - 43

Total 814 545 1,286 1,483 3,398

4.03 Of the approximately Pesos 2,000 million for SOP and ASA as expenditures in infrastructure about Pesos 600 million represents a preliminary budget allocation for a new Mlexico City International Airport at Zumpango; Pesos 334 million is for maintenance and general airport improvements; and Pesos 807 million for construction or major improve- ments at LI airports. Budget provisions have also been made for land acquisition, studies and design and supervision of construction. While the amounts for maintenance and improvement may appear reasonable for a five-year program covering an infrastructure system in a country the size of Miexico, the mission believes the case is not proven and requires careful re-evaluation (see para. 5.o6).

4.04 The SOP program has apparently been prepared as an extension of the existing development work and as such does not have adequate basis in feasibility studies, particularly traffic forecasts and market analyses. The picture is further complicated by the entry of ASA into the design

i/ Includes prov-isioun f0or ettJ-i.ler a new airport a-Ij ±'exico CLiUy adi the alternative of improving the existing airport. - 22 - and construction fie-d. Over "O' of the tentative budget for ASA is for new airport construction (350 million pesos). Since the budget was established the cost estimate for the airport at Zihuatanejo increased from Pesos 55 million pesos for the five year period has increased three-fold because of design changes and other factors.

4.05 Expenditures for Aeronaves include about Pesos 950 million as a tentative sum for conmnitment towards the end of the five-year period to cover the possible acquisition of wide-bodied jet aircraft. Pesos 120 million is allotted to purchase an additional DC-9 aircraft to accoimmodate forecast traffic increases. The Aeronaves management is quite properly cautious in its attitude towards the need for wuide-bodied jet aircraft investment and, apparently has provided for such a program on the contingency grounds that competitive pressures may re-iiire invest- ment. The DC-9 purchase, however, is likely to be a necessity to maintain route capacity. Both items are recognized by Aeronaves as nseding further analysis to determine both justification and tining before finnm cormnit- ments are made.

4 .o6 Given the magnitude of the civil aviation budgets, greater emphasis on planning and inter-agency coordirnation is required. In the mission's view there is a danger that the magnitude of the planning requirements might be underostimated by officials who fleel they have succeeded so far. The Government and private enJ;ities, however, should be encouraged to avail themselves of the experience of the advisory services of various international agencies and private consultants experienced in the field. 1texican planners, designers and engineers are verv capable, but in the absence of experience developed internationally in the civil aviation field in the past few years, this expertise is not being properly utilized nor are the results consistent with the effort and cost being applied. There is the added danger that, as with the railways, engineerine may out-run economics and finance and produce technically high standard facilities that are of questionable justifica- tion (espnciallv in teYmns of timning) and viabilitty.

_n.07 TDetailed co.ment on the projected investments is didffinilt in the absence of adequate feasibility studies and organizational develop- men+. prorams Feasibility studs +.to dn+a hnae bhonn somewhatoursonry, and generally have not fully considered all aspects of the proposals examined For example, a study being coi-issioned for the possible expansion of the I'4exico City Airport was being so programmed that results were to som-e degree pre=established and adequate consideration of the fk11 economic and technical aspects could not be accomplished in the short tine 'Iowd-. ,-Atfu ltor 4f dr,t;n te,.. s of- refec for sch sudie to ensure a balanced look at the problem and alternative solutions would provide a firmer base for budgeting of funds. This major tyWpe of study is an illustration of the work that could be overseen by the Pre-Investment

0 LUUdies UiLL .111 Uwie I I esi -y VihichUIthe ruission hdas .ecorLuLeniled elsewhIS4ere. - 23 -

4.o8 S:,imarly, aA deta:'e-4 4- nay-4 of- e e-is-.n ca4b-iie and future requirements of the air carriers by experienced management con-

SU.lILsutr.s-4 WCUU.Uoul .e0 PJ±ILL.£U.L.L-,- i 14. re4 eff-tlv±:.LAti L..LVLI VIUJII--- nagmn_____4.'~UJI1IL, jJdL1W1 Aeron-avesd.L'UlIVU considered such an organization study recently but deferred its execution as a WUUoJA berL econor,-iiy m.easure. Ilili Mrib-SKiOn cUnsjiUUersj k/IIdL wU llUQ. _ management studies of both Aeronaves and Mexicana would most probably result -"I suffi-c1ent oper-atiLUnal saviLgs to more than pay- thLe cost of the studes. Such studies would also form a starting base for the broader consideratiors of closer cooperation and coordination oI the two airlines and their subsidiaries.

4.09 Mexico's civil aviation sector is basically sound and is served by organizations staffed with capable anid qualified personnel. A stronger sectoral hand, however, should be able to exploit these existing capabiliti'z in a way that will permit civil aviation to continuously inprove its capacity to serve Mexico's expanding domestic and international economy as a major means of communication. In addition, the development of well studied programs, based on up to date criteria, should permit the services to be provided without any unnecessary drain on the national resources. It is wzith this belief that the mission makes the recommendations of the following Section. - 24 -

V. RECOMMENDATIONS

5.01 The Government has recognized the potential of c vil aviation for Mexico's development program. Most of the administrative and operational structure necessary has been theoretically piovided for, and an increasing portion of the transport sector budget iS being channelled to aviation. Nevertheless, due to a lack of coordination in initial planning, the overlapping of responsibilities in some areas and, still worse, inadequate communication between the various agencies, the system is not realizing its full potential either in service or efficiency.

5.02 Substantial increase in efficiency could be obtained within the present framework solely by improvements in the present coordination and planning functions. Efficient coordination cannot be :imposed, however, on the diverse groupings which comprise the civil aviation sector in Mexico. Rather. it Tmust depend on the nersuision. mnidance and dedication of senior officials in all of the agencies involved. Firmer direction, however. could assist to bring this about. It is reccn-mended. therefore3 that a Sub-Minister for Civil Aviation should be est:.1ished Lifaiiin the missionrs renonTmended new hiinistrv of Transmort. Hi--er.l of reference should make hin directly responsible for the foxmu1.a-.:,n and overall exnncution of AvintAn no]irtr in,l1iriCn .iicr' fri.rtth -_ tAriffs. He should represent the civil aviation sector in all ir.a . ers directly or indirectly involving the sector TIn additionj. conŽciration should hp given as to whether he should be a senior member of the Technical Con- sultative ormmittee (Cc i-ssio-n Tenica Consrltiva), whih l l -should be made more active and dominant in the area of inter-sector planning and -_cordi.aMt io n . He should be the Chai...a ofP the1 A-olsid lreco de Aeropuertos" which should be reactivated and staffed so as to become a positi-v 1;>in thle in1frastruLctu,re pl anning f -, rie"-l. Su-.M-;Q..e " for Civil Aviation should, either personally or througl a senior subor- d.LLiiVa, be on1e oVJ. tLJV C-oveUVf U.LeJJ nIJ mrlIel Lers onJU.&1e BoaxUds of' th e va"J.r.Lious public and private aviation corporations in which the Government is now p parULL..±L dAtLUOUU*IIU tngL S-uL1_MI.bL± JIesUUneted not beIUi ani expetIj in1 civil aviation, but should have an understanding of and ability to deal -W.w LAL b,o spectrum-wbad of technical, legal, ecooUmLc anu fii'acl±d matters that are involved in civil aviation. His staff should not be large, but consist of a sma9ll group of highly qualified and experJLeIcUd aviation oriented personnel who would be capable of working through the existing agencies in the field.

5 03 Among his tasks should be to review the terms of reference for the various commission, Government agencies and Government corporations and make recommendations for such adjustments as may be necessary to provide for adequate cooperation between the groups while, at the same time, clearly defining the primary responsibility of each. Thereafter., the Sub-Minister should, either directly or through monitoring officials; ensure that each group retains adeauate authority to enable it to meet its assigned responsibilities.

5.04 Under the general direction of the Technical Consultative Committee, the "Comision de Planeacion de Aeropuertos" should be made responsible for the general planning not only of new airports and extension

5.0) In general, a furtner major capital development program for the civil aviation sector should await the recommnendations likely to arise fro,m tlhe invest-igatiors suggested in the previous paragraphl. Certaun activities, however, will benefit from a more immediate handling of four particular problems:

(a) At present airport master planning and design is carried out either by SOP or ASA almost entirely with tneir own staff. wThile the staffs of both agencies are well qualified technically, they are short on experience in dealing with the operational complexities of modern airports that have to deal with very large volumes of passenger, aircraft and freight movements. It is recommernded, therefore, that a much greater use be made of qualified inter- national consulting organizations to assist in - 26 -

preparing any master plans, especially for Mexico's major airports, and in developing design criteria, particularly with respect to the terminal area requirements.

(b) The two trunk carriers, Aeronaves and .'exicana, should be encouraged to initiate a joint study on the feasibility of achieving greater use of commercial ground facilities such as ground handling at airports served by both carriers; Joint overhaul facilities and stores, taking into account the different tvPes of aircraft involved; common flight kitchen facilities; and joint computer flight operations and reservations facilities. The full support of Government should be given to the imnnlpremntation of any ensring recormendations. The technical and economic impl le'.ations of a sin.gle flag carrier on inter- national routes to achieve economies should be reviewed as part of this study. RePnnnq5hility for final recommendations in this respect, howPv'r_ i p hn+'bette + t.d ton a independent of Aeronaves and Mexicana.

(c) Aeronaves is burdened with an overwheThiing debt stylintnirp thatn+ affetcts +.he effiriency)rI o_ its otherwise capable management group. It seems

tenance and administrative facilities are being deferMred L4n Cn effort s,o.._ 'ak O± V.L pay= ments. less efficient operations than the mnang-ement -is capable1 o-f res14'tbeaue f4t U .L~J u V.L .1 OU..LV i1.1 " 0c Ul. A.J..t understandable reluctance to incur further ~ V ~.Li Li~UL~LL ± .L 4L,- -- for new or improved facilities. As a prelude to the JoInt study reconrmended in (b) above, Aeronaves should be recapitablized and placed in a more equitable financial status to permit it to properly realize its full potential in a highly competitive field.

(d) Tne domestic fare structure is irrational in many respects and produces some strange anomalies. The airline user may be faced with the choice of delaying his trip or paying additional fare to ride the alternate airline. A route and fare structure study should be initiated at an early date to resolve some of the anomalies and to put fares on a cost reflecting basis. Such a study would be a proper field of enquiry under the proposed new Sub-M'iinister for Civil Aviation.

5.o6 Mexico's civil aviation sector has, with some minor exceptiors, both the agencies and qualified manpower to implement effectively and efficiently the National Aviation Policy. The primary need is for a strong coordinator to direct and inspire the existing organizations to fulfill their terms of reference, in full cooperation with the rest of the sector. If given full Government support, such a man could play a major role in increasing the efficiency of the civil aviation sector. AN1PSX A Page 1

CIVILrrTA ATTOT Pt"'APO = At-zTMI'T1T TKtTrOT'T T)

GOVER:T,,ThT

Secretaria de la Presidencia Responsible for general oversight n-d budget4 ' 'Iocaw4i-or. Fnall say- on investment programs.

Secretaria de la Hacienda Responsible for budget disbursemenrtv and itiburule4r.tsi response to aniu U L'Uuru-ii-LZj -"'- 'p2iegost from organizations requir*- ing additional 1financial s-upport.

Direccion General de Tele- Licensing-of communicaticns equaipriment communications, SCT used by RAMSA and other organizations in civil aviation.

Secretaria de Obras Publicas Legally responsible for toe desieri and construction of airport facili- ties, exclusive of those for RAVSA.

Consejo Nacional de Turismo Policy planning and public relations.

Departamanto de Turismo Direct relations with organ-zat:Lons involved in tourisr, industry and with tourists.

Customs, Health & Immigration Responsible for processing arriving and departing international air passengers.

GOVERNMENT SPONSORED

Centro Internacional de Aviation basic training center fc,r Adiestramiento de Aviacion Mexicrn and other Latin American Civil (CIAAC) nationals.

Macional de Combustibles de Resnonsible for operation of POL Aviacion, S.A. (NiACOA) installations at most federal air- ports.

DIGAS POL responsible at limited number of airports in Yucatan area.

PrEE,X Suppliers of aviation fuels and lubricants to NACOA, DIGAS and iir some instances directly to users,, H:i A Pa-'e 2

Camara Nacional de Trade organzal,ion of all ma-or au Aerotransportes carriers, national and foreign.

ASPA Airline pilot's union.

INTERNATIOMAL AGENCIES & COMPANIES

International Civil Aviation Regional office in Mexico City.

Organization (ICAO) Provides scholership funds and assistance to CIAAC.

International Air Transport Responsible for international fare structures. Both major Mexican carriers are members. Through jolrt. consultative committees provides technical assistance in aviation planning.

US Federal Aviation Assists in aviation planning on Agency (FAA) request.

Foreign airlines A minimum of 28 schedules carriers serve various points in Mexico.

Foreign tourist agencies & A number of foreign tourist agenc-i-' hotel operators and hotel companies have established themselves in Mexico and are largely dependent on air transportation.

October 15, 1970 AJTI~TX B Page 1 MEXICO - TIiE NATIONAL AIRPORT PLAN*

One of the central objectives of the Federal Governnelit's t, c- _rt policy is that there should be an adequate infrastructure of air traif'c. For this purpose, and to comply with the directives laid domn by the Presin.2t of the Republic, the Ministers of Communications and Transport and of Fijbl1c W4orks set up an Airport Plamning Commission in 1964. Its work provided the basis for the draft investment program designed to permit timely completicr. of the works in progress and the execution, in an order of priority, of thobe which would be of immediate benefit to the community.

The program includes construction or modernization work at 75 airports and provides in each case for the building of longer runways than those had been usual to take into account the requirements for the type of aircraft expected to be using the airports in the very near future. Because an airport, whatever its type, is threatened with obsolescence as a result of increased traffic and the need to serve more advanced types of aircraft. than originally envisaged, the National Airport Plan is under constant rev'.ew. This tn kes into accootLnt ehanging requirements ar. close observation of the results obtained and is an effective instrument for the solving of the changing problem.s and invariably involves close coordination with inter-- national civil aviation at,thorities. On the basis of surveys, transport statistics -andpopulation and economic growt+h indices, the Plan drawn ur, hot only determined the level and scope of service in each of the 75 airports but also laid dot.i, spec ific priorities in order to achieve some balanced overall progress at all types of airport.

The airports were split into three categories, corresponding to long, medium and short-distance aircraft. The group of ai rnorts for lorg- distance flights is made up of Acapulco, Gro.; Il4azatlan, Sin.; Monterrey, N.L.; Guadalajara, Jal.; MAerida, Y1uc.; Puerto Vallarta, Jai=; La Paz, T. B.CJ. Mexico City, D.F.; and Tijuana, B.C.

These nine airports in fact absorb over 75% of the total traffic0 They also include the longest routes flown, both domestic and international The original program accordingly allocated 42% of the total investment e-nvs- aged to this basic group. In this group .ore than in any o+he.r the need is to insure that airport facilities not only meet present day requirements but also respond to the medium. and even long-term. needs in view of the rapid! development of air transport.

