Delta/Aeromexico JV Termination Finalized by DOT

The US Department of Transportation finalized its order terminating the Delta Air Lines/Aeromexico joint cooperation agreement and antitrust immunity. This order brings to a close deliberations and negotiations that formally started in January 2024. The DOT further ruled against the pair in July of this year, before issuing the final order this week.

Under the terms of the Order the pair must wind down their jointly coordinated operations – though they may continue to codeshare – by 1 January 2026.

Also of note, the Order is signed by Secretary Duffy rather than a civilian staff member in the Department. That is somewhat rare.

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The key stumbling block has always been access to Mexico City’s Benito Juarez International Airport (MEX). Slots were seized. Cargo carriers were forced out. And US authorities expressed repeated concern about the capricious nature of the moves, along with lack of transparency.

The Department gives Mexico some credit for its commitment to return the seized slots and to establish clearer administrative processes. At the same time, however, it describes those as part of “an evolving situation” and expects it will take several seasons to fully play out. With this move the US makes clear it wants to see results, not just promises.

In denying the renewal the DOT also calls into question the economic impact of the JCA and ATI, arguing the analysis submitted by the airlines vastly overstates the numbers:

And even without immunity, they will still be able to provide consumer benefits through codesharing, frequent flyer program cooperation, and other joint marketing activities (activities they have engaged in for more than 30 years), which will enable them to continue to attract customers to their services. The estimates of harm the companies provide do not assume such ongoing cooperation and are, at best, inflated, especially since both carriers engaged in such cooperation prior to obtaining ATI.

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Delta and Aeromexico claimed 37 new routes were added over the past two years, directly as a result of the JCA. The DOT counters that only 12 are new, with three others added earlier in the joint operations. For 22 of the routes in question the DOT shows that at least one of the carriers operated prior to the JCA but in the time period questioned.

The DOT further gets into the weeds on potential route cuts, analyzing the claimed “at risk” markets and dismissing many of them as unlikely to disappear, as they are beach routes operated for US-based customers:

Many of the routes that Delta and Aeromexico claim to be at risk are leisure routes such as MSPPVR, Minneapolis/St. Paul-San Jose del Cabo (MSPSJD), Cincinnati-Cancun (CVGCUN), Atlanta-Cancun (ATLCUN), Detroit-Cancun (DTWCUN) and others. These are unique markets that have been operated largely by Delta (and not Aeromexico) for U.S. customers traveling on vacations. These are routes in which the vast majority of customers originate in the United States and may connect on a Delta-operated flight at the U.S. departure point to the Delta-operated flight to the Mexico “beach” destination. Upon arrival at the Mexican destination, these customers do not connect to a further Mexican destination on Aeromexico; they terminate at the “beach” destination. Delta is not reliant on assistance from Aeromexico to operate these flights because, in general, the primary customers, American citizens, have the relationship with and loyalty to Delta. Delta is not likely to end this type of flying as doing so would simply cede this traffic to competitors.

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A Warning to Allegiant

Allegiant has been so long for its joint venture and ATI application with Viva to be approved that the Mexican carrier changed names along the way (previously Viva Aerobus). The pair lobbied on the side of Delta/Aeromexico, recognizing that their application hinged on a market where such joint operations were permitted.

The DOT’s message in this final order makes clear that the application is premature at best, even if the MEX airport slots get sorted:

The Department has encouraged airlines to establish arms-length cooperation that does not require ATI first, such that if ATI is granted, all benefits generated proximate to the grant of ATI would fit the statutory definition of “benefits otherwise not obtainable.” Only once the benefits obtainable from this arms-length cooperation have been exhausted does the Department consider ATI to align economic incentives to further integrate operations to achieve public benefits otherwise unobtainable.

The Department cites applications from Hawaiian/JAL and American/Qantas as examples where it denied antitrust immunity because it believed further cooperation was still possible without limiting competition through ATI. The latter pair eventually did receive ATI approval in 2019, long after the initial 2011 rejection.