In a surprising move, the U.S. Department of Transportation (DOT) has ordered Delta Air Lines to unwind its joint venture with Mexican carrier Aeromexico. The DOT refused to renew the antitrust protections that have been in place since 2016, citing anti-competitive actions by the Mexican government at Mexico City International Airport. This decision could have significant implications for air travel between the U.S. and Mexico.
Delta and Aeromexico have had a deep partnership for over a decade, with Delta holding an equity stake in the Mexico City-based carrier. They codeshare on routes and coordinate on scheduling, and Delta has increased its stake in Aeromexico over time. Last fall, Aeromexico announced 17 new routes, 14 of which involved Delta hub cities. Delta has praised Mexico as a “great source of strength” for the airline.
The issue at hand is the regulation of Mexico City’s primary airport and Aeromexico’s home base. When Delta and Aeromexico deepened their partnership, regulators required the divestiture of slots at congested airports to prevent the consolidation of slots by the two airlines. The DOT argues that the Mexican government has been opaque and anti-competitive in governing these slots, benefiting Aeromexico at the expense of new-entrant airlines.
More recently, the DOT claims that the Mexican government has cut air cargo operations at Mexico City and that flight capacity has decreased over the last three peak air travel seasons. The Mexican government has claimed that this is due to renovations at the airport, but the DOT argues that no such plans exist.
As a result of these issues, the DOT has refused to renew the antitrust protections for Delta and Aeromexico and has ordered the airlines to unwind their joint venture by late October. The airlines will likely have the opportunity to contest this ruling, but in the meantime, they must submit a wind-down schedule to ensure that consumers are not harmed.
Delta has expressed deep disappointment with the DOT’s decision and has pledged to protect the millions of consumers who have benefited from the partnership. However, if the ruling is finalized, there may be changes to codesharing and the coordination of schedules and fares between the two carriers.
Despite the unwinding of the joint venture, it is likely that certain aspects of the partnership will remain intact. As long as Delta and Aeromexico remain members of the SkyTeam alliance, customers should still be able to enjoy reciprocal loyalty program perks and earn miles on each other’s flights. However, there may be new restrictions on codesharing, and the two airlines will no longer have antitrust immunity.
In conclusion, the DOT’s decision to order Delta and Aeromexico to unwind their joint venture could have significant implications for air travel between the U.S. and Mexico. While customers should still be able to enjoy certain benefits and earn miles, there may be changes to routes and restrictions on codesharing. The future of the partnership remains uncertain, but it is clear that changes are on the horizon.