The 22 airports forming the second group are located at Mexicali, B.C.; Hermosillo and Ciudad Obregon, in Sonora; Torreon, Coah; Culiaca., Si-i.; Leon, Gto.; Minatitlan-Coatzacoalcos and Veracruz, in the State of Veracruz; Oaxaca, 0ax.; Villahermosa, Tab.; Campeche and Ciudad del Carmen, in Canipech-; Tapachula and Tuxtla Gutierrez, in Chiapas; and Chetumal and Cozum.el, in Quintana Roo. These 22 airports, for medium-distance flights, accounted fLr 40% of the originally envisaged total investment. The 44 airports comprising the third group not only serve to complete the tightly woven network but also help to compensate for the isolation of certain regions. They are intended to operate as development-promoting factors and., in a number of cases, they will also provide much-needed facilities for tourists. They are located at the following places:- A.NITI B Page _.

Ensenada, Bahia de Los Angeles, San Felipe, San Lucas, San LuiL: Cionzaga and San Ouintin. in the State of Baja. California; Loreto, Santa Rosalia, Bahia Magdalena, Mulege and Todos Santos, in the Territory of Baja arlifornia! (Tnnnpn. Cuavmas and NoLales. in Sonora: Nuevo Casas Grandes. Chih.; Monclova, Piedras Negras and Saltillo, in Coahuila; Ciudad Nlante and Giiudnad Victorina in Tarnaulipas; Di-rango. Dgo.; San Luis Potosi and Tamuin, in S.L.P.; Zacatecas, Zac; Los Mochis-Ruiz Cortines, Sin.; Tepic, Nay.; Manzrri11n. Gol.;1~ Qetro Qnlo Am a 1salien-tes- Ags- ; Huetanmo Morelia and Uruapan, in Michoacan; Distrito Federal; Jalapa and Poza Rica, in

Veraeruz; Iguala nnd Zihuatane+n in Gerrepro; Pueb1a - IT'lxtnepc;- Oax.: San Cristobal and Palenque, in Chiapas; Chichen-Itza, Yuc. and Akumal and

program, whichincluded 21 airports, had a projected investment of the order

of I eo 00 Apllion.rW iI1; d4.± Uo LCiuId O Y c Torreon, Chihuahua, Matamoros, Acapulco, Guadalajara, Mexico City, Ciudad UJ CU'tr6e, I t6dLU.LcI, LiJuana, PrUeIr Uo Val.larltUa, ICUI±±plUV, Uxua.PnW, uU C±UIo, Veracruz, Mexicali, I4onterrey, La Paz and Merida. The works carried out include both the building oi runways and the erecting of buildings for passengers and freight, parking areas, taxiways, storage facilities, contrcl towers, fuel storage facilities, iarkcer cnU aerlal rUavlgaU±ofl aids, etc.

Thle works uridertaken to 'ate have been rmore costly than planned as a result of a) completion of final engineering; b) changes in design and other modiiLcations; e) price inllation, etc.

October 15, 1970 TABLE 1

MEXICO

CUU1iARTIVE. AiR TRAFFIC STATISTICS

Aeronaves de Mexico and Conmania Mexicana

1965 - 1969

1965 1966 1967 1968 1969

Thousands of Kilomlters Flown Aeronaves 20,270 20,521 19,897 22,361 25,818 Mexicana NA 18,631 20,061 17,846 20,753

Hours Flown Aeronaves 54,293 59,150 50,805 46,704 43,230 Mexicana 41,570 39,723 37,281 32,978 35,220

Thousands of Ton-Kms Produced Aeronaves 175,625 185,062 194,712 248,786 302,191 Mexicana 149,816 150,958 189,784 177,090 219,591

Thousands of Ton-Kms Sold Aero naves 97,609 103,670 98,8140 122,557 143,236 Mexicana 85,109 85,338 95,746 94,290 113,749

Tons of Cargo Transported Aeronaves 9)532 9.709 9 5,66 1__2__ ll)j48 Mexicana 13,067 12,434 12,409 12,459 14,037

Millions of Seat-Kms Produced Aeronaves 1,650 1,827 1,693 2,262 2,729 Mexicnna 1,373 1,421 1,716 1,582 2,050

Millions of Seat-Kiss Sold Aerornaves 964 1,021 977 1,196 1,425 Mexicana 842 859 977 966 1,164

Number of Passengers Carried Aeronaves 847,164 852,176 850,620 1,029,107 1,091,914 Mexicana 827,280 892,934 1,033,034 1,032,945 1,185,393

Seat. Ut 1 i z7ati on Aeronaves 58.4% 55.9% 51.6% 52.9% 52.2% Mexicana 63.5% 68.0% 56.9% 61.1% 56.8%

Average Cost Per Seat-Km Procduced Aer naves .263 .26 .261 .250 .236 Mexicana .273 .287 .276 .276 .260

Average Cost Per Seat-Km Sold Aeronaves .440 .472 .505 .473 .453 MexicAnno .L5 .474 .L81, .1,2 .457

Octcber 197C TABLE 2

MEXICO

OO)PAXIA MIXICANi DE AVIACION. S. A.

Profit anid Loan Statements

For the Years &ided Deceaber 311 1965 throuzh 1969

(Pesos 000)

126i 1966 1967 i296 19629 Operating Revenues Passengers 320.641 326,371 382.404 392,1149 49,980 Cargo 45,244 42,924 46,061 50,651 59,941 Other 12,617 14,407 1_4,795 16,168 17,858 378,505 383,702 443,260 458,968 572,779 Operating Expenses Flight Operations 124,936 130,987 144,975 136,949 Fligpt Operations 172,076 r'I -f 3,11to au0,r1onO D 7 , 00 -0- Maintenance 62,5'L4 80,378 78,4 228,lOoo,0l3 General Expenses 152,085 162,842 137,804 177,103 228,030 Depreciation 33,970 39,279 43.R5 43j872 373,505 406,218 472,838 436,323 532,167

Net Operating Revenue 5,000 ( 22,516) ( 29,578) 22,645 40,612

Interest and Other Expenses (net) 2,060 11,706 10,794 14,324 967

Net Profit (Loss) 2,940 ( 34,222) ( 40,372) 8,321 39,645

Operating Ratio 96.7% 105.9% 106.7% 95.1% 92.9%

Passenger Revenue Per Seat-Km Produced .234 .230 .223 .248 .241 Passenger Revenue Per Seat-Km Sold .381 .380 .391 .406 .425

Revenue Per Ton-Km Produced 2.526 2.542 2.336 2.592 2.608 Operating Exoenses Per Ton-En Probccd Fligit Operations .834 .868 .764 .773 .784 Maintenance .417 .484 .424 .443 .402 General Expenses 1.015 1.079 .990 1.000 1.037 Depreciati on .227 .260 .314 .248 .200 2.493 2.691 2.492 2.464 2.423

Net Operating Revenues Per Ton-Km Produced .033 ( .149) ( .156) .128 .185

October 1970 TABL.

AJRONAVZS DE MEXICO, S. A.

_rofit ma, LozStSate menta

For the Year Ended December I. 1965 Thrm uh 1962

(Pescs OC )

1965 1966 1967 1968 1969

*erat4n Pever.e Passengers 373,276 394,473 392,948 519,368 628,490 Cargo 55,166 63,972 62,182 69,885 84,552 Other 27,520 25,165 24,257 21,776 18,966 455,962 483,610 479,387 611,029 732,008 Operatine Expenses Flight Operations 239,569 276,542 322,806 353,343 415,318 Maintenance 97,803 98,617 92,442 101,715 114,945 General Expenses 65,045 81,903 52,254 68,217 88,223 Depreciation 32,352 25,277 28,692 45,275 52,319 4324,769 482,339 2496,194 568,550 670,805

Net Operating Revenue 21,193 1,271 (16;807) 242,479 61,203

Interest and Other Expenses (net) 38,906 10,964 74,639 80,414 110,115

Net Profit (Lose) ( 17,713) ( 9,693) ( 91,446) ( 37,935) ( 48,912)

Operating Ratio 95.3% 99.7% 103.5% 93.0% 91.6%

Passenger revenue per seat-ion produced .226 .216 .208 .230 .230 Passenger revenue per nieat-km 0old -387 .386 .402 .24324

Revenue per ton-lo proOlced 2.596 2.613 2.462 2.2456 2.4,22 operating Eoenaes per ton-km Produced Flight Operations 1.364 1.493 1.658 1=420 1-3724 Maintenance .557 .533 .475 .409 .380 Administrative and Sales Pro tion .370 .443 .268 .274 .292 Depreciation .1824 .137 .11,7 .182 .173

2.475 2.606 2.548 2.285 2.219

Net Operating Revenues Per Ton-Km Produced .121 .007 C .086) .171 .203

October 1970 mawriW I ±ADJ~ 4

MEXICO

UEJ,DE YUTCCO0 Se A

fl 0 1anon _~hee+a

Au ef flnpmher 1. 1QA thrneiih 1969

(Pesos 000)

ASSETS 196L 1966 1967 1969

Current Ass ts Cash and bank deposits 46,327 20,022 8,957 9,826 10,429 Accounts receivable 204,501 243,175 155,793 127,378 146,946 Inventory of spare parts, fuel and stores 35,894 33,876 .32,282 34,684 34,719 Investments 8,047 9,838 5,318 6,781 21,227

294,769 306,911 202,350 178,669 213,321

Fixed -Assets = Net Flight equipment 222,587 303,065 481,790 735,311 688,975 rrou ' __.___ipmn nr' Qrl. 55 01 :? 7 1.ArL VJ U IiU UJL L L= L) U)L4 £),) 1714V7 U ,)UyU1 W 4L L' n

248,839 328,396 516,058 805,783 761,908

Deferred Charges 36,985 103,870 106,271 172,137 142,222

580.093 739.177 8.'4.679 1;156.589 1;117.l;45

LIABILITIES AND CAPITAL

Current Liabilities Amounts due agents and othera ) 80,321 68,175 Notes payable and accrued interest) 731,167 787,971 825,829 890,517 1,035,429

731,167 787,971 825,829 970,838 1,103,604

Long-Term Debt Notes payable 89,026 230,536 195,797 695;589 574j1 3

Provision for repairs - - 19.938 27;928

Deferred Income 43,000 13,754 1.8,890 27,594 L3,006 Equitv Capital stock 124,669 124,669 124,669 124,669 124,669 Accumulated deficits (407,769) (417,753) (640,506)(682,039) (756,269)

(283,100) (293,084) (515,837)(557,370) (631,600)

580,093 739,177 824,679 4156,589 1,117,451 TABLE 5

jV.rEsI w-

COMPANIA WEXICANA DE AVIACION? S. A. Balance Sheets

As of December 31. 196' through 1969

(Pesos 000)

ASSETS 1965 l 1968 Current Assets Cash and banks 17,266 14,767 19,072 36,5co 74,182 Accounts receivable 27,'L47 28,534 451,3'' 59,839 7,,1L2 Inventory of spare parts, fuel and stwores 12,786 16,905 16,791 16,4 67 15,408 Investments 10,822 11,910 11,166 18,223 16,592 68,021 72,116 92,340 131,029 181,324

Fixed Assets - Net Flight and around eauiDrent 177.673 273,602 343,064 301,637 275,447 Land and buildings 852 4,356 1,201 - _

178,525 277,958 344,265 301,637 275,447 Deferred Chargeg 5,264 8,551 15,720 13,757 11,242

251,810 358,625 452,325 446,423 468,013

LIABILITIES AND CAPIZIL

Current Liabilities 104,923 130,186 169,123 256,149 143,468

Long-Term Debt 62,476 141,437 226,953 145,454 241,947 Equity Capital strockI 1,000In( 1,000nrv),00 10,0 100nn,0 Reserves 8,358 10,171 19,791 - - Revaluation -1rplus - 35X000 35,000 35nclo 35,000 Accumulated delfcits ( 23,947) ( 58,169) ( 98,541) ( 90,220) ( 52,402) 84,411 87,002 56,250 44,780 82,598

251,810 358,625 452,326 446,423 468,013

October 1970 TABLE 6

MET Crn

Empresas Alimentadoras

Staten et of Profit and Loss -YeaEer d DeceT1be- I 1969_

(Pesos OOO)

Aeronaves Aeronaves Aeronaves Aeronaves Aeronaves del Centro del Sur del Este del Oeste del Norte Conso1idated

Revenue from services 4,288.9 7,121.1 2,336.8 4,310.7 3,270.8 21,328.3 Operating costs 6,109.1 8,511.8 3,818.0 6,687.9 5,369.5 30,892.3

Gross Profit (Loss) (1,820.2) (1,390.7) (1,477.2) (2,377.2) (2,098.7) ( 9,164.0)

Administrative expenses Costs of selling 29.5 95.8 20.2 117.2 61.6 324.3 Advertisi ng 488.6 884.7 316.6 259.- 210.9 1;760A3 Administrative expenses 836.4 1,000.3 560.0 619.8 442.5 3,h58.6 Other - 1.1 - - - 1.1

1,358.5 1,581.9 896.8 996.1 715.0 5,5L4.3

Prof it (Loss) before f'inancial charges (3,174-7) (2,972.6) (2,378.0) (3,373-3) (2,813.7) (1,708.3) Financial charges 403.3 476.3 231.3 3.1 3.1 1,117.1

Net Prafit (Lossj) (3,578- U3,L44.89) (2,605-3) ,.(L (2,816.8) (15,825.5)

Less: Operating deficit to September 30, 1969 absorbed by Aeronaves de Mexico, S.A. 822.8 756.0 660.8 737.2 717.0 3,693.9

(2,755.2) (2,692.9) (1,914.5) (2,639.2) (2,099.8) (12,131.6)

October 1970 MEXICO

Fvr esaaUimitadora,s

Balamce Sheets as of December, 31, L969

(Pesos c0oo)

Aeronaves Aeroiaaves ,SSETSS Aeronaves Aeroniaves Aeronaves del Centro del Sur dlL Este del este -del NDzte an DLit

Cu,rrent Assets Caish and banks 50.8 LL2.0 194.0 Accounts receivsble .306.0 37.2 600.0 3,226.24 1,571.5 1,217.3 2,245.3 2,2143.4 6,093 41,/ Stores 1~474.2 23.0 Investwi te 6.3 - 20.1 523.6 19.8 LL.7 4.9 - - 35.4 .3,771.3 1,718.2 1,420.5 2,551.3 2,300.7 7,252.4 F'ixed Lssets_- Machinery, ecpipment and buildings (net) 6,222.9 4,1351.9 1,622.7 46.5 149.6 12,793.6 Deferrd Chares L, 433.8 1,333.9 607.8 ]L25.5 1'20.4 3,621.5

LL,428.0 7,904.0 3,651.0 2,723.3 2,470.7 23,657.5 LIABILITIES AiD CAPITAL Current. Lia LU tieI 7,589.0 3,:205.3 514.3 1,1&92.5 776.4 9,0458.0k/ ProvisoA for gment RepAU 332.3 1335.3 293.9 827.4 6:16.4 2,905.3 Deferred Rev4mue 55.8 12.2 72.2 42.6 177.7 3450.5 Lopng-Term Debt 3,156.7 3,1467.1 1,677.3 - 8,301.1 Capital Stocl Social capital 3, 000 .0 3,00.0 '3, Deficit 000. ID 3,1000.0 3,000.0 15, 00. 0 2,705..8 2,615.9 1,906.7 2,639.2 2,099.8 11,967.4 294.2 384.1 1,093.3 360.8 900.2 3,AX)2.6

LL,428.0 7,5904.0 3,651.( 2,723.3 2,470.7 23,667.5

I/ Colurmns do not add across because inter-company obligations have beien eliminated on consolidation.

