Maybe “soon” isn’t the right word. Nevertheless, beginning in January 2016 (a mere 13 months away) some of the silly regulations governing travel between the US and Mexico will finally go away. While this isn’t likely to open up a ton of new opportunities in the short term, in the long term this is going to make it much easier for new airlines to enter the market, and that’s a good thing.
For many years, the US has focused on negotiating as many “open skies” agreements as possible. These agreements allow US carriers to fly to another country’s airports without restriction. The same goes for airlines from that other country who want to fly to the US. (This doesn’t impact airport slot restrictions, so it’s not truly open skies in some places like Japan.)
While open skies agreements have generally done well for the US, there’s long been one important country that has held out. Mexico, the country that shares our southern border, has yet to come around to the idea of open skies. Until now, the last time the US-Mexico bilateral air services agreement was updated was in 2005. While this new change isn’t a complete open skies agreement, it does remove the most visible restrictions.
The agreement today says that only 2 US and 2 Mexican airlines can fly each route. In the map above, you see nearly every large city in Mexico. These cities are considered the exceptions in the current agreement in that 3 carriers are allowed from each side instead of 2. The notable missing dot on this map is Mexico City itself. That one still allows only 2 carriers.
In the new revised agreement, carrier restrictions will disappear. This may sound like a bonanza, and airlines will be able to flood the market, but that’s not really the case.
There really aren’t many markets that have demand for more airlines than can already serve them. Certainly there will be interest in markets like LA or New York to Mexico City. In LA in particular, on the US side, I can see American or Delta being interested (United and Alaska hold the two designations today). And even in some leisure markets like LA to Cabo there may be interest. (United, Alaska, and American all fly it today, but wouldn’t Delta want it as well?) But beyond those, the number of markets that will be impacted are few… for now.
When I wrote about Spirit flying internationally from Houston, there was talk that this could have been a move to freeze Southwest out of some Mexican markets by filling the final allowed designation in key markets. But with United the only other American airline in these leisure markets, there was still room for another carrier to join in after Spirit to make 3 total.
Even in Mexico City, Spirit will be serving alternate airport Toluca. That’s specifically called out in the current agreement as being separate from Mexico City. Again, no conflict. (Fun Boring fact: Washington and Baltimore are the two other areas separated by name in the current agreement.)
All this being said, there is growing interest in flying to Mexico so there could have been challenges in the future. Obviously Spirit likes it there. Allegiant has publicly said it will be entering the market, though its plans continue to be delayed. Frontier has already been there for years and may very well want more. And of course Southwest has just started dipping its toes in. So the elimination of these rules will help open up competitive opportunities in the future.
How about on the Mexican side? Well, there’s less competition in the market in total at this point, but that doesn’t mean this isn’t helpful. The only legacy airline in the market is Aeromexico. But there are a trio of low cost carriers that serve the US and want to grow. Interjet serves 5 cities so far, VivaAerobus has tried a couple but is only in Houston now, and then there’s Volaris with a whopping 17 destinations in the US. As these guys all grow, they’re bound to step on each other at some point.
This is most certainly a good step in the right direction. You might not notice any huge changes the day this takes effect, but in the long run it’s going to let the market decide the winners and losers instead of the politicians. That’s not always a good thing, but in this case, it most certainly is.
