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.
CF- I agree that loosening the rules is “a good step in the right direction”; however, I disagree that “in the long run it’s going to let the market decide the winners and losers instead of the politicians.” I wish this was the case . I think we can use as a model and debate the extent the US politicians have allowed the market to decide winners and losers in the domestic market. Southwest had to fight exceedingly, and some may argue needlessly, to operate freely in a “de-regulated” market. We just saw, 20+ years later, the end of the wright ammendment. Today, in my estimation, we have an oligopoly as three carriers supply at least ~2/3 of the capacity. How did they get there? The US gov’t allowed ~6-7 carriers to merge in bankruptcy (NW/DL, UA/CO*, AA/US*/AW*—-*not in BK at time of merger but in BK before x AW) instead of allowing them to be liquidated. Yes, on one end we have “market” practices as airlines set their price, seat availability, and schedule. On the other end bankruptcy or near bankruptcy and politicians acting to prevent it or once they get there. I want to be optimistic, and given airlines reliance on the gov’t and the gov’t willingness to act on them will lead, IMO, to the status quo with the only wild card being a maverick, what Southwest used to be.
Meh, Southwest hasn’t had to “fight exceedingly” for much with the exception of the Wright Amendment which was 30 years ago.
Most of the time when Southwest is fighting its because they want something nobody else has. Like commercial access at Boeing Field in Seattle because they’re too cheap to pay for SeaTac like everybody else. (And SeaTac isn’t a Taj Mahal of terminals.)
The “Southwest underdog” meme has gotten really really old. Southwest is perfectally able to compete on their own, and they’ve removed competition through mergers just like the other airlines. (Airtran is the latest case in point.)
btw, I was not aware of this rules and its eventual loosening, so thanks for bringing it up to attention.
Can you explain the origin of these rules, and who they were meant to benefit? It seems like these restrictions hurt both countries by reducing traffic and trade and increasing prices.
Jason, the Australian govt has a good summary of bilaterals and international aviation http://www.infrastructure.gov.au/aviation/international/bilateral_system.aspx
Jason, I don’t know about Mexico in particular, but these types of rules are usually designed to preserve balance in the market. US-based airlines are much larger and have more money and expertise than Mexican ones, so Mexico may have been concerned that if they opened up the market, US carriers would dominate and their own airlines wouldn’t be able to compete. Since they have agreed to lift the restrictions, they probably feel confident by now that their own airlines will be able to compete effectively against the American ones.
I’m guessing this is also a legacy of the thought processes of the CAB era, where airlines had to apply for each and every route to “guarantee” profitability.
The rules were originally created to protect Mexico’s two state owned airlines, AeroMexico and Mexicana. Much has changed including the creating of LCCs, the collapse of its largest airline, Mexicana and Mexico’s record number of US tourists. Only security concerns are keeping the number of passengers from sky rocketing. Mexico is sovereignty protection crazy and will do all it can to protect Mexico, a policy which has always stifled investment and spread mistrust. Mexico’s sovereignty attitude could have to do with Mexico losing three wars, first to Texas then twice to the United States. However three carriers per city is better than two, just do not any Japan style open skies any time soon.
Mexico seems to be servied pretty goood right now so will this really change much? Are fares so high that Allegiant/Spirit/(new)Frontier can move in and steal away business from the larger carriers with super dirt cheap fares?
I know that DL and Mexican have stated that they’re hoping that a change in the rules can allow them to pursue anti-trust immunity. That would be interesting to watch unfold.
Tim – Yes, great point. In general, open skies agreements are a prerequisite for airlines between two countries to be able to receive anti-trust immunity and pursue a joint venture. This doesn’t appear to be an open skies deal, but maybe it’s close enough.
Yes fares are exceedingly high between Mexico and the US. Look at fares between the US and several small to mid size Mexican markets such as Quereterao, Aguascaliente, Zacatecas, and San Luis Potosi. Airfare to Europe can be cheaper then some of these destinations, but I doubt this agreement will change of any of that. These aren’t cities airlines are lining up to serve.
The easy ones are that AA will enter LAXMEX, JFKMEX, LAXPVR.
Delta will enter LAXMEX, JFKCUN.
Volaris will enter LAXMEX, MIAMEX.
Question: Southwest, Frontier, and Delta all operate MKE-CUN seasonally. How is this possible under the current law?
astra – As noted in the map, Cancun can have 3 airlines from the US and 3 airlines from Mexico on each route.