October 1970 TABLE 8

MEXICO

AEsOurUBRTOS Y SKLv_CIOS AXILIARES

Trofitand Losa Statements

Fror the 'Lega- Ended December ,^ '965 throug' 16

(Pesos 000)

1965 1966 1967 1968 1969

Operating Revenue s Charges for landing, lights, etc. no 41,627 55,303 62,107 84,472 Rents details 11,924 15,849 16,889 20,364 Profits from handling fuel and lubricants available 4,555 6,051 7,983 9,132 Other 2,949 3,910 7,156 8,539 4,889 61,055 81,113 94,135 122,507

Operating Expenses Salaries, wages and other operating expenses 1,155 35,992 41,597 47,690 53,543 Depreciation and amortization - 970 15,713 19,223 24,902

1,155 36,962 57,310 66,913 7o,445

Net Operating Revenue 3,734 24,093 23,803 27,222 44,o62

Interest and Other Income - 1,106 13,769 5,535 7,483

3,734 25,199 37,572 32,757 51,545

October 1970 TABLE 9

MEXICO

AIEIOPI TOS I SERVICIOS AUZILIARBS

Balance Sheets An of December 31. 126 through 1969

(D es osDW9

ASSETS 1965 1966 1967 1968 1969

Current Assets Cash and banks 13,626 11,624 5,057 10,4ih5 16,164 Accounts receivable 15,420 5,436 31,560 52,210 38,421 Stores 108 4,408 4,155 5,620 13,371 Investments - 33,620 52,125 58,103 103,618 29,154 55,088 92,897 126,378 171,574

Fixed Assets

Tan.d, runwayfs, t n-l.', -- AJ equipment, (net) 7,391 12,577 573,906 599,791 690,571

Deferred Charges 143 736 2,059 2,063 1,955

Other Assets 20 230 903 992 10,121

36,708 68,631 669,?65 729,2:24 865,112

LIABILITIES AND CAPITAL

Current LiabLlties 63 5,005 3,112 1,958 4,516

Ecuity Capit t ,e' ,189 600,643 Os,- 70a4,9"40 Retained Earnings 3,734 28,437 66,010 114,331 155,648

36,645 63,626 666,653 727,266 860,596

36,708 68,631 669,765 729,224 865,112

Ort.nhpr 1 9'C) TABLE 10

MEXICO

RADIO AERONAUTICA MEXICANA, S. A.

Profit and Loss Statements

For the Years Ended December 31, 1968 and l969

(Pesos 000)

1968 1969

Operating Levenues 34,806 44,312

Operating Ecpenses 25,536 36,363 Administrat,ive Expenses 2,993 3,386

28,529 39,7h9

Net Operatinig Revenmes 6,277 4,563

Other Costs (Income) 2,030 ( 633 )

h,2L7 5,196

Note: Resu2ts for the years 4,65 through 1967 not I rovided - the ope-. ations were then conducted on a break-se3n basis.

October 19'?O TABLE 1]

HE2LCU

RADIO AERCKAUTICA MEXICANA, S. A.

Balance Sheets An of December 31, 1961 througi 1969

(Pesos 000)

ASSETS 1965 i2 1967 1968 1969

Current Assets Cash and banks 1,059 1,379 770 1,828 2,908 Accounts receivable 3,223 3,004 3,704 7,011 5,896 Stores 324 355 385 853 1,763 Investments 701 91 105 1,982 6,389

5,307 4,829 4,964 11,674 16,956

Fixed Assets - Net 3,784 2,880 2,730 3,338 19,364

Deferred Charges 191 1,079 910 292 472

9,282 8,788 8,604 15,304 36,792

LIABILITIES AND CAPITAL Current Liabilities 3,523 4,176 4,624 6,840 8,549

Long-Term Debt 2,653 1,506 874 1,111 2,687 EqLuity Capital stock 3.106 3.106 3.106 3.106 15.317 Reserves - - _543- Retained earnings - - 4,247 5,196 3,106 3.106 3,106 7,353 25,556

9,282 8,788 8,6o4 15,304 36,792

October 1970 PADP.. B 'v.r3AM rPttTSATT) POR

T n A rf Tf'OlATThNM Le| U1AJ.LUiWJ UI'VL'

A. The Federal District/1Mexico City

1.01 The Federal District of Mexi5o ("Distrito Feneral", or D.F.) covers an area of about l,500 km,- an d nas a populationt of some 7.0 million people. It is surrounded by the State of Mexico, with its boundaries being fixed in the national constitution. Officially, it is a Department of the Government. The Mayor is appointed by the President of the Republic and holds the rank of Cabinet Minister. The Federal District, therefore, has an importance and status unlike that of Mlexico's other large citiesl/which are responsible to the Governors of the State in which they are located.

1.02 Over the past 20 years, and particularly the last decade, there has been a rapid increase in population not only in the Federal District but also in the suburbs and nearby urban areas lying within the State of MyIexico. This larger IIetropolitan Area of the Valley of Mexico (as it is officially knoim, or more commonly-Mexico City) is a complex of about 9.0 million people and is increasing by some 6.0% p.a. At this rate of increase it would double the population in 12 years. As discussed below (Paras. 1.05-l.l0), semi-official forecasts are for a population of about 20.0 million in the year 2,000. No matter, at this stage, what reasonable assumptions are made it is evident that the population of the Metropolitan Area will be vastly greater by the end of the next 20 years.

B. Transport and the "Urban Problem"

1.03 The transport problem of Mexico City, therefore, is that of adjusting to an inevitably much larger population than now exists. Transport, however, is only one (and, perhaps, not the most pressing) of a set of broader issues constituting the "urban problem". Among other things, these broader issues include:

1/ For examnle. Guadalalara with 1.25 million Deonle and Monterrev with 0.83 million. - 2 -

a) improving health, education, housing and social welfare generally;

b) raising economic productivity, creating new locations for economic activity and generating additional employ- ment opportunities;

c) providing adequate recreation and similar facilities; and,

d) alleviating the environment by reducing accidents, congestion, pollution, noise levels and such social ills as crime, etc.

1.04 The responsible authorities in the Federal District and State of M'exico governments are vitally concerned about these broader issues. They recognize that transport, to a varying extent and nature, is related to the issues and must be a part of the programs for their solution. They are particularly interested in the physical arrangements of people, buildings and economic activity so that a transport system can be developed which can serve the area in an efficient, economical way. That is, they are seeking answers to such questions relating to physical arrangements as:

a) How large should the Metropolitan Area be in area and population?

b') T;it. natttern shoulid it, take (Pe. star-shaned based on radial transport routes, clusters of satellites, etc.)?

c) t4Jhat should be the population densities of particular areas and thue, density gradien bet+ween them?

, I C N * i. 4 CIIL LiC I i nl'JC lLi n "I V'-'n '-- IC a housing, business, industry, recreation, etc.)?

e) Should the transport system be more of a linear, radial, - iUfoP grid o. -U-. idJeu- grid patl-1? Depending upon the answers to such questions, they have to face policy UULisions si bUu -w;1 leL Ue uop er atui ons o thLe t-1-t b-p- S sh-IUid0syste be more public or more private, and how much shouid be above or below ground. They will also have to produce institutional arrangements to achieve the changes needed to permit the efficient economic and social functioning of an urban popuiation of perhaps twice the present size before the end of the century.

C. Population Groiwth

1.05 Population in both the Federal District and the suburban and nearby urban areas within the State of Mexico has grown from 2.25 to 8.76 million over the last 20 years, or over 3 million per decade; Popilation (millions) Total Federal State of Mexico Metropolitan District % inc. (urban) ',inc. Area % inc.l/

1930 1.14 - 0.20 - 1.34h 1940 1.65 46 0.26 28 1.91 43 1950 2.88 73 0.35 41 2.25 69 1960 4.67 63 0.73 99 5.40 67 1970 (est.) 7.00 44 1.76 140 8.76 62

1.06 Although most of the absolute increase has been in the D.F. itself, the population growth rate there seems to have been slowed doufn to about h% p.a. by 1970. By contrast, in the suburban areas which li.e within the State of Mexico, the population growth rate averaged 1h% p.a. between 1960-70. Most of this increase took place in four satellite cities:

Population ( '000')

1960 1970 g inc.

Ec.atepe. 41 221 hi41< Naucalpan 86 372 355% 1\TP+.a7.hiiln n -un.1_ 7 Thalnopantla 105 374 254%

1/ The apparent relative decline in overall growth, especially in the 10ACc, sfiholdq not+. be g4inme +nto muirch T.Tn4eyl+ becnasel:n al +hn 1 _nc+. official census (1970) has not yet been published; b) some areas r.ear JMAico City are st+l.]. officlally cl.assed as rural4.., bUt h-ave had significant population increases and are taking on an urban character; and c) the figures include some official urban areas (e.g. Toluca) which though not physically in the official rietropolitan Area are economically and socially closeLy linmed to it, but which have had slower growth rates which pull down 1…t o-verall a-verage. 14 -

Netzhuacoyotl, which is discussed as a separate important case below, did not exist as an official "municipio" in 1960, but about 60,000 were said to be living in the area. Its rate of growth to a city of major size has been a phenomenal 900% over the period 1960-70. The rapid and innnlanned grnoith of such urhnn areas nnoAs eri ous plATning nroblems for tho future.

1.07 Of the 3.3 million population increase in the D.F, between 1Q),n01960j 1 -' mnilliAn w,as acrfconte.A fnr by-vat r grro*h anci 2.0 million by migration from elsewhere. Assuming the same natural growth between now an.d 19000 as took ploce betwTen- 10 and- v-+r-lo net g+ai+n,w place into the Metropolitan Area, then it would have a population of awV| bouAvS VuU L '2; VsVL* ndllion_bly L U.yL..Lv 1± LJ t ±74oA_A48+1a c VULAend ofDt Ufl4te ce A sntu s 1. / sA Umre u'JJ/.] U Acuaew tii ci1 U'4w V.,A 1A_nstiM_te .LIiLa u.s +AA+ is expected when the results of the 1970 census have been analyzed.

1.08 Such a figure of 20 million, however, implies a considerable slo-wiUngdow in tLliu Vver UUia c s te pai Utdecad tuU aoL)UUU _)/0% per decade. If the total Metropolitan Area is to have less than 20

I;LLL.L±on u1y t11e onVloU.L J d LUidlLU c d4J1 C11U L -a.I UiULly Vl.J± IJu- flow of younger people from the Area would seem necessary. Reducing net immigration to the Area poses forrmidable problems. Inlduc_ing a net emigration is difficult to conceive in present circumstances.

1.09 Econometric studies eleewhere show that migrati.:in to a city is positively correlated with its real income per head ^s c::. ared with other cities. This would seem, a priori, to be the case Li 1cxico City also. The Metropolitan Area dominates the Ilexican econo)my in terms of industrial output, which is usually associated with higher per capita incomes. Rough estimates suggest that around 50%, in value terms, of all manufacturing production in Mexico and about; 45/ of all industrial production takes place in or around the Metropolitan Area. The only presently foreseeable counter-magnets for migrants from the rural areas are Guadalajara, where population increased by 75Za% between 1960-70, and Monterrey, which had a 50% population increase in the period. If these and other cities are to attract migrants, substantial public and private investments which generate high per capita incomes will be necessary to avert the strong continuing drift to Mexico City. A variety of measures will be required to bring a shift in migratory patterns and volumes.

1/ If growth continued at the present rate, the population by the end of the centurv would be 38 million! 1.10 For the purposes of this report, an accurate forecast of the on gaw,.=-popt'a4n Js not necessary. TfVala seem s -nevita,ble over the period of the next Presidential period to 1976 is that a much larger popu- .lation, per]aps one-tLrd, wILl exist. rTe feeding, ho-using, erip-Loying and transporting of an additional three million or so people will preserAt ser-ous plannIing proUlemns, at probablv in-creasing sociai or public costs, when seen in the context of the physical constraints on land and water s-upply.

D. Pu'Dlic Costs of increasing Population

i.11 Topography is one of the major factors likely to impose increasuig marginal costs of growth in the Metropolitan Area. The principal reasons for believing that public costs of increasing population will rise steeply are:

(a) The shortage of water is such that additional water must be brought from great distances.

(b) Soil subsidence is such (25 feet in this century) that it greatly increases the costs, and reduces the possibility, of building upwards. It also increases the cost of tun- nelling for the Mletro; and of some roadbuilding.

(c) Water shortage and subsidence problemrs are likolv to result in increased drainage and sewerage cos - .

(d) The mountains surrounding the valley of Mexico greaily restrict and increase the cost of developing tle land suit- able for urban expansion. In the past expansion has tended to be southwards and westwards of the old city in the oore of the Federal District because the soil and subsoil condi- tions for building were better. Now,J in most directionsj urbanization has expanded as far as the mountains so that the future thrust is ulanned to be through the gaps in the mountairns to the north (and south east) which will increase infrastructure costse

(e) The mounitains -n SO cause a smogproblem. It does not seem to be agreed how much this is caused by vehicles, and how much by dust. But itis probable that rapidly rising car ownership could make this much worse.

E. Conclusion - Consequences of Not Planning

1.12 (a) Unless there is a very determined and carefully worked out plnnto 'kb41d up other citiles rap-ld tob efctv polarisers of migration from the rest of Mexico (including theJ.~J2U^-I..L.L ItJI e of leco CiAU y iJ.se Lf) thLe YletropoeliU ud Area is likely, at the very least, to double in population to 20 m llion, before the end of the centuty. - 6 -

(b) W,Tithout deliberate planning, the growth of the city could be even greater than 20 mill-on.

(c) A population of 20 million itself poses formidable urban (including transport planning) problems. Without planning, more squatter cities like Netzhualcoyotl might be expected to arise, iith the same problems followming in their wake.

(d) More than in most cities, there may be increasing diseconomies of growth in Mexico City which are not passed on entirely to private decisionmakers. - 7 -

II. THE TRANSPORT SCEUE

A. Spatial Pattern and Movements

2.01 rilen the Spaniards arrived in Mexico in the 16th Century a large part of the Valley of' Mexico was lake (Lake Texcoco). They built their first city on roughly the destroyed Aztec city site. This area, around the main cathdral and national papace, is still the traditional and political center of the city. Most of the streets are narrow and built on a rectangular grid system around the national square or Zocolo. As the lake dried out, the urban area grew slowly, but in the second third of this century the city has expanded rapidly in westerly and southerly direction where land was nora suitable for building. Elsewhere, and particularly in the east and north- easterly direction, the drying out of the lake has resulted in soils which are not only saline and useless for agriculture but also liable to flooding and subsistence and rermain an obstacle to growth,

2.02 While there is no unique definition of "richer/poorer" against which to classify residential and other zones in most urban areas, in the Federal District the general picture is a Z-shaped area, lying slightly to the west of the old citY. in which the richer tend to live. work. shop and participate in recreational activities. Beyond this Z area, where car ownership is rising most rapidlv. the noorer popul2tion live - esnecially to its east and southeast.

