US DOT suspends consideration of Allegiant, VivaAerobus JV application

Since December 2021 Allegiant and VivaAerobus have been pursuing antitrust immunity from the US Department of Transportation to operate a transborder joint venture between the US and Mexico. Today that application took a somewhat unexpected turn, with the DOT suspending the procedural review, owing to factors well outside the control of either airline.

The Department reviews applications for antitrust immunity to U.S. carriers and their foreign partner carriers based on the complete implementation of a liberalized air transport agreement between the United States and the country of the partner carrier. Recent actions undertaken by the Government of Mexico affecting U.S. carrier operations at Benito Juarez International Airport call into question the existence of this predicate.

– US Department of Transportation regulatory filing

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The two countries have been sparring since March 2021 over a downgrade of Mexico’s aviation sector safety rating by the United States. At the time Mexican authorities predicted a quick resolution. Without a resolution to that safety rating issue the two airlines would not be able to implement the bulk of their planned cooperation. But they’ve pushed forward with the application, hoping to have everything in place whenever the safety rating issue is resolved.

Other challenges, mostly tied to access for US carriers at Mexico City’s Benito Juarez International Airport now stand in the way.

While not offering much in the way of written details, a letter from the US Assistant Secretary for Aviation and International Affairs to her counterpart in Mexico cites actions by the Mexican government at that airport as the cause of the suspension.

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Access to Benito Juarez International Airport (MEX) has long been a challenge for US carriers. The airport is overcrowded and new operating slots are incredibly scarce, particularly at useful arrival or departure times. JetBlue cited these factors, and low yields, as it was planning to leave the market in December 2019. At that time it wanted United Airlines to have its slots. That deal didn’t go through, and then COVID made a mess of many other things. But access to MEX slots remains a challenge.

Furthering the issues, President Andres Manuel Lopez Obrador halted construction on Mexico City’s new airport when he took office in 2018. That airport was to take over from MEX as the city’s primary gateway. Instead, AMLO drove a multi-airport strategy that virtually no airlines seem happy about.

Rather than completing the new airport, AMLO pushed airlines to operate at Felipe Angeles International Airport (IATA: NLU), 28 miles north of Benito Juarez. Since it opened last year Felipe Angeles airport has attracted an anemic 30ish daily passenger flights from a handful of airlines, including Volaris, VivaAerobus, and Aeromexico. Panama’s Copa Airlines and the Dominican Republic’s Arajet are the only foreign passenger carriers, combining for just above daily service in July 2023 per data from Cirium.

The Mexican government has also been pushing cargo operators to the less convenient airport, hoping to free up a few operating slots at Benito Juarez. Or to push new airlines there, because of the crowding closer to town. The US Department of Transportation has pushed back on these efforts, per the letter filed.

And now the US sees them as a critical stumbling block in aviation relations between the two countries.

Even if the safety rating issue is resolved in the weeks or months ahead, as was recently intimated by Mexican authorities, without a resolution for the Mexico City situation the Allegiant/VivaAerobus deal may stay sidelined through another peak Q4/Q1 holiday season for transborder travel.