Mexico airlines cancel routes on rising fuel costs

MEXICO CITY, July 23 (Reuters) - Two Mexican airlines have canceled 11 routes to low-profit destinations this year, due to rising fuel costs.

Aeromexico, one of the two leading airlines in the country, has canceled eight flights, including three U.S. cities -- Los Angeles, Phoenix, and Austin, Texas -- to offset soaring fuel prices that are adversely affecting the air industry all across the globe.

"After a market investigation, the routes ... have been suspended," Aeromexico said in an e-mail to Reuters.

Aviacsa, which only operates one international flight, to Las Vegas, has halted service to three domestic destinations.

"We are trying to be more productive," Manuel Cung, Aviacsa's director of planning, told Reuters. "The impact of the fuel is so strong for all the airlines that not one will be able to compensate for the rise (in prices) that we have had to date."

Mexican airlines are already adding a modest fuel charge to ticket prices but are holding off passing sharp increases along to customers, for fear that a broad hike will scare them away.

And unlike many U.S. peers, most Mexican airlines still allow two large luggage pieces per passenger and offer free beverages and food on flights over five hours.

The Mexican airline industry was just starting to bloom with a surge of low-cost carriers when it was hit by surging fuel prices last year.

Aviacsa's Cung said that 45 percent of the company's operating costs now stem from fuel alone, compared with 35 percent a year ago.

The fuel crisis is also taking its toll on airport operators.

Grupo Aeroportuario del Pacifico (GAPB.MX) (PAC.N), which operates 12 airports along the Pacific Coast, including Puerto Vallarta, Los Cabos and Tijuana, last week cut its 2008 passenger traffic outlook, citing the elimination of air routes. (Reporting by Cyntia Barrera Diaz and Veronica Gomez Sparrowe; editing by Gunna Dickson)