2.03 An important study exists which throws light on the way the city works. Tt is a .cnple ninnmpratin of the home origin and work destinatio.' of 700,000 workers on the basis of social security records. It is thought -that it Govers about 7n% of the city's workers, ectives, pro- fessionals and self-employed. The information from the files is on their journey to work only. The city was divided into 111 areas chosen on the basis of their apparent homogeneity from aerial photographs, but for various reasor.s the-se aWere cor.-M-ined 3Qto zones of -bi-Dh;e retan n6;-the L"'L zones of destination. Casual inspection suggests that a diminishing prapor- tACoT eof nonnla f"rom. T,nn7 of' then originnatng zo,nesIaworkv in) zonessucesiel further away. But there are a number of zones especially in the southwest,

southeast -nd east *w1er-e this usu' relations141p looks S 4-- t d0 no ho4- -' In .an origin zone, for example, in the southeast, the largest numbers seam to r.al uc wo.rk ai th4e oJLd cente .. Y, Jthe.ULLO U. L,.Ld area -tLtG--Ie n.:1oUrU11iJ;.wsU around the refinery, the industrial area to the north and in the environs

depth is needed: is the City in disequilibrium in the sense that a high proportion ol people are travelling fUDrr'ter U 'Lo their work t'h ban tlhleley cand be imagined as holding when their incomes rise?

2.04 It is possible that because of the great poverty of many people, they have located where the land was cheapest at the edges of the city. ror poor people living to the west and south, particularly, this means exception- ally long average journeys to work that involve spending from two to foar - 8 - hours a day in travel. The financ-ial costs of this to workers is low because the autobuses and streetcars have flat fares over long distances. The city may thus be to some extent in spatial disequilibrium and as incomes rise people will try to locate their homes or change their jobs so as to reducc the journeys. This possibility needs consideration as an element in fubure planring.

B. Traffic Growth and Congestion

2.05 There has not been a serious effort to measure the extent, manner and costs of traffic congestion in the Federal District. Experience suggests, however, that it is severe on many streets and especially in the traditional center of the town. In part, it is a result of the stead]y rate of increase in car ownership:

Year Vehicles Registered ('000)

1960 60 l1960 v190 19565 310 1970 500

20 6 A study carried out in 196 7 shows +he folloing flows in and out of the small city center between 6 a.m. ard 10 p.m.:

('000) 7 oT)00T In Out % In Out %

Private Cars 113 97 56 201 178 13 31K1 cfP I,, ILr u c 1Ks 16J ±719 4 5 4 Pedestrians - - - 260 265 14 Texis 1~~iAJai ~~~~44L114 43)£4) £~~~~) -L3!~- I2 126-±e' Ur 9 Buses 21 21 11 791 741 52 Streetcars 2 2 1 102 98 7

Totazl 190 102 100 1,428 1,h66 lUU

The figures show first, that a high proportion of vehicles attempting to use these streets are private cars, even with present levels of car ownership, and, secondl-, while private cars account for 56%' of vehicles they only carry 13% of the people. Buses, by contrast, are 11% of the vehicles but carry i2% of the people. - 9 -

2.07 The main public tranrsport peaks of the day are from 8 to 9 a.rn., 2 to 3 p.m. and. 5 to 6 p.m. of which the last is the grea-test. However, only lOl of the daily traffic is in the peak hour, which is much less than is usual in a North American or European city. There is a much more even spread of traffic through the day because, in effect, the start and end of the working day and of the siesta are staggered. This dispersion of traffic over the dav because of staggered w^zork hours and the siesta is probably a major reason why transport is nostly profitable. Any movement towards the European and North American pattern could have profound consequences and. on transport grounds, at least, could affect the total cost of transport by reauirinz large amounts of equipment which is needed only in peak hours. C.Streetc.ars

2.08 T'he compnny whir.h operates streetcas and trolley buses (Servicio de Transportes Electricos del D.F.) is ou'ned byr the Federal District. S,treet- car operations beg,i- -in 189Q and were +hJ only form of mass trqnqit until th2 appearance of a few buses betwieen 1910 and. 1920. The number of buses ir- creased much faster from the 1920s on u.ntil today- +tere are 2639( r±.rAr and 229 trolley buses which operate on 11 routes and in 1970 carried 550,000 persons da;'l/. This contrasts with so,ne 7,200 a-utob-uses that carry perhfp2 5.5 million people daily.

2.09 T'he planning authorities of the Servicio de Transportes Electricrz del D.F. appear to disagree with those in the State of Niexico on the futurp of streetcars. Whereas there is a view in the State of Niexico that streetca-'. may have a role to play in the poor urban satellite towns that have sprumg up, the company thinks they will die out in another five to ten years due to the following factors:

(a) Difficulty of buying new streetcars and trolley buses - a-li :its cars are bought second-hand from abroad, usually after having been operated for 15 to 20 years. They are then run

J/To get sorile perspective on the proportions moved by the different public transport modes, the following (1564) figures froxi -the Direccion General are useful: Dailbr Volume (thousands)

Urban Autobuses 5,335 76% Suburban buses 3004% Streetcars and Trolleybuses 600 9% Pesero taxis 160 2% Other taxes 636 9% 7,031 TLV 196A figu1renc's from. +the sar.eI0~yn1 so-urn+ in"O' prvate4 -9 cted the- percentages: Autobuses-65%, Streetcars-7T, Taxis-9%, Private Cars-19%. - 10 -

in Mexico City for another 20 years or so. Supply, however, is becoming more difficult and the costs of transporting and making minor improvements to them are increasing.

(b) Very great difficulty in getting spares - the company resorts to cannibalism; and also buys up any old or scrap streetcars it can get from abroad to use for spare parts. The resulting high costs of maintenance make its operations increasingly expensive.

(c) Losses due to inadeauate fares - as a nationalized concern, there is much greater pressure to keep its fares down. At present they are fixed at 35 centavos flat fare (or under US$¢3) which will buy Journeys up to 40 km long. They helAieve that. the fnre P. owlrl have to doiible to about 75 centavos for revenue to equal expenditure charges. Their I nql:s nover +hp yeanrqs hae ben mp+. hbr non-interestf. hbarigrr reimbursable loans from the Federal District. Their total debt. ui-nry +this hea- is a t Pesos 1i50 millionn

(cd) npit21 inuPtmTn±t. 1in new nTowr siih-statinr,s to repplace sub- stations more than 50 years old - it is said that there are not infrequen-t power failures bich halt al cars Lnvt- ment is made to reduce risk of power failure, rather than

for ar.y iaen4,11y co,nsin Ared econorn;lc re.ason. They ,r a hav to go to the Federal District for capital expenditure needs.

2.10 ,hJile it might be imagined that the very low fare on streetcars wou-ld bVUUJ.LseriLously~ .LUu~L,y affd.L.Le e ctU 4theLU1~~IU __Proiabl iL 4f~UJ. UI oWherU LAIUJ._- .,iodes-P111UUt.eO,, it_.U is-.Li generallrt:;.LB-.LC.LJL thought that their slowier speed and the possibility of a power failure make the_U11t: j.LJ.LUU UL-rcreasonable L)UI~± -o lul theUIIU" servi'ce_LVLL of_.__IJ. :L'U deU. L.'Si__ _qI.Llfic- _ I L L;Wi -tlyX -L~±y Iluiltnon 0±_ teUlIlI- other modes complain that they are undercut by the streetcar. Thus, though the fare has niot been worked out on a marginal cost b-asis, it may not be un1- reasonable to ccntinue low prices on this basis until the company's services ernd. In addition, as there are many very poor people in i,iexico City, there may also be a social case for a minimum standard, low-priced service for some years to come.

2.11 W-Ahile this mode of transport may be dying out in a number of cities', and especially in cases where a reserved track is not practicable, their obso- lescence may not be universally true. For this reason, an authoritative studv to reconcile the different views held in NIexico and make clear recommendations as to the future would be desirable. D. Autobuses

2.12 Bus transport activities in the Federal District are affected by controls exercised by the Dlireccion - General de fTransito over entry into the industry and fares.

2.13 Entry control began after the prolonged streetcar strike of 1922. This, led to more buses appearing and an, allegedly, "anarchic" situa- tion with buses running wherever, whenever and at whatever fares the owner liked. Initially, about 1,400 permits were issued. By 1950 the number had increased to 2,300, i.e., one bus per 1,200 inhabitants approximately. The number of permits increased from 5,275 in 1963 to the present 7,200, i.e, one bus per 1,000 people in the Federal District or one bus per 1,200 people if the suburban areas are included. The Direccion-General de Transito re- cognizes the number of permLits issued is not "scientifically" based. There is, for example, no profound market analysis of supply and demand. One criterion employed is a, vague concept of an average level of profitabil.fty per bus. it is questionable, however, whether adequate statistical and financial dlata exists to determine this in an accurate way.

2.14 Control over fares influences profitability directly and, indirectly, the flow of capital into the industry which is entirely priirat Vy owned. Fares have remained unchanged since 1958. The reluctance to allo37 fare increases to meet rising costs is defended largely in welfare argurment terms. i.e., Door people need cheap transoort. It is probable. however, that there has been some indirect subsidy or income transfer from bus on eis and driver. to industrial and cther employers. That is. if fare increases had been permitted, the profits of bus owners or the return of their capitn' may hauv hben maintained AnH/or d3rivers' conrition-s may have improved. Workers, through their unions, might have been expected to put pressure on empnloyers io inrease wages to meet the increase in the costs of going to and from work. This might have squeezed employer's profits or, in some cases, ninduced them to pro-vid-e bDu s tr anort for 4emrntheir oT. plrytr=c

2.15 The present 7,200 buses are divided into trwno groups - first class (5,600 buses) and second class (1,600 buses). The first class fare ia fl at+ C' 0 c -----.nt (IT•).0) forn,n -v, rl4As+ntranc inN -o 209rim. rn ti+vh ni adrl-r tional 10 centavos for any further distance. Comparable second class fares are 10 nrAr 0 centavos. TA- see,n,s 4-1,h4-a - e authoritnes, s 'ri 1a the public would like to eliminate the class distinction. There are political

%A.L.L.LL.i'UJ ultes,ul 4-U-L~, hoee,iLAIVViZ., L asmltn teDofrs,srelA UV LJI VO, D iLLA1_, _L -L.os ierta~ V*~L the second class fare would rise to the first class level. The difference is 'l'arge.l.Y hi.,to0ric%-al- and not enirl men-fu nowI since-4 --s 4qupet jQ ~ IL) LU.LJA.O±.OIA 1±uiin U W11U M± L,y 1UUCLIJJ_1_U.. IIVJW D.JA: U1AVZ UqA_jI"1±U.LL kLQ.0:.. is fairly iniform - though low in quality. A passenger pays a new fare witl every bus ch,ange - tere is no tran.sfer syst"er. within or btween buses ;,f the two classes. 2,16 The present 7,200 buses reportedly have 4,5CO cwners - some, how- ever, are u u - (w_v, childrer, eUu.) W-i UtlhUIU U±VV tive n-UMber of1 o0ivncr probably being around 3,000. The small scale of units derives from law and. Ltie post revolutilOn-a ry ueleT to prevernt concentration of capitaL anu tihe promotion of the small man in transport as in agriculture. Originally de- signed to encourage and protect owner-drivers, it is probable tnat iess thGn 50Q,S of the owners now drive their buses.

2.17 The buses are organized into 86 "lineas", or routes, which are made up of some 500 sub-routes. Few routes have less than 30 buses; a few have more than 200. Slightly less than 100 per route seems to be average. Tne number of buses per route is approved by the Federal Distract authorities. Each "lineal' has a President, Vice President and Treasurer, with the exact internal organization varying from route to route. Usually the drivers collect the fares, unsupervised, which are handed cver to the route's col- lector each night. A deduction is made for gasoline and other operating costs (including, sometimes, maintenance costs), the driver's earnings and the "tlinea's" commission, with the balance being handed over to the owner usually every ten days.

2.18 In some cases the owner is responsible 4.r hea:-rr inm.ntenance. He is obviously responsible for the purchase of the bus, tha capital cost of which he often borrows from a Government bank (12% current rate), as well as for the licensing of the vehicle. For many owmers, therefore, duties are minimal and they are, in effect, investors not bu&inessmen in bus trarnsport. Bus permits are rarely "sold" in the market, with inheritance being the mail means of transfer. ItJhere they are transferred by a "sale1T, strict rules apply as to whom they may be offered - drivers, other oTwners, etc. Prices, therefore, inadequately reflect their scarcity market value.

2.19 It ma-y seem doubtful that with an average utilization of 1,500 passengers a day per bus and average fare of about 50 contavos that bus uperations can be profitable. If it is assumed, however, that:

(a) a bus costs Pesos 600.000 and is amortized over 10 years (which apoears to be less than the usual life of vehicles); that there are 300 worki.ng days in the year -- then ssr- vicing the debt requires about Pesos 320 per day;

(b) about Pesos 40 per day are paid in overheads to the linea;

(c) gasoline, oil and minor spare parts total about Pesos 100 per day; ard,

+ hAe AAa-; 1 . A4sv.. +,, ;+ - 4- ab-t p_ _ A n nrG)A+ fA_44-1;, A_A 'J t4..± UtA K- pVVDGO GO QAt}OU W hi [ .L yW, 61 WI revenues of Pesos 750 (US$45) per day. A margin of aboult Pesos 150 per day U'vO' ud appear- to be left, therefore, to neet heavier main1enanc, insurane, - 13 - licensing and profit. Whether the resultant net crofit. after tax. is an adequate return on investment is uncl.ear. It may be that some owners stay in the busiless in the exnectation of windfa1l canital gains. A thorough examirnation of the economics of bus operations and the relevance of the present svstem of nermits would now seem necessary.

2.20 The nr.sethbus system is u1nsatisfactory and still somewhat nnarchi,. There are no timetables. The public is uncertain as to the departure tines of' t.he first or lacst busm on a rot Tri,rn" S+till -ra.ce eac'h o+the1r for pas- sengers. Crowding is intense at peak hours. Equipment is often in poor npyi.-cl Aontition m,YNrnI -A_ -Ae lo - -A 4--- + ;- . C r~~~-- -v -- _-k- - V- __ U_&vY _~ - - -sw-, -vs -i of sinuous routings in a search for heavy passenger loads and the general congestion-. Buses ar-e annipostionab-elhyan c4 U 4 -l 4theU-J high leve l of noise and air pollution in the Federal District.

2.21 The introduction of the Mietro is an especially opportune time for +Vl VeA--_e n__-4C&- -- _-- - re ._ t*__1__n_.:_ --- 4 U - A%l ..0L .IJi_ Ul _L U GUVoUeIUentU 4u plIgll d 1gvel VeniqUllIy JJ-L)W ull operation and economics of the bus system. Some bus routes will have to be realigned because of the MIeuro. This could offer' an opportunitly not only for seeking ways to speed up buses but also for examining the implications of settin.g up larger operating units -which may offer tne possibilities of achieving economies of saale, etc. The new Labor Law (1970) which, among othuer th.ings, is intenided to improve working conditions of drivers is also of relevance and will increase costs. A fare increase to meet these may be necessary, but it w-ould have to take into account the present fare system on the Metro (Pesos 1.20 per single journey; and Pesos 1.00 on bulk purchas.is of tickets).

2.22 ITnhile the above-recommended investigation is being considered and taking place, some re-routing should be done on a gradual and experimental basis to test out the effects. Here, the interesting work being done at the ^omputer Laboratcry of the Polytechnic University, which employs mathematical miodels to select time minimization routings, could usefully be extended and speeded up. The Federal District authorities may wish to consider fin ncing the additlonal origin and destination and modal split enquiries required. an-x ensure that appropriate standard grid referencing and coding of the existing highway network is undertaken to make the analysis comparable with other urban studles. The Polytechnic is financing the present work itself. I,lhile imaginative, without outside help, the project is unlikely to have the re- sources needed to make it useful quickly. Because the Metro has meant the closing or reduction of Services on some routes, and owners expect to be allocated compensatory profitable routes elsewhere, improvement of the sta- uistical base as an aid to decision making is urgent. The Metrots impact means the role of buses as an element in the mass transportation system needs rethinking. Gn the basis of its limited examination, it would be imprucdent for the mission to make specific recommendations. 14

E. Taxis

2.23 There are some 20,000 taxis licensed in the Federal District area. They are classified into six main types, four of which are licensed by the Federal District and two (tourist and airport cabs) by the Federal Govern- ment. The largest group are known as "Sitios" which operate from a particular stand or site. Officially, they are supposed only to pick up passengers for any destination in the city from these sites and supposed to charge by the meter (Pesos 1.50 for the first 225 metres and 55 centavos per km thereafter) plus an additional 50 centavos per trip. Negotiated special rates when demand is particularly high, e.g., a sudden rainstorm, is not uncommon.

