Background and Relevance of Delta and Aeroméxico
Delta Air Lines (Delta) and Aeroméxico have maintained a strategic alliance that has allowed both airlines to grow, strengthen the market, and ensure Aeroméxico’s survival. This growth was partly facilitated by Aeroméxico’s Chapter 11 bankruptcy restructuring in the United States, which enabled debt reorganization and investment attraction to sustain its presence in the market due to favorable prospects from their alliance.
DOT’s Decision and Mexican Unilateral Actions
The US Department of Transportation (DOT) is likely to decide not to recommend renewing the Antitrust Immunity (ATI) for the Delta-Aeroméxico alliance. This decision stems from Mexico’s unilateral actions regarding airports where US airlines operate, specifically the Benito Juárez International Airport (BJIA) and Felipe Ángeles International Airport (FAIA).
Understanding the DOT’s Position
The DOT’s stance on Mexico’s violations of the 2015 bilateral air transport agreement is understandable, given Mexico’s unilateral decisions to prohibit cargo operations at BJIA and limit slots, which resulted in reduced flight allocations for US airlines. In response, the DOT imposed restrictions on Mexican airlines regarding pre-defined procedures and approvals.
Questioning the Fairness of DOT’s Decision
However, it is unclear why Delta and Aeroméxico (DL-AM) should be held accountable for issues in the bilateral aviation agreement between the two countries. The DOT argues there are no fair conditions for equal operations or just competition, which may be true due to slot limitations. Yet, the DL-AM alliance predates these limitations, and both airlines had to relinquish slots in airports from both nations to secure antitrust immunity.
Market Participation and Potential Impact
According to recent data, the Delta-Aeroméxico alliance holds 18.9% of the Mexico-US market, while American Airlines alone accounts for 18.8% and United for 15.9%. Interestingly, Volaris holds 13.3%, and Aeroméxico only manages 9.4%.
Arguments Presented to the DOT
Delta and Aeroméxico submitted an 80-page document to the DOT on August 11, outlining their concerns. They highlighted potential job losses (at least 4,000 in the US), reduced connectivity in both countries (directly affecting 23 frequencies across 21 routes with 1.8 million passengers and indirectly impacting 1,062 itineraries across 831 routes), and annual losses of at least $800 million and $310 million in GDP.
Unintended Consequences of DOT’s Decision
The DOT may believe they are punishing Mexico for violating the bilateral agreement, but they overlook that the Mexican government is not shielding Aeroméxico. Previously, Aeroméxico faced opposition from the former president, who allegedly said, “Get rid of them!”
The real harm would fall on passengers and private businesses, not the administration. In essence, if the DOT’s threat to not renew ATI materializes, Delta and Aeroméxico would be unjustly penalized, as they have been the least interested—and even benefited from—the mentioned decisions.
Key Questions and Answers
- What is the issue at hand? The US DOT is considering whether to renew antitrust immunity for the Delta-Aeroméxico alliance.
- Why is this decision important? The ATI has allowed both airlines to grow and maintain a strong presence in the Mexico-US market.
- What are Delta and Aeroméxico’s arguments? They argue that renewing the ATI is crucial for job preservation, market connectivity, and avoiding significant financial losses.
- What are the potential consequences of not renewing ATI? Passengers and private businesses could suffer due to reduced flight options and financial losses, while Delta and Aeroméxico may be unjustly penalized for circumstances beyond their control.
