No person might be shocked to listen to that the US authorities is getting robust on Mexico. In spite of everything, we stay in an “America First” form of world nowadays, for higher or worse. The issue with this type of dogmatic stance, nevertheless, is that if adopted too rigidly, it might punish the mistaken folks. And that’s what is occurring right here now that the US has determined to finish antitrust immunity for present three way partnership companions Aeromexico and Delta. This additionally suggests the Allegiant/Viva three way partnership goes to need to be shelved for now.
In fact, there may be one enormous caveat to this put up. The present US administration likes to throw out massive penalties as threats to punish international locations world wide. Then they anticipate these international locations to barter and are available crawling again, by no means really implementing the penalties. If that sample follows right here, then this complete put up might be for naught. However let’s fake that this does really occur.
The lengthy battle between the US and Mexico is one thing I’ve coated earlier than. There’s a lot happening right here, however finally the 2 fundamental points are:
Mexico unilaterally compelled cargo airways to maneuver from Mexico Metropolis’s fundamental MEX airport to the brand new AIFA airport which was constructed as a reliever
Mexico eliminated slots from airways at MEX on account of development, however that work by no means occurred and there’s no signal that slots will return
The argument is and has at all times been that Mexico is violating the Open Skies settlement with the US, and with out a legitimate Open Skies settlement, joint ventures with antitrust immunity between airways within the two international locations wouldn’t be permitted. (When you’ve ever puzzled why there are not any joint ventures with Chinese language airways, nicely, there’s your reply.) That’s the stick that the US has been waving round.
The one three way partnership in place right now is the one between Delta and Aeromexico. These two airways are long-time companions relationship again even earlier than the founding of SkyTeam in 2000. However in 2011/2012, Delta invested in Aeromexico and took a board seat. In 2015, they utilized for antitrust immunity for a three way partnership, and that was put into place throughout 2017 after approval.
The pandemic took its toll on each airways, however Aeromexico needed to file for chapter and Delta’s share fell from almost half the airline. Nonetheless, it was clearly a really influential minor proprietor. The larger downside got here in Could 2021 when the US downgraded Mexico to Class 2 standing for questions of safety. That ended Delta’s codeshare on Aeromexico, restricted Aeromexico from launching new routes to the US, and prevented Aeromexico from flying new airplanes to the US. Successfully it froze the partnership till September 2023 when Class 1 standing was restored.
As soon as that drama was performed, the DOT began to ramp up its battle. Regardless of the standard bloviating within the present administration’s communications about how the earlier administration was a horrible, horrible failure, it was the earlier administration that introduced plans to finish antitrust immunity between Delta and Aeromexico. Delta, clearly, was not happy. However that didn’t go into impact. Now, DOT is getting extra critical with three filings:
Half 213 Order requiring Mexican airways to file schedules with tDOT for all their US operations.
Half 212 Order requiring prior DOT approval earlier than working any massive passenger or cargo plane constitution flights to or from the US
Supplemental Present Trigger Order proposing the withdrawal of the Delta/Aeromexico three way partnership’s antitrust immunity (ATI), thereby taking corrective motion to deal with aggressive points out there.
The primary two are pretty fluffy, simply requiring Mexican airways to file schedules and require all charters to be accepted. That feels extra punitive in that they’re simply creating extra paperwork to be annoying. However the third one that may finish antitrust immunity for Delta and Aeromexico could be extra impactful.
There’s a lot within the 40-page order justifying the motion, however let’s simply set that apart and take a look at what has occurred to capability between the US and Mexico on Delta and Aeromexico since this started. To start out, I need to take a look at what Aeromexico has performed. See, Aeromexico has lengthy been a confused flag service. Did it must fly seashore routes? Most likely not, but it surely did way back. Within the final 10 years, it has modified its community to the US. Here’s a take a look at the place it flies into the US:
Aeromexico Seats by US Vacation spot Kind
Knowledge by way of Cirium
Aeromexico dabbled in small cities with visiting associates and relations (VFR) visitors, however that was by no means an enormous a part of its enterprise. However look what has occurred because the airline has labored to get above pre-pandemic ranges, lastly. Delta hubs and focus cities now account for greater than 50 p.c of flying, however the massive cities have additionally seen important progress. And this actually didn’t begin kicking in till the improve again to Class 1 standing. Within the final two years, Aeromexico has began service to McAllen, Newark, Philly, Raleigh/Durham, San Juan, and Tampa plus it has returned service to Atlanta, Boston, Phoenix, and Washington/Dulles for the primary time in a number of years.
However now take a look at the place these planes are coming from in Mexico:
Aeromexico Seats by Mexican Origin Kind
Knowledge by way of Cirium
Aeromexico has discovered its place as THE Mexico Metropolis airline. In a spot the place slots can’t be discovered, as everyone knows by now, Aeromexico offers Delta and its passengers an enormous alternative to get to Mexico Metropolis from an rising variety of airports within the US.
However what about Delta? Delta has grown seats between the US and Mexico by greater than 35 p.c since 2015. That may be a exceptional quantity of progress. Practically all of it is available in its personal hubs, in fact, but it surely has performed some non-hub flying to Cancún. I don’t want to indicate you a chart of this, however what I’ll present you is what has occurred on the Mexican aspect.
Delta Seats by Mexican Vacation spot Kind
Knowledge by way of Cirium
It appears very totally different, proper? Sure, Delta has grown some in Mexico Metropolis over time, however it’s constrained so it might’t actually do this a lot. And Delta has tried non-leisure markets, together with the massive cities of Guadalajara and Monterrey, however that’s all a rounding error. It’s the leisure flying to take Individuals to the seashore that has grown enormously over the past a number of years.
When you take away the Delta/Aeromexico three way partnership, what do you get? Delta loses the power to optimize its Mexico Metropolis slot utilization, and Aeromexico will possible need to divert slots away from going to a few of these new cities it added and again to core markets. It additionally makes it presumably costlier and tougher to attach folks between the networks with out pricing coordination. I actually don’t see how ending this could really assist the buyer. Mexicans would proceed to fly Aeromexico and Individuals would proceed to fly Delta, they only wouldn’t have as many good choices between the 2.
The secondary assumption right here is that the top of Aeromexico/Delta additionally signifies that the Allegiant/Viva three way partnership would by no means be accepted. It has been shelved for years as a result of it acquired caught in the midst of the political state of affairs, however that one is one thing of a no brainer.
The flexibility for Allegiant and Viva to make use of one another’s airplanes to serve small and markets may very well be a giant deal. It may additionally not be something, however the plan actually has no draw back for vacationers.
Once more, I’m hoping that that is one more one of many present administration’s bluffs to attempt to get one thing resolved utilizing blunt pressure. In that case, then this complete screed can have been written for no cause. However this isn’t one thing as important as large tariffs, so there’s at all times that probability that no person backs down. And that may be dangerous for Individuals.