2.24 The next largest group is known as "tLibresl. These are taxis with- out a fixed base which circulate freely in search of passengers. They charge by the meter and at the same basic rate as the "sitios". but not the 50 cen- tavos supplement. Higher charges are permitted for night work and hiring at officially hourly rates (Pesos 12) may be arranged.

2.25 A third. but smaller grouipn consists of Radio Taxis which onerate from fixed bases. They have the same basic meter and hourly rates as the previous groups but add one or two extra pesos service charge per trip. Officially,they are not supposed to pick up casual passengers on the streets in competit,ion with the "libres".

2 .2( The fnourt.h grorun iq nn impnrt.ant r nd nulsual c ategory ia m n _q "Peseros". These vehicles shuttle back and forth between the termini on 26 fixed routes Althougih there are marked pick-up -nd drorp-off pointsj drivpr. often stop at any point for a customer. For the major routes there is a fixedor r-harge of one Peso ireseciv of--c s tare Th oe ca scale allows two and three pesos on some special cr longer routes. The ilpeserosi" are popeullar Mid are usedc byI 'knd of pe-p-1e because a) the- offer an alternative to crowded buses at peak hours. They are remarkable examples of intensive use of capital equ-pment nd reven-ue earnng, i.e., drivers are seeking to have all five passenger seats filled at all times. On a 15-20 1LUlIroute, for example, the driver m,1ay collect Pesos 20-25 per one-way trip when business is good.

2.27 Of the two groups licensed by the Federal Government, there are about 1,000 Tourist Taxis. They also operate on the "sitio" or stand principle with the stands most frequently being outside large hotels that cater for foreign visitors. Rates are usually negotiated per trip and are much higher than by other taxis. The justification is that drivers need to speak at least one foreign language and have passed certain tests as to thi'i- abilitv as guides, etc. 2.28 Finally, there are about 100 airport taxis which have a monopoly of traffic from the airport to downtown. They are not expected to bring traffic back to the airport and, therefore, charge a one-wav fare of Pesos 17. In view of the limited numbers of such taxis, and the absence of an airline bus service to a downtown air terminal. passengers arriving at the airpcrt in peak hours mnay experience significant delays or have to rely on private tranrsort, which aridd to congestion in the trmirial areapnarking lot.

2.29 O+her tha. for th.e airport ta is for which the -Pn"o is collect at a booth at the airport exist, control over rates does not seem stringent0

mA 1ke_. L 11u L. t L i oDxJ II7 l sV&A o&S. v I W IVISa tlA I t..rhe+ i.a. we.>;1M;1LIk1 -Im e- S t - ecore the political difficulties associated with officially raising prices.

2.30 As with buses, control over numbers is based on some rough corncept

O.f profitUa±± lU±± *.y O.±uU wfJih _heintUUcUtUIi Uo U±itif rL'zJuiLMerMnU theUthe nLtinLdI alternative profitable bus routes, the authorities seem to be considering a restraint in thi grwthWjI li UXL nbIintUajxi er Thi* culdUU particu' 0larl y afet, a the "Peseros" which ply the main through routes acting, in effect, as "mini- buses".

2.31 The profitability argument is complicated because of the different interests of owmers and drivers. Studies by the Direccion-General de Tran- sito suggest that taxi ownership is profitable (it is also reflected, pos- sibly, in the reportedly high free market rate for taxi plates when these became available). This is achieved partly, at least, by drivers working long hours for very low incomes. Estimates suggest for a driver to earn Pesos 1,000 per month (US$80) he must work a shift every day or some days with two shifts. The new Labor Law will affect taxi drivers also and is likely to generate a demand for increased fares to cover increased costs or reduce the number of marginal operators.

2.32 Since there is some evidence - though not strong - that taxi owner3 are making significant quasi-monopoly profits (economic rents), the relaxing of control over taxi numbers should be examined. This need not affect the position of drivers, i.e., more competition might squeeze the owners' economic rents leaving the driver's earnings unchanged, yet increase the service of taxis to the public. Since the whole general situation of public transport has been changed as a result of the Hietro, and there is a clear need to re- think policies towards bus operations, it would seem that a special group should examine the taxi scene as part of the high level study recommended earlier by the mission. There may well be a case for allowing free entiy into the taxi industry, as in Washington, D.C., subject only to a physical fitness and area la2owqledge test of the drivers and a safety inspection syLtui over the vehicle. Fares could be on a km rather than zonal basis as in Washington. - 16 -

F. The Metro (Sistema de Transnorte Colectivo - 3CT)

2.33 Technical studies of the nossibilitv of building a Metro in Ivexico City were made privately as long ago as 195a. The City and Federal authori- ties graduallv ber.ame interested and actionr took nla.e rqicklv after a more formal feasibility study was made in 1964-65. By the beginning of 1967 the project had been examirned and acc.epted byv the Federal T)jatrict. the Presi- dencia and the Hacienda and a fiaal decision to proceed taken. Contracts aJere dratm upin by Jinm 196Q7. The first section of Line I of the 14ietro was in operation by January 1970. The whole 42.2 km of the first phase of the system is expected to be in operation. by early 171, perhaps ev-tn by the end of 1270.

2.34 The original studies and design were made by a Miexican group,

i U t UU1X U .±Io/1::.IVV U 1rAUU± %JPJL L UO.±I \ s.LJJ.IJ/X, WLUYLV A electromechanical and operational work from the French firms SOFRETU and SGT2 wh1ich are conn,rected with1± tlhue Paris MlUetro. TLIhe UoIntractI oUUO L'dLLu LV-s giLVenL to a large liexican civil engineering group, ICA.

2.35 A specialized decentralized enterprise responsible to the Federal n4 4. _ _ 4E -w_ -A . 1- 2Y.zv_| DisLL coI U Go1vr1nent,U UUU I.JWJ. co nUsUiderabdUJa aUtnUlUiyhaIiY L)een sed;; L- UoJ supfr_ vise construction and operate the IMletro. Its budget and capital expenditure are examliLed and approved, and its senior personn1el appointed, by -the Fedelal District and 'by the Presidencia and Hacienda in so far as they are part of the finances of the Federal District. The head of STC reports directly to the Mayor of the Federal District.

2.36 The total capital cost of the MBletro is now expected to be Pesos s,163 million (US$4Li3 million), or about Pesos 125 miilion per kn (US$6.25 million per mnile). The original (1966/67) estimate was Pesos 2,350 million but this figure excluded land costs and other compensat-ion; costS of dislo- cating public services; waste disposal; financial commissions as well as the administrative expenses of the S.T.C. I, would seern that the cost in- crease can be accounted for roughly as follows:

Million Pesos

Original estimate 2,350

Omissions from original detailed abn"l/ 1,150

Increases in compensation above estimate 193 Cost increases because of changes in desigr. and route 1,470

- This figure is a residual and has not been confirmed by STC. - 17 -

2.37 The finaricing of the Metro is complicated. There are six major sources from whi.ich capital has been borrowed (at three different intere,t rates) and these have been complicated further by the devaluation of the French franc. Besides this the Federal District has made an (interest-free, gift of PeSos 1,739 million (US$139 million) for construction. The Federal Government has given a subsidr equivalent to 75 of all import duties.

2.38 The financial arrangements are such that it is planned to pay back borrowings over the period 1970 to 1985 and to have accumulated a balance of Pesos 3,90) million by 1985 en the basis of 1.20 pesos for ordinary fares and 1.00 pesos for multiple purchases, with an average revenue per journ2ey expected of 1.06 pesos. The projections allow for increases in operating costs of a 2% annual increase in material costs and a 15%; increase in labor costs every two years based on the labor contracts which are usually signed in Mexico. The employees are not unionized yet. As Federal employees, they are not subiect to the labor laws and it is almost impossible for them to strike. Thle depreciation periods assumed do not seem e-cessive:

Building and Civil Engineering 20 yea;- Rolling Stock 203 yea-- Ellectromiechnical Installations and Miscellaneous Equipment 10 years Material and Cffice Equipment 10 years

2.39 Using the same assumptions about traffic estimates, fares, and depreciation periods as above, the average financial rate cf return from 1972 when the lines will be in full operation will be just under 12%. An approximate calculation on a discounted cash flow basis suggests an internal rate of return of about 10%.

2.40 Traffic estimates are crucial to those profit forecasts. These were no-t done in a scphisticated marner. Judgment and so.ne info-rmaation were used to fix the areas of greatest population density, the tLeavi-cit floiws of traffic on the streetcar, bus and pesero routes, and the routes of greatest congestion. The most important factor in fixing the route of the three lines was, it seems, that these were the densest streetcar routes.

2.L1 There are obvious difficulties involved in this approach to traffic forecasting:

(a) It assumes that all the streetcar and bus traffic on these roautes lrii stAtch to the Metro. In fact, this has been taken care of by abolishing streetcar and bus services on streets directly over the Metro routes- Tt. _ possible; - 18 -

therefore, that the Hletro will acquire all this traffic. Although for most travelers the IIetro fare will be two or three times what thiev were paving before and journev times will be almost proportionately shortened, the strong argu- ment that most peonle would have changed irn using the h'letro without closirg the streetcar routes irn view of the service advantages may be contested. It ma7r also be asked if bus rationalization had taken place first whether the comparative advantage of the lyiptro TTonl cl have been so great. Against this, however, is the fact that population and traffic are Innrensing so fast th;;t any atteprt to car7r t.hp yecnnted added traffic byr buses and streetcars would have led to such congesriCon as t.o sloi dowTJn journers reasuraly on these major routes.

(b) It assumes, without demonstration, that much traffic on nearb streets will sw,itch -to the WIetro -and th^at a prop or- tion of journeys now going by other means than streetcar a~Ur bus JnL.L LU'so 14Lvert. VWha- U .LO L1eLher.IIO Ls a. IImod.aL soli.t functior., that is a predicting equation, based on stu,diies, V1-lch"a - press-ct Ifor ;-eretrelative;V_ -Jo-ey tim'es (and possibly wa-iting times) what proportions of passergers cf i-"fferent characteristics --w' tr-ll v by '-4fetro VVa_Li UrL-.VtVL U~y rl-, u. rather than by car or sonie other mode. Over-estimation cf theU lietro proZportull ±N clearly posUible,5 cUialzly giVel the growtlh of car owmership.

(c) It assumes that the routes peopple use - the flows - are a good indication of where they want to go - their desire lines. But as many transportation studies show people use a particular route ( to make a cdogleg Journey) because a suitable, more direct route does not exist. A comprehensive origin ard destination survey would have elther confirmed or improved on the judgement made.

(d) Even if it is assumned that there is enough demand now to make the hetro profitalble, the effect of trend changes and how they may affect profitability is uncertain. The I'letro, for example, has taken no account whatever of possible traffic increase after 1S72. The 1972 level is assumed to continue to 1985, at least. Any substantial increases in traffic over the 1972 levels will require greater frequencies and more trains and different operatiing and maintenance costs.

2.42 Silnce the Pietro and Federal District authorities are thinkdng of possible extensions when the present first phase of the systea is finished in 1971, a number of steps would seem c1esirable in order to forecast the prcfitabllity and net social benefit effects of any such extensions: 4 f*

(i) A comprehensive origin and destination study is required. That is, even if tle hietro traffic and net revenues e re to cor,e fully up to expectations, it would be foolhardy tC) pick new routes by the methods useci Defore. AS more routes are chosen, there is arn increasing danger that a mistake may be made without, at `he very least, a conpre- hensive crigin and destination survey being undertaken.

(ii) Ani after, and if at all possible, a before hodal Split study of hetro travellers is needed to find out:

(a) their income (social economic class);

(b) occupation;

(c) journey purpose;

(cd) origin and destination;

(e) travel mode on other legs of the journey;

(i') how they made the journey before unless it is a new journey;

(g) whether it has caused them to change job, home or other origin or destination;

(h) the cost difference to them because of the 1'etro; and,

(i) the journey time differenGe (mHd waiting time difference).

(iii) A study is needed to get some feel of the effect of the present lIetro linns in decongesting streets aa necessary preliminary to planning and assessing extensions.

(iv) Future extensions of importance should be considered only in the context of av m+voreeh l.4-d u-se trannsport1atlJA study.

(v) The effects of the five main stations already opened on main- tenance co sts and tra-fic shoIdJ be mionitored to assess how far it is right to continue the high architectural and aesthet:ic st1ndards of the first part of the system -whe build ng an.y extensions. - 20 -

G. Parkinrt

2 43 Parking policy ir the FedneraI nistrict is the resnonsi'ilitv of a separate office in the Transit Department. On-street parling control comes inder the Traffic Engineering Division of the T affic P P r) L1 th.ough t.h' a are many streets with signs forbidding or restricting parking, it is gene-'&1y 1 ronce de d that the reg"g tn; rSc- .n be fl 1 re,t ed fr -een1"r rwr +t rn-in : rcons.

_v. * 4444 V . U± 42.1V X1 UJ Ii FJ ¼1U± V.A. 42> I)r L^-~ f 4 ..U.J ._t4J .A .. CSL4 LJ U., 2.X1 The&---4wi of on=street paking is recognized5 'by the aul+horit-Ie, to be taking up too much street space which could be used to ease the flou ~~ T4-r 4. . .C'.71- .4l.... 44-- 4 - ...- 4- 1-J .. 4-,.. 4 ~ of 1oving vehicl t iLs felt, Ihlowever, Ulhau it is Uimvslble -Lsist fully on the law until there is sufficient off-street parking space. As a result of a law in 1560 requiring permits for ne b-uilding, a major effort has been made to ensure adequate parking space is provided and the number of registered off-street parking doubled by 1960:

Spaces Category 1960 1968

In buildings only for parking 4,600 9,000 In buildings partly for parking 1,800 2,900 In private open space for parking 9,100 17,700

15,500 29,600

1While this is a creditable achievement, it has barely kept pace with the increasing numbers and use of cars. As a result, no tendiency to a decline in on-street parking seems apparent.

2.45 The authorities recognize that a major effort is needed to provide even more off-street parking before it becomes politically feasible to clear many streets of freely parked cars. Yet so long as parking is largely free, there is little incentive for the oiners of nearby buildings to provide park- ing facilities or arrangements for parking. To break out of this circle the first of 1,700 metered spaces are now being put in a main boulevard (Pasec de la Reforma). Charges will be one peso per hour with a four-hour maximum.

