Delta, Aeromexico JV Smacked Down, Again

Any hopes Delta Air Lines and Aeromexico had that the US DoT softened its position relative to their Joint Venture renewal in the 18 months since initially calling for it to die were dashed this morning. In a follow-up filing the Department reiterated its position that the Mexican government is in violation of the bilateral treaty between the two countries, and that anti-trust immunity cannot be allowed under the circumstances.

The ruling is a tentative one. If it is finalized the existing JV/ATI efforts would expire on 25 October 2025 at the earliest, allowing the carriers to unwind the joint operations at the end of the Summer IATA season.

When the Joint Applicants petitioned to extend the expiration date for their grant of ATI, we granted the request; when the COVID pandemic and the FAA safety audit were in progress, we extended the timeline; when two other carriers, Allegiant and Viva Aerobus sought a new grant of ATI, we deferred a decision; when Delta and Aeromexico strongly opposed the first proposal to terminate the ATI, the Department allowed another 18 months for conditions to improve and for new government administrations in each country to transition to office. Not only did market conditions in the U.S.-Mexico market fail to improve, they worsened…

The Department can no longer wait to prevent further consumer harm and must treat all stakeholders fairly.

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As with the prior ruling the DoT makes clear that access to Benito Juarez International Airport (MEX) is a critical consideration. The department cites “The degree of opacity and arbitrariness surrounding the GoM’s slot management practices at MEX” as “undercutting the ability of U.S. carriers to fairly compete in the market.” Similarly, the forced relocation of all-cargo operations from MEX to NLU in 2023 is a sore spot for the DoT. (As an aside, NLU is not designated a Mexico City airport in the agreement, which is part of the fight.)

Failure to Benefit Consumers

More that that, however, the DoT also takes the airlines to task for not actually delivering the promised benefits to consumers.

Additional capacity that would otherwise not be possible is a key test for assessing whether an immunized JV is procompetitive. The extent to which the alliance is adding capacity in the market, especially compared with its competitors, can be an indicator of the degree to which an alliance is competitive.

Network-wide the DOT presents data suggesting the early years of the JV saw competing airlines grow seats between the US and Mexico at a rate double that of the immunized pair. By the end of 2024 Delta and Aeromexico were up 18% from the 2015 baseline, while competitors increased by 70%.

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In Mexico City the numbers have been a bit wonky, owing to limited slots and other challenges. That is also the key market where regulators wanted to see parity in growth, not the pair outpacing competition. While that was mostly the case early on, in the past couple years DL/AM have taken a lead. This is attributed by the DoT, at least in part, to “anticompetitive rules and lax enforcement” of slot rules at MEX, allowing Aeromexico “to underutilize its slot portfolio while simultaneously keeping slots out of the hands of competitors.” Ultimately Delta and Aeromexico outpaced the competition based on this asserted unfair advantage.

Read more: DOT orders termination of Delta, Aeromexico partnership

On the US side of the border both Los Angeles and JFK were key concerns in the initial approval. In both cases the pair came up short.

At Los Angeles the anti-trust immunity application argued it would enable the pair to “form a  cohesive hub at Los Angeles serving the 10 largest West Coast-Mexico markets…frequency and gauge on existing routes will be expanded. Neither Delta nor Aeromexico acting alone could implement such expansion at Los Angeles.”

Read more: Mexico’s government joins Delta, Aeromexico objection to US DoT

In reality, however, that growth never came. Quite the opposite, in fact. In 2015 the pair served 11 Mexican markets from LAX. In 2024 that number is just five. Moreover, total seat capacity from the pair is down 29%. At the same time Volaris and Viva Aerobus added three markets and boosted seat capacity by 36%.

On the JFK side of things the pair anticipated growing from five to six daily frequencies, while also making slots available to competitors. While slots were divested impacted the competitive landscape, the growth never came.

Read more: US DOT suspends consideration of Allegiant, Viva Aerobus JV application

Finally, the pair argued that a coordinated operation would improve connectivity through their hubs, especially at Mexico City. The numbers moved markedly in the opposite direction:

On Aeromexico-operated services between the U.S. and Mexico City, local traffic, or those just going from the U.S. origin to Mexico City, grew from 44 percent to 76 percent, while overall transit traffic decreased on both sides from 56 percent in 2016 to 24 percent in 2024. Similarly, on Delta-operated flights between the U.S. and Mexico City, local traffic grew from 28 percent to 51 percent of traffic, while connectivity dropped from 72 percent to 49 percent. This preliminary quantitative analysis shows that following implementation of the JV, flights to Aeromexico’s largest hub carry significantly more local passengers as opposed to beyond MEX passengers than before implementation of the JV.

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A Glimmer of Hope

While the pair face a new deadline to wind down their cooperation, the DOT does offer the carriers a chance to object (no doubt they will). Those filings are due within 14 days and responses seven days after that. And along the way there is also an opportunity for the Mexican government to weigh in, altering its policies at MEX to the satisfaction of the DOT.

Additionally, the application for renewal of the JV was suspended, separate from this ruling. If MEX access is resolved that application will be picked back up and can be processed. Ditto for Allegiant’s pending JV application with Viva Aerobus, which is focused on almost everything but MEX, and which is also suspended nearly five years after initial filing.

An Alternate Outcome

While there are opportunities for things to get better, the US DOT is also setting the stage for things to get worse. In a separate filing the Department announced that Mexican airlines must “file their schedules” to continue operations. This is the first step towards the DOT potentially imposing unilateral limits on those operations.

Under 14 CFR 213.3(d) the Department may issue an order, with or without a hearing, “notifying the carrier that such operations, or any part of them, may be contrary to applicable law or may adversely affect the public interest.” At that point the carrier would be forced to suspend the route(s) in question.

A similar approach was used with China, resulting in the current operational landscape of significantly reduced capacity between the US and China.