2.46 There are mixed views as to parkirng meters in Mlexico City. Some hope that irn the end there will be very little on-street parking and argue therefore that meters are an unnecessary, temporary expDedient. Others be- lieve that the public temperament is such1 that they will not accept paying for what uintil now has been a right. ri rill i)se ingenuitv to defeat the system. Other skeptics argue it will be just another opportunity for petty nrimp modr ncorynintionr - 21 -

2.47 Introducing parking meters is not easy and differences in attitudes have to be recognized.l/ There is a strong economic case, however, for mlak- ing people pav for parking. It may be useful, therefore, to touch on some reasons why other major cities in the world have taken strong measures to restrain Darkina:

(a) it can increase highway capacity, but this is not alwavs the case if there are many junctions and heavy crossflows of traffic since canacity then is more a hmrtion of the junctions than the streets between them. That is, c:learing alne oflnf-- L- lp.rkpdi------c-2rrsnq,--d -_-…-&niholb st-rPeet._- --crnp,aiytir _--F--- hut still have bottlenecks at the junctions. The paradoxical result of a sunne-l'l parking policy may be, therefore, more con- gested streets as vehicles fight their way to limited parlking snaces. That is, congerrstio+n ;i shifd to+nl+th lca tion oA,f the parking lots or buildings.

(b) Unrestrained car use can threaten public transport finances, especi~~ 'ly thec mIeoRetrKus, thrfoe sho' improve public transport ridership ard firiances. In addition,

4 - -- J_ .9______A__. 4 - 1_ __r O;UJU 1iJVV1x:ZX- Pu p6ytv c t; d.L't W11u _LnU.L SIU;: Ou-L.tmu vV'U[V 1 Wa2e spiral of deteriorating public transport and rising fares to meet increasing costs as richer people spin OfII ilO cars, there is an economic welfare advantage.

(c) Urban road traffic is underpriced in that:

(i) It costs more to provide and operate (including traffic police) urban. roads than others.

(ii) ~Every aciditionial vehicle coming onto the road slows down every other vehicle and increases their costs by a determinate amount (given the speed flow function relevant). Thus the social costs exceed the private costs of his travel; and there is more congestion than if efficient.

(iii) The taxation on gasoline and vehicles may not be enough to cover the costs of providing and opera- tirng the road system on average.

2.48 In the case of the Federal District, it seems to the mission that paying for street parking must be pressed, especially at key locations; ahether meters, a disc or other system is preferable is not the main issue. The recent effort to give a large boost to the supply of off-street parking places must also be increased. In addition, parking policy should be re- thought in the light of overall policies towards the use of vehicles in the

- Te city of Pa 's, for example, recertly voted against theiri. - 22 - congested city cenrter and the external costs of noise and pollution involved. Finally, there is a strong case for an analytical study of highway and junc- tion capacity in the context of the general traffic engineering studies described elsewhere in the report.

H. 'Traffic Engineering/Highway Planning

(i) Traffic Engineering

2.49 Mhis is the responsibility of a small office in the Traffic Police Division. 'While showing competence and vigor, not more than 20 professional engineers are involved. Of these, three-quarters are employed on the install': tion and repair of traffic lights and other facilities. In other words, only four or five are able to ponder a traffic engineering strategy. The staff needs doubling or trebling if it is to cope writh a citv the size of the Federal District.

2.50 Fortunately, they have available a remarkable series of aerial nhotogranhs coverirxg the whole Npietropolitan Area, withT ner st.for each daylight hour. From- these, if the-y were carefully analyzed they could yield more information for r-iore streelIry Than pcssessed by cit,v in the worTh It would be possible to deduce from these photogra-phs vehicle flows by type ot vehiclej their s s the percetage of left nd right trns at each 'Junction, as wqell as a complete inventory of on-street and parking lot parl-

rP.heyr do rnota give ,n-r.o,Tvrn fasse,ngr,--r1 firato r nfln e serles. Bu they are an invaluable base for any traffic and transport engineering studies in the Federal District.

,, v U AA'JLI ULU1 C_ UC L'y ULu .JI)1V Vg i AD VI C.AJU1U X 11 i 11I EC £urs U Do1 'ave I.U been processed and these are the most crucial. Brief inspection of a selec- 4ti4on by-h misslo- -4 suget h-at:-4 u4 Ni u±tzZ- ii.. I l~u uL .Ld U;. 1 _Lb 1

(a)dJ .ere is --a-' lne scXl4ir wWLUit UUss U din ± ±lcuIUe cutting across other traffic;

(b) there are many parked cars interfering with the flow of traeffic; ald,

(c) there is a possibility that traffic light settings give a weight to crossflow traffic out of proportion to the nunbers involved.

2.52 The mission recommends a major effort be made to interpret the information available so that it can be a base or bench mark against which to test changes. in addition, two studies would seem urgent. First, to assesc- the measures, including computerized traffic l ight synchroniza-tion, that could be taken to increase traffic capacity. This must be done with full r-gard of the environmental irTplications involved. Secondly, a study of the possil- - lity of reserved lanes for buses and streetcars is needed. - 23 -

(ii) hilgh-.Tay 2in,neeringa

2.53 The Federal Districtts Public Wiorks Department is well able to design, contract for and supervise the construction of roads and streets. It is unclear, however, whether adequate economic studies ate undertaken to determine the best construction solution and timing of the wforks it carries out. This may be particularly important since traffic engineering measures can relieve the pressure for new construction for some time. It is alsc, unclear whether sufficient attention is paid to the fact that widening some congested roads is merely a shifting of bottlenecks, while generating addi-- tional traffic. A network Dlanning analysis could avoid this. but such work has not been done yet.

2.54 It also seems to tlhe mission that more "post-hoc" studies are re- quired to assess what has haprpened to traffic morvements and patterns as a result of new constructions or major street widenings.

2.55 It is recormended that any major highway construction should be e con Asidreredorl-my on the-a basis of cosrillet onrigin r.ad dest ination+y S- and a more comprehensive land use study of the Federal District. There 4dentif -- earsLi to'A''J be frewLVV ..roadis iAL -wherleV.V.V 004safLe 441VVnet UIV" O~scan W b#-eJ iL.LV J ~LZ;.' r.;."_ow, W eith-4 because their priority will depend upon the land use plan to be adopted in t&h~e r.ea-r `fure or 4their efet on present !ietro, fu--_ _-4xtens4ns to UJLV ~lV0±iL LiU. V bJ.JA -± VIf f V Li "hel U JJVVL l ±VI± tZ Li).L-V .LAUA.ILU.V V.&VV±IOJL.' OL i'. V~ and possibly surface railways. In other words, any proposals for futher

- -- -4 - -: 1 _'nT - - _- - 4. . - 71 -1 _ D__r.. _ . L - 1 -3 1 miCaJuo hiLghlW

I. Surface Railways

2.56 Mexico City is unusual in having a network of surface railways which are not used for commuting at ail. They are assets wnich in part, at least, the Mexican railways are not able to use profitably for other purposes. Some go near or through important residential areas (especially to the south- west and east). Cthers go through areas marked for developmertL to the north- west and north. As the city grows iarger it mignt be expected that part, o1 tL7 traffic to and from Mexico City could be channelled along the railways.

2.57 Another possibility that seems worth exploring is using the railway (with a short offshort) as a high speed link between the proposed new airport and the city. It is recommended, therefore, that a study should be made to see if there is benefit in running commuter services on some of these lines and what would be entailed in doing so. - 24 -

III. TRANJSPORT PLA1b!ETG

A. The Federal Government and Federal District

3.01 The Federal District initiates its own urban policy and projects. The Federal Government. however, exercises final control t'nrough its approval of the District's current and capital budgets. Recurrent expenditure propo2ais are submitted to the Iiinistrv of Finance (Hacienda) for approval of detailed line items. Lkle ot-her branches of Government, the Federal District cannot ch,npe the anrnrovsed line. items, wlthnito. nprmiasion from the Hncienda. In this way, some control is exercised over such matters as the number of employees nnd other issues ub-ich intepres. the Federal Government

3.02 The Pedmnl ThtrTirlts capital budg1oet is to 'hp submitted to both the Ministry of Finance and the Ministry of the Presidency. Thi.s budIget+rincludes the - o+n rnf1AnnAor+ 0,-n ipq rf' t.ho Federal District, e.g. thle new iIetro, and joint ventures between the District GOverrnMent -andpiaenee ,eg a pl -g ro,ects. Tlh.n P-eien4 nnc-7 ~flJ~ £Uk'Lti .V0. ~ J±U ± &0 4, ~ * .4 ±-J. ~sJ 1>-± J '.".- U * -LA'. J .. JL_l~ evaluates it for project justi fication and may significantly modify it after iit- has been-~rexn od by%r a Sm., 1 1e+m of P"pp-sd.c,-e--r -,c other Federabr-1l Gorverrn, ment officials. The H'acienda examines the proposed capital budget to ensur- that projects are s lf financing, or can be met fror the Lis-ic-'s resourrc:. and, if foreign borrowing is required, to assess the debt, servicing impli-

cations, Un ; h se OrfU olthl0er Fedtercal a-ig en± cdies, thei0.1ela d.L Go is particularly concerned that any support from the central budget to the L 1' i0s 11LL1i.L1IiJL. UIUd Uo,Ly fo rU U± Vitie0 UofI.Up iLcdU nat,IionL lintere11 st0.0.

).0) lerge,±ui uvell orgBni'.zed aunL:LI.LbJ.b bfJ_vi1 for ±uli.Lig 1110th cLity IepU-t to the Mayor. Tho Departments are primarily responsible for transport mattca-s>

(a) The Transit Department (Direccion General de ',.ansito) winThicn has ::oficinas"' concerned w%rith road safei- generally; the control and inspection of vehicles; the ici--e of bus and tadi permits; parking and traffic engineering. The activities of the traffic police are coordinated wzith this Department. It also has a section concerned with more general transport policy and planning that has initiated some useful surveys.

(b) The Public lWorks Department (Direccion General de Obras Publicas) iwhich has of2ices dealing iwith the construction and maintenance of roads and streets as well as that of the "City Planner".

3.04 These twTo Departments report to the Hayor through the secretary- general to the Federal District Government, whereas the t,wo decentralized transport organizations (the Metro and Streetcar Company) report directly to the IMayor. That is, the largest passenger movers at present are under the - 25 -

Transit Department, but the potentially large mover (the Metro) is not. This dichotomy is one aspect of a more general coordination problem.

3.05 Clearly, the activities of the different offices and agencie.s impinge on each other to varying degrees, for example:

a) Metro policy affects bus and streetcar routes and operatLLons;

b) highway construction and traffic engineering are inter- related and, in part, alternatives;

c) policy and planning for both public and private transport is affected by the City Planner's decisions as to land use;

d) important transport implications result from the Housing Department's programs; and,

e) the Federal Government's decisions as to main access rout;es to the city affect traffic volumes and patterns on key routes within the city.

3.06 It is possible to coordinate the decisions and activities of such different agencies through meetings and informal administrative arrangemenrt.3 The price, however, can become high in terms of time spent an-d decisions delayed -- often because of differences in objectives.

3.07 The details of a reorganization to meet the challenge of growring and changing transport needs requires specific examination by the Federal District authorities themselves. On the basis of the mission's brief examination, detailed proposals would be inadvisable and not well founded. Three broad features, however, seem desirable:

a) There should be one nerson at the Directorate level with an overall responsibility for coordinating transport policy and planning and the phvsical development of transport facilities. He should have a clearly defined posit-on vis-a-vis the Metro nnd the StreetcAr Co-nmpny. He should have a small, expert staff to assist him in policy forril.qtion so he nnn think nnd not. lprrnioede in administrative detail -- but for wyhich, however, he would still be ultimatelv resnonsible.

b) The phvsical 1pln f'or the Federal Ti stric+ now being prepared in the City Planner's Office should become:

(i) a more general planning document, covering trnsn qor+. jrhiiiinc devielor+ment and housing; and (ii) a strategic policy document, with a strong economic anu financial content, so that decisions based on it relate to the strategic development of the Federal District.

c) TIere shouid be one office to coordinate generai urban planning wzith the responsibility for ensuring that the studies done by different ofiices of tne District Government relate sensibly and do not duplicate each other. This office should also try to standardize approaches so that different studies use the same statistical definitions, the same zones and similar code numbers for data processing by computers, etc.

B. The State of !Ne1xico

3.08 Only a small proportion of the to'tal population of the Mletropolitan Area lies in the State, but itL is in these areas that population is growinz fastest. In any case, relative shares of population do not reflect the nature or severity of the problems being faced. The State is particulary concerned with the future pattern of development since the effects will be greatest there. Accordingly, the new administration in the State has brought togeth,x. a lively, imaginative group of planners iwlho have gone an astonishing distanrc in a few- mon-ths. They are less concerned with transport policy issues and more interested in anticipating and influencing -physical developments, including transport routes.

3.09 Their major interests are:

a) Possible long-run develonment patterns, i.e. whether the J-.etropolitan Area should grow outwiards all around the Federal District or whether the present system of satellite cities should be further developed, Different spatial patterns require different traxnsport arrangements. From the State's viewpoint there is some support for:

(i) an outer beltwav (ring-road) linking poresent and future satellite cities; and

(ii) a hig'h speed road and/or rail link to the State canital in Toluca so that it can becore a major development axis.

b) Shlorter-run pl2nning issues, i.e. to improvements in existing and ;resent. nl.nned develo-meorv-,c am-rncl the Fedepral Hisrict.s boundaries. iluLch of the recent developrnent in the State has bPeen in housing for tirpvery poor and very- rich. The first i s and w.ill be a drain on. the State's linances for many yea-s, T-r

the tax-base. A large part of the industrial development in tuie ietropolitan Area nas been tempted into tile State by liberal tax concessions and cheap land. The net inpact of ti-is on the Statets resources is unclear. The State, however, may find itself for many years in a position of importing some of the financial problems of t1he P-ederal District.

3.10 These issues can be seen in the cases o0'present satellite cities:

a) Metzahualcoyotl

This is a city just over the State of i4e-ico boundary l1yn,; to the east of the airport and to the north of -the road from Hexico City to Puebla and south of Lake Texcoco. It has grown from almost nothing to a city of about 700,000 peoplE in 10 years. It has almost no made-up roads, water supply, drainage, garbage collection or other public services. No industry has grown up near it.

Of the appro)imately 200,000 daily journeys made in and out of the city, some 85,000 people went to Me'dco City -via tha "Glorieta Ir'nacio Zaragoza", a roundabout to the west of tt:.e city; 10,000 went south to the areas lying south of the main Mexico City-Puebla Road; 5,cOo wient to the industrial areas begiinning to develop some distance eastwards; and a further 10,000 worked locally. The great majority went by bus.

Theoretically, there is a two-minute connecting downtow^n bus service in the peak, but other termini of the routes are far away in the Federal District and congestion on the routes in the District tends to destroy the regularity of service. Wlithin Nletzahualcoyotl i-tself the appalling state of the roads, the possibility that power lines may have fallen on the road, and other hazards make bus service irregular. It is at its worst when there is flooding.

Even though the buses in the satellite city are never more than Live years old, the state of the terrain has made them old before their time. There is a high incidence of mechanical failure. All this is reflected in the fares which are higher than in the Federal District, i.e. .50 to 1.30 pesos per trip.

In addition. because of the ronnestion in the District, anrd the considerable distance from home to work place it has been estimated that the mriority of worknr. srn-nd frnm ftw.o to four hours a day travelling. This year (1970) the opening of t.he first line of the TJetro to Glorieta. Zragoza has increased accessibility of the area to the centre of Mexico - 28 -

City, though at a substantial increase in cost to the poor people living in Netzahualcoyotl.

The State authorities are concerned about the social, economic and political implications of the unplanned area. To ease the transport problems iwithin the area, they have made an excellent cost benefit study analyzing alternati,ves. Six alternative solutions were considered. There were three modes: bus, trolley-bus and streetcar (fed by buses). Each was considered in relation to two sets of street inmrovement, differing principally in geometric design. A mixed streetcar and bus service, at a cost of ahout ^,7 million) has the highp.t bene- fit cost ratio. The benefits which are a function of tirie savinrs onnlv are l1est for the nll ntreetnnr alternative.

Capital costs are second highest for the streetcar al-.ernative chosen. Hlmever, (a) botlh buses and trolley- buses are argued to have much shorter lives: buses - 10 y ar sj trc llerr-hI)e - I) i a ncompnredtvi- h 20 vears for (secondhland) streetcars; (b) the capital costs in general nf qt+rPP4cs are asserd .much lorel becauseTof tk.e smnll nuamber assumed needed (22) compared with 210 trolleJy-buses and 200 huqePq and (c) the operating consl.s are als nssmie, lower.

The investment would seem plausible in cost-beniefit terms on the assui tions that (a) it i- possibl to provide 20- year old streetcars which ill give a good enough service, at the predi ct cost; (h)' tlq econo;es fo'resen possible and that their much higher loading will compensate for lesser- freqiuencies at .lchte nlru;()epa- ment secondhand streetcars will be available in 20 years time9- (cl) 4the ecn.c 4ofthe- fedr u yse asbe correctly evaluated.

The mission iwas impressed by the energy and imagination of Lithe4 "ULtateual u7-4 p-lannersjZ--I - - - - -in-i± Utach_lirig thisL Osate.L~tIels-- 4-1, 4.LL , - talUU.UUL - Ud planning problems, of which the transport oroblem is but' one partu. T'ie inge:-uity ar±c. self-help phiLosophy and practices of the people living there offer some hope for ui1rpIrveraenLs. The mission believes, therelore, that assistance by the Bank could not only ease the problems, but also be an important demonstration project and iearning experience for tackling a problem characteristic of much of the Latin America capital cities. Accordingly, it suggests that the Bank should sy,pathetically consider any recuest from the Mexican Governmaent to send a special project identification/preparation mission. b) Other Satellite Cities

There are a number of other, but smaller satellite cities aro-ald the Federal District and within the State of Mexico - e.g. Xochimilco, Chalpan, Texcoco, etc. with populations of about 100,000. If the predictions of population growth for the area are correct, some of these could increase to the size of Netzahualcoyotl in the next Presidential period (to 1976). A high proportion of the growrth ill be poor people who need such land and services as they can afford. It is vital that the Netzahualcoyotl experience of unplanned; unanticipated and uncontrolled growth not be repeated. The fundarnental mistake there is that a city has appeared without jobs.

In the future the State of Mexico intends to plan new satellites which have a much better balance between homes and jobs. To do this, however, it is necessary to try to build workers' homes on land adjacent to existing industrial. areas. If land near industry is too dear for workers to buy, z the lsnd will be necessary, at least for a number of years, if workers are to live there. In addition, where there are now workcers' homes, but few jobs, industry has to be persuaded to site itself not far from its workers. Care is need.ed because it is diff'icult to determine the miniimiml size of the subsidy needed -which would persuade firms to locate wihere the planners want. Another alternatiwre would be to tax less preferred locations.

It would be wrong to assume that merely by creating a toin with balanced job/home ratio, it becomes or stays self- sufficient. In 20 or 30 years' time the gravity coefficien-s of trips to and from a new tow-n are likely to approzinate towards those elsewhere in the metropolitan area. This means that: (a) it is unwise to plan as if there are not goUing to be a substant-al increase in trips between these ne; -'-oms and the central area especially; (b) forecasts should be made in the context of examining alternative land use plans - in particular it may be wrorth examining the advnntages of locating new towns on railway lines; (c) it is sensible to make predictions of the sensitivity of trip generation to locating newz towns at greater distances from the already built-up area. C. Comision Para El Estudio del --rea !Ietro)ooli-ana (el Valle de bexico

3.11 Because the population of Mexico City now e:vtends substantially beyond the Federal District into the State of 'exico, there are alreadLy problems ihich cover a wrider area than the Federal District and wihich reqtif-re coordination. In order to consider tlhese problem-, a Commission was set up in February 1970. It reports jointly to the IMinistry of the Presidencia, the Federal District and the Governor of the State of Mexico. It also has close relations with other Federal ministries concerned. And it has its own technical team composed of people from all agencies with an interest.

3.12 Its principal objective is to consider the feasibility and outline the methods by which a master development plan can be drawm up and made to work within the Yetropolitan Area. It is also to establish a system by which the activities of the different boclies can be coordinated. This iraplies first the e-change of information. The process is to begin with the necessary studies which are to lead to recorimendations to be put to the relevant authorities. Proposals are to be made -for carrying out these recommendations, and for coordinating the activi-t-es of the different authorities. The Commission is also to evaluate wAhat happens and keep a continuing watclh on later developments.

3.13 The six major study areas are: population, physical planning (covering miiapping, spatial forecasts of future growrth, land use planning and consideration of ownership matters), econoric planning (covering planning of the industrial, commaercial and other service sectors), infrastructure planiing (in which the most important items are cornmunication~, water, sewage and poi.er), structural planning (mainly concerned with locaL'o.; of future activities) and legal and administrative plamning.

3.lL The first step is a preliminary plan to be completed by the end of 1970 for discussion in 1971. In this first stage it is honed to achieve:

(a) a complete land use Dlan of the present 1Ietrooolitan !1rea:

(b) a land use and tenancy olan of thle area im,nediatelv sur- rounding into wlhich expansion will take place;

(c) a study of manufacturing industry which will include a study of its ray material sources and markets, the trans- port modes used, its wrater consumnption, the pollution it causes nad ot'.hRr mafttprs

(d~~) a i r r studyT Or food-~ produned annd cons.ed in the-

(e) nn nr;r gin and destati,-on -tudyoftral within the area

(f) a stc ofP wa~ter suples ~o. - 31 -

(g) a special study of the crowded, central quarter around the Cathedral/Zocolo areas.

3.15 In looking to the future, difficult problems exist at the polit-iraii level; i.e. whether any, change in relations is needed - at one extreme tli! case for a unitary authority or enlarged Federal District could be arguei. This would present formidable problems. A change in the Constitution tJOull' be needed. There would be a difficulty in deciding how much larger than thr present Federal District the new authority should be to allow for growth. ; might, in fact, be unnecessary since cooperation and voluntary coordinat:Lon may well succeed. it is over location policy that many cities have come to grief with their hinterlands, competing sometimes in an inefficient, bitter and wasteful way. A political resolution of tne broad policies and measuires which will influence the types of industry and population to settle in -.he future in the Federal District and the State of MDxico seems desirable.

3.16 The Federal District should be given the lead in transport planrJ.ng for the who-Le metropolitan area (while leaving to the State the initiative in making proposals for transport wholly writhin its boundaries). Thus, '_t might have the task of coordinating the transportation studies to be done Cr, the political level, because:

a) a high proportion of all traffic in the Metropolitan Area originates in or is destined for or passes through the Federal District;

b) the most substantial means of transport in the area are under its supervision. It would seem preferable to plan the transnort investments elsewhere as extensions to the heart system; and

c) while the areas within the State may become increasingly s.lf-suffiripn. in ichsj for mnn- vyers there is bound to ---- ~~Job I - - be a large number of people making journeys to work and for other purposes into the Federal District and this must be allowred for in Federal District transportation planning.

3.17 Primacy for strategic land use planning should be given to the State. The exact way in whirh the growth areas should develo_ - whether finger plan, a satellite system, some twin city, etc. - is perhaps of molst interest to the State of Nejdco since the grealtest nart of the develonmert will be in its land area.

3.18 It cannot be pretended that there is any one agency which has 2. natural primacy in location polic-. T+ interests the Federal Glovernmeznt, the Federal District and State of Mexico governments. It would seem, there- fore, that onlY good sense, within the broad objectives of the Feeral- Government for the country as a whole, is the only way in which key decisici-s Car be ar-LLc ablvl setele4.1 IV. A PROPOSED PROGRAW3 FOR N4ORE COCjT'EICJTIVE PLtI:nG STUDIS

A. General

4.01 IThile the standard of most of the studies that have been done is high, and sorre are especially original, they were done by a number of boa_e-s in a way which is only beginning to be coordinated and there are some gaps. Because of the high degree of interdependence of strateaic decisions for a city - one thing affecting another - there is a need for wphat is usually called comprehensive land use transport planning.

4.02 The following paragraphs attempt to describe a comprehensive progra..L of studies for land use/transport planning in the Valley of M,exico. The ccr- of this is the kind of forecasting nacka-e -which has been used in manY cit-es. but adapted to:

a) allow for the consideration of the right size of

b) to help comnnre alternative lnnd use strpategies;

G) to inrove the-- major transport alternativ.es to b considered by various prelimincary studies in relation to the more important modes;

g) t tiovi nul weconht tonor-car trainort tlternatives;

f) *-totry to allow for certain social cot an. beneits of importance;

g) to tie in with economic forecasting for the Valley of T,u co and

h) to- co si er vest -,uent -Xn the-1 'L g1,4 t o P S S b r C n UU1. .j JJ L.L .LJ. C kIIU _LI 11~Ul J.SIU '- J Vi 0L&J-4.. P -_UL.r and other relevant policies.

4.03 The studies are divided into three parts, although there are Mti-er -ci nnecJtions. *LJoriie wVork.l is now belng, clone onU21all t'hiree LDut f-uthler development is needed. The three areas are:

a) The size of the IMetropolitan Area, - 33 -

b) The Land Use Plan; the distribution in space of homes, jobs and other activities; and,

c) The Transport Plan.

B. The Size of the MetroDolitan Area

h.0h To aid decisionmakers trvine to decide whether to restrain Mexico City's growth and by how much, the following studies are needed:

a) The Public and Social Costs of Alternative Developments

Public Costs - The costs of providing water and drainage., for exam.ple are exnected +o rise steeply as the cfty expands, and,

(i) it is difficult politically to reflect rising

(ii) eaisingL -r ta toL cover these costs 'or a long time distorts the incentives to business- mIen nd developers of reseLn11Uares.

The second best economic solution may be to try to restrain population and employment growth.

Social Costs - It should be possible to estimate the costs of congestion and pollution as a function of rising population and income.

b) The Relative Benefits of Agglomeration as Mirrored in Attitude Surveys

In order to measure the relative henefits of agglomeration from the alternatives, discussions with representative businessmen to find their reasons for locating in Mexico City and how their views would be affected by sharp increases in taxes to meet rising public and social costs would be worthwhile.

c) Population Forecasts for the Area

This is a specializationd' its own. Most crucial is a study of the causes of the migration pattern since this gives the most clues to policymakers.

d) Employment Forecasts

Most sophisticated forecasts of employmentl/ are impossible on the regional level because of lack of data. An approximation to it is the differential shift annr^ac-,.

1/ eag., those done by Aruie for Stockhom Land Aawaii uing ixIVut-o-uAltpu, analysis4 One way of doing this is to postulate an o-rerall growth of G.N.P. for Mexico and derive from it na4,ionally, the rate of growth of employment in different industries and other sectors. Then assume that output - labor ratios remain constant and that Mexico City's share in the growth of each sector remains constant over the period. Thus can be derived an estimate of the growth of employment in Mexico City (when factored up to allow for tertiary employ- ment).

e) Efficient and Feasible Policy Measures to Restrain the Growth of the City

If there is a high probability that a decision will be taken to try to restrain the growth of the city, a study of what policy measures will be efficient and feasible will be needed.

C, The Land Use Plan: the Distribution in Space of Homes, Jobs and Other Activities

a) District Planning. and Engineering and Design Studies

Thqe nill he studies for new towmsn for the expansion of existing towns, for urban renewal projects (e g. of the kind th-t the S+ate of Mexico has done for Netzahualcoyotl and which the Federal District has done within its hcmnrjeC)

b) Studies to Hel-p DetPrminJe the Developm,ent Alternative to Follow

The State of MIexico has put forward a number of pos-

i)considlerabl"e re-deve-lopm,e.t a ihrdniis ij ' _uiLud cauJ.. %± LA'Uv~~

ii) peripheric gro-wth;

iii) a system of satellites;

iv) a large contiguous twin city;

v) a more distanced twin city;

vi) development in a different part of the nation for part of the growth; and,

vii) a radial development. 4.06 Mapping these alternatives will give a number of variations on each. To reduce the n-umber of alternai-ves to a rianaigeable number, it is possible to use:

a) the cost-benefit framewfork as produced by the State Planners;

b) the Delphi Method whereby a large number of professionals are asked to rank the factors they believe to be important to the cdecision; a point system is then used to assign weights to those factors to narrow the possible alter- natives.

4.07 There are a number of urban models which can help to give som,.e feel of how workplac9 s, homes, and services would distribute themselves in different cases,' and advice should be sought from experts. The transport implications may be very important since different land use configurations are likely to lead to very different patterns and volumes of tripmaking.

D. The Transport Plan

Short Term Studies?! Improving the Efficiency of Existing Arrange. ments

1. The Bus System

4.08 Adjustment to the Metro - To remove some bus services which are competitive iith the Metro. it would be nossible:

a) To take the 700-000 Worker Origin qnd Destination Study and using generalized costs as the maximand reassign neonle from the buses to the Metro. assuming that where more than a given number travel from a subzone to a Metro station it will be nrofitable to nrovide a feeder bus to it.

b) To feed in the relation from the Modal Split Study to decide what traffic has transferred to the M.etro and would transfer if more feeder bus services were run.

1/ A.G. Wilson and others, New Directions in Strategic Planning, Centre for v-o-- 4r ' Studie, T -- Ao 960 sec. 3.2. 4. 2/ To be completed witlhn six months to a year. 4.09 Slowness of Present System - The growth of the iletropolitan Area per se and thle begi-InIgs olf a vVAsX UU ue of time wit inom militate against the slowness of the present system. In the long run the perfect system will be one wi-ach has somle of the characteristics of the present bus service at the origin and destination ends of the journey for taKing people up and putting them down; but has a m-nuch faster line haul journey in between.

4.10 Pioneering Work at the Polytechnic should be exterKcd:

a) Fist they need a complete road (and Metro) map of the City in the computer so that they are able to work out the jour%eb time and cost implicaticns of different routings.

b) Using costs (generalized time and cther costs to the user, net revenue to the operator) they should then test out various patterns, predicting traffic that will use a trip on the assumption that the total of trips remains constant (or grows with population).

4.11 Then try rerouting some of the most promising routes in this way to see if they get the traffic predicted. Testing of the two follow- ing variations are recommended:

a) A new route with as much sinnosity in the main pick up and put down areas as at present, but not on the main haul;

b) Another with much simplified and straightened routes throughout. This would be some test of the effect of sinuosity on traffic.

2. Road Congestion

Hopefully this can be dealt with by (a) better traffic engineer_ng, (b) reserved busways nn (G) possibly road pricing. This leads to another important area of study:

a) The Capacity of the Highway System

There seems to be a strong case for considering in 1 a e ho-.mh sa ca..p citn,y ,c,nr. nlasd (a,n investment avoided) as well as specifying the corridors

on whil tiILUOWi±h Ld..I m U tVdL,±J LICy Jhappi. LtU IILLLU Ube LWLLW-L to do too much about increasing highway capacity until

thisi hias Ueeni cumpareu wUith otleVr soLUtioLnVs to uidL tranis- port problem, because increases in highway capacity can at worst increase bottleenecks elsewr-4ere. - 37 -

b) Effects of Metro on Road Congestion

Some study of the effectus of the MIetro on road congestion should be given priori tv.

3. The Metro

4.13 A Modal Split, StiAdv of emisting HThtro nasseprngrs:

_) ton gto+.e relanti on bi t ween pop a.t i n+,4-ntions beforehand and what they actually do. (Some study on buses should be done befoe at least one of the present ext ensions is opened.d

b) to help winth the bus-rerouting; and

p'h +.n h1rn1. -iri+.h+-l :1+.-rn+A n +.y'rl:r.ro±. ml n

h,_w._ _ _ v _ _

L1. J) Resolre difference of opinion over -he future of streetcars of thlr Streetcar Company and the planners of the State of Miexico. There may be a local bus services, carrying volumes of traffic w-ihich are too light to

Au4.0 u.L± 4 C. v 1 '.4 IJU U - -OV OILU.± aa -4 +1U: J .. 1tC..SVCI4tJ Qnc/'I a 0

M3U1L, J.U1 ±I StdU.iUIus " Ulated to LtLie SeleLcioU WLUn of).A u±ernai-)vte TLnd4. Use and Transport Proposals

1. Aerial Photographs

4.15 The following outputs from the aerial photographs are needed for the traffi'c engineering study and others, for the effect on congestion of the public transport improvement study, and to provide a base for the larger adLu &ui±epre5h LILLnary transportationu s±uduy.

aj fLLowLj on i*ialli ruads by vele., -typeU.L wu U.LfrPd-wje

U) speeds on main roads., peaki and offpeak;

cy speed flow relationship derived from (v); and.

uj average flows by district and speeds on the local network.

2. update Information on F0ows

4.16 Information now available on flowrs by pub-iic transport (e,xcell-Ent for the MNetro) may need to be updated by crude means. 3. 700,000 'vorker Origin and Destination Study

4.17 From the 700,000 Worker Origin and Destination Study, derive:

a) a table (matrix) showing flowrs between all pairs of zones (11 t).e

b) Gravity coefficients - These will suggest the relationship betwfeen populations, distance and the number of trips made. (This may be perverse for some originating zones - it might be sensible to calibrate different gravity models for different income levels.)

c) Estimate of trip generation per head of population and how this is related to i) population density, ii) income level, iii) car oimership. A very srall sample of w-orkers (stratified by areas of different population density) wqould be sufficient.

d) With (c) it would be possible to perform a crude test of the imip'lications of di2f''erent alternative land use plans to help the first sif-t of alternatives. A prediction of the gravity coefficients of workers' journeys 15 or 20 years hlence could probably be made, and the travel patterns that might be expoected to arise for different land use plans considered.V/ These wluid give a num,lber of tentative distributions and assimn.nents of traffic to the existing transport system f'or the alternative land use plans.

e) Some rough costing of additional transport facilities should be done here. Unless there are cointervniling benefits. this might lead to the eliimination of some alternatives.

1/ Tn d1o t.l1i s somp. met.hnd of mnovingr from iTnrkprq1 f1om!.T in the. nenk to tnioIl pealk 'lows would be needed. Perhaps the simplest method would be to compare the flows on a snanple of roads in t1he nenk from erial hotor',r,an. with that from the Wlorkerso Origin and Destination Study. The study of

flowrs into the central district couldl also be used. * lthougb there wrou~ld be errors because of variat,-on in load factors, tirmings, etc., th1is should cti-ir cnnn r !nr crc' k'KI Tjlrli + r, 11'r'n O +c'n n r'--I'-Ty-' t'I o - y rl .,`1 c Ic c + fi Infl sorime f'eel of the journeys made by executives, self-employed and non-worl;-c It vrculdA n--+, o-f couse, be orin -anrd des-,t J n-at-i o peclfi^;C a t

is some evidence from the flow charts thlat towards the w-es-t especially 17 e

worJ±lcers~ muiake sore u o ~Ley v a v , oneIwoldA have tos Ioo' at t'. e relationships on roads nearer to and furth.er from the centre separat-ly. lForecast-ing 1lc' or 20 years ah>ead as r^ie eerspr'u rr;i of modal split. It might be. usef-uAl to makce distributions and assignmen'-,

to -1 testse-nai of.L n o .t n -nl IV; p-tis.xr' 5 H ctOOLtIIUAIS ci LAJL 0: sin ui Ci cL 1 J5C'5. ~'s~-3A--"A-- ~ ' to test the sensitivity of overloaCding of the network -to this. - 39 -

Longer Term Studies

1. Additional Data Collection

4.18 Jhat tends to take the most time and money is data collection, ,Tfe most important question for the transportation studies is to decide how much more data needs to be collected and -or what purposes. There is a groirLng feeling among professionals that a 3X'o sample Origin and Destination Survrey. usually using a home interview technique is unnecessarily large, even ii starting from scratch. But in Medco City there is already the TWorkers' Origin and Destination Study, as well as first rate flow data.

4.l9 The analysis above should give some feeling of how uniform a relationship there is betwJeen the XTorkerst Origin and Destination matri.x and total fiows. The less uniform it is, the greater the case for sup- plementarv work. There are three areas worth considering:

2 Tn1½rm'+t.in on iournevs to wrork other than those of industrial and cormiercial workers:

i) For the richer people, a home interview study basdc nn a qmpll sample drain from car registration material would be useful;

ii) For the workers wrho were not surveyed, the first question is to as:c ITo theylvrer. A small home interview survey, perhaps biased towTards those most likely to have dii 'ffrent.travel patterns front those surveyed, might be the best approach.

b) Identification of peak journeys other than those to wTork. qom.Ie ofP t±1his .0,4ht be gott-en eas- ly, U..I -- . A sample interview of coammercial users might help: freight vez>cle,etc.Ah Kn-veJnr nM+jiiczu imdr1P-r+qk-jnQF til- prohnblvy not be needed.

c) Journeys outside the peak. Perhaps the most important area for -4rther information is jouneys ouside the peak. In many cities there is a strong case for treating these in a irch less detailed way: but-f the e.istence t sevral peakv in iIeydco City may pose nore of a problem.17

1/ If it is supposed that the 7 to 8 a.m. and 4 to 5 p.m. peaks are doimTa4 Pd by-.worker u whos pe--- l; enough L--vrth ^ thr -sis ohr.in t that the 2 to 3 p.m. peak is dominated by others wiho have a very dife&fe:-; patter of travel, imposirng different directional loads upon the trcln rt system, As these are more likely to use cars, the loads may be out of proportion to th.eir nunbers. A home interview study of these people could be amplified to give the information needed, but it might b;; necessary to supplement it t-ith a smaii sampile homie inter-view s-uve- of-- the workers already surveyed to get some lmowledge of their offpeak movemerLts. - ho -

2. The Generation of Alternative Plans

4.20 Provided that all agencies have a forward looking urge, it is sensibrle to nllrT +-them to conmte to so ent n puiitting fnrTJTrd nronpozc's. Combining mi:tures of proposals for specific modes into a multimode altel- native- is vn r.ord ff iiclt. Thls--nl ben "ninh easier 1 -the oynirl nrPlirarpri distribution and assignment has been clone for the preselected land use pi.ans'. But a lot of jdemXn sbAldt onoteslcino rsotat natives for each land use plan. It is important:

a) in each case have one alternative which is strongly road and aotu he r , hlch,C1>SiS t ron g ly+pu'; trnpr +nt n

) Uto seuiaU teUta toUt.L Ulrlsportation cos. i e by" an al-ternative is fiscally feasible.

3. Engineering and Costing Studies

4.21 Uhen the alt-ernatives have been chosen, engineering and costing stude ale:1O~Uneedued;

a) ILe Uj0 ' -

Some attention must be paid 'uo tne imrpact of u±i±erIent alternatives on the "off network". Quite often considerable secondary investment on Uhis cani u e uUen away Wnd noU UroughtL into the evaluation procedure.

b) Iaterials Already Assembled -

Some of the materials for evaluation have already been assembled for other purposes:

i) values of time and other values affecting differences in valuation of modes irill be derivable from the Modal Split study described;

ii) information on operating costs of different kdnds of vehicle is presumed to be available;

iii) the costing of the transport proposals should also include estimates of operating and maintenance costs, including police and other traffic controls costs3

iv) some analysis is probably needed of how accident e perience varies on different facilities;

v) the pollution studies already mentioned should give data on how car oTmership thirough car use is likely to affect pollution; - 41 -

vi) the speed flow relations described above shoulc be ideal for calculating congestion costs;

vii) noise may be important. Usually the best way of dealing with noise is through the design standards of freeways and the regulation of vehicles.i/

viii) pedestrian interference and environmental damage of other kinds (visual intrusion, neighborhood separation) are much harder to estimate. It may be best to leave this to the political process entirely. They should not be neglected;

ix) ensure that the actual adding up and subtracting of surpluses is done correctly. This is almost never done and can have serious effects on the outcome.2/

c) Synthesis -

The next stage is that of synthesis, when the models wenra r,.,, -i nrlati^nA nnm ,4- . vo-I-n each n.nl lar.d1 --r use11-m the4-ha tisgenerated.,+,.4rjc "n.nnav' or! distributed, modally split, and assigned. They are then

5.. V C;-CLaut..U , A) T- rn , n-4--4,nA +- D - 4 owre~ of ~ ~ 1 as~ ~ A QU1

5.J± ~.LLLU.~IJJ 1 . 1JL,JJ.L '-P 1. d,-. Lj A-4---4, 54*L.C. J.1±V O.L VVJ-JV . LOd. O L.-j.. jU.LI. UL LV1Ld" L" IJSJ JV . OV.IL 6, Y. 4+.22 Thvbveiivasr4piv,o =twu- seem, to beau- tae for Mexico City, but which would have to be worked out in detail. If less UL&On t.his is dUone th erte aure s(eveUre udaugers 'JlO be reckoned -widjh-. morlgllt thIe if are:

a) an inability to tackle rationally the question of metropoUitan

b) acceptance of population projections without relatg the;-n to growth of enployment;

c) the choice of a land use pattern which is then found to impos: heavy transport costs (or some other costs);

1/ See C.D. Foster and P.J. Mackie, in Urban Studies, forthcoming.

2/ See H. Neuberger. - 42 -

d) the development of strategies for each mode independently which may end with excess capacity and unnecessary financial burdens;

e) a too arbitrary selection of a public transport plan which thien runs into difficulties because of rising car oinership;

f) a comprehensive land use transport plan wihich nobody believeo in.

How the Studied !ight Be Done

4.23 The study should not be entirely handed over to a firm of consultar. for the following reasons:

a) there are many ongoing studies being done by others;

b) a consultant would probably come from abroad and leava an in- adequate memory of the procedures;

c) not too many regular consultants appear flexible enough to supervise such a program snecially tailroad for Niexico City- e ;.

d) the studies are a good educational process and wfill heln buldY up a number of land use and transport planners with these sk:l1.

4.24 There should be a strong Mexican and government; participation so th.L there wqfould be the closest interworking of administrators and professional.s throughout. How-ever some skills may well have to come from outside. In nnrti culnr Hex-io rmLv be short of npeonle with mathematical and transport modelling experience. It is recommended that a number of experts should he invited t.o Twrite nnners on hoW the vnrioUs key as-pects of the more technic•. studies should be designed and that a conference should follow. It is suggested that the Ban ,m.nv wish to be nssocinted with this process of study development not only because investment requests may be contingent on the studies, bht thiat. i- orta.t lessons for Alse..ThereY' in TAtAn AmepriGn mn- hpe learned. - 43 -

V. GUADALAJARA - THE CASE FOFl A SUBIWAY

5.01 ad laani nra is n-n:T A Citv of nhout I 5 ni llion. It has one of the fastest rates of grourth of population in 'exico, more than 7% per aninurm. It, is an old STP;5ish tvn. trvmI nd +.tnically th. largest. nart, of its area ~~~~~~-al - - - - r - - - v . - still has a grid street system. All transport responsibilities seem -t,o OG1-re irnder the herl ofl f.he State nPnrn+tmPnt of Tirnns-i±. The Knvor is responsib'le for city pL.unn.ing.

5.02 There are positive indications of the sufficiency of the present

a) The streets. uri,-r+-Afiil c1ogser civ,na mos- 0 the day. The staggering of working hours and the siesta tends to spread th.e peak;s.

over 115 routes. These are organized into 8 "lines". Sever, 4 of C ~ths zre,,-rnn n-nit,A e 4vo one, ,'n.- nv, th othe4-r,v h-r farv thea largest iith a quarter of the buses, is independent. Ho -, , allwe,1 1rirti mrhhneu-r,, V-Aj Thecre is m,vore orFszC--l, than in Iexico City:

i) There are ti-metables on each route;

ii) There are supervisors on route w^Ihose job it is

*_ sA _. L - - _- 1 - _ _ __ _...Az Io waJ4ysde!_ IAUe.LliV±lU, L,U OWUi UIp UiJ LiVUl- UOU)U if there are large numbers waiting;

iii) VIehicles are tested annually, as in Mexico City, 'but more rigorously. The t%est tends to put off the road most buses of more than five years' li.e.

iv) Drivers are tested annually, and are expected to have had at least two years ' experiece dri vrng a car first (wdhich is not so in M14exico City).

5.03 The Transit Department indicated that the service was definitely profit able to the owners, even though the Iare Of 40 centavos had not riser since it was iixed six or seven years ago.

5.04 Various proposals have been put by Japanese, English and German firms on their own initiative. Neither the City nor the Transit Departnent have considered them formally and wrould not seem to be near making up the! I mind whether to pursue the matter. lThe various proposals vary from a oL5t- of about Pesos 3,000 to 5,000 million, depending on the length suggested (approxirmately 45 to 55 kmi) and the proportion on the surface and undergrcxrnd, 5.05 The demand studies were probably done as follows: Guadalajara generates about 11>s to 2 million itnrnevs q dnxr. Tking t.he nnn1qMti_on groiwth predicted and increasing the trip generation rate per head to that roughly of M-exico Citv. . 1980 trin volume is predicted. At prpAnrt there are about 60,000 registered private cars. It is argued that the growth oi' private car traffi c nci1p 1lv ton lnr froflork,T will h-ve to be retrained considerably. Thus, the present bus fleet and possibly a substantially larger one. Taight be all the streets coupl contain withou s conges';. and might well be fully employed carrying the increment in passengers by 1980 Pnd thius l flre enuagh traffic over to r% e the Metro lines proposed profitable.

5.o6 No immediate action is recormended on the Gua(lalajara subwiay. Eore t-tsoatorrtsev ar nede upr.s.>=ch o ase so Ilrge ar,eenie

a) .ioorigin a nd destination study has been done, though on.e is planned. It will be an improvement to consider possible fiubL,ad~JLJayo a'CLLgLi 6.L nm eI~LU) -,. -"I relation-Lt.dL U-LI u desireut -L 'Lines±.L±~~ r-ather.dg~L uhax~± to flousTs .

b) A more exact atterrpt to predict the effec-t of 1980 flows on st-+retsed on two - - -_ 4ion4

Li X O UIL_1 ulzlcul ca o-n r I11-114p r WlU-il'stwd D1|Wt population and income;

ii) assuming that policies can be adopted to keep cars off the roads, at leasb in the peaks, so that the traffic goes mostly by bus,

c) Unless there was considerably more congestion, it would seermL the relative cheapness on the Dus solution snould be seriously analyzed before any commitment to a subway uecision.