The US Has Had Enough of Mexico’s Air Cargo Shenanigans, and Allegiant is Paying the Price

This is admittedly a very strange headline. Why would Allegiant — an airline that not only doesn’t fly to México but also flies no cargo aircraft — get caught in a fight between the US and México over said air cargo? It’s a complex tale, but the short version is this. México is making changes that others don’t like, and the US has had enough. Because of this, Allegiant’s proposed joint venture with Viva Aerobus has been put on hold.

Allow me to explain.

As I wrote back in January, the Mexican government has been downright hostile to the airline industry since day one of President Andrés Manuel López Obrador’s (AMLO) administration in late 2018. I don’t need to go over the details again, because you can read that linked post above, but suffice it to say that AMLO has a vision that makes little sense. That doesn’t matter. He will not stop in the pursuit of that vision no matter what.

One of the centerpieces of his platform was to halt construction on the half-completed new Mexico City airport and instead try to create a regional airport system where the old Santa Lucia Air Force base was turned into the Felipe Ángeles International Airport (AIFA). It would be used to complement the existing Mexico City airport (MEX) along with Toluca.

AIFA is far from town, and public transportation is poor. Very few airlines have opted to start passenger service there, and those that have are doing so mostly because of government pressure.

Despite this grand plan with a brand new airport terminal, Mexico City’s main airport remains gridlocked and has been bursting at the seams. There was little question this would be the case without a new single airport, but AMLO has no interest in entertaining reality in this particular area. So instead, he’s been trying to find new ways to fix the problem.

The latest and greatest plan came earlier this year when he unilaterally announced that within 90 days — now pushed to September 1 — all cargo flights had to relocate from MEX to AIFA. This is a small bandage at best. It may free up some ability for additional commercial flights to operate, but not all that many. The number is even less at commercially-viable times for passenger flights.

This throws the cargo world into complete disarray. It’s not as simple as just pointing your airplane to a different airport. You need to have infrastructure at the new airport, some of which has been rapidly built but it’s not completely ready. It’s not just that; it’s the entire eco-system that needs to move over. Think of freight forwarders, etc. But this isn’t just about moving everything. It’s about duplicating everything.

Freight in the belly of passenger aircraft will continue to be allowed at MEX, so that means airlines like Lufthansa which fly dedicated freighters and passenger aircraft with belly freight will need to have freight operations at both airports. Beyond that, apparently connecting freight is a thing.

This article says Cathay Pacific connects freight via MEX to LATAM passenger flights to get between Hong Kong and South America. That means that not only do they need to duplicate their efforts to handle freight at both airports, but they need to be able to transport freight between the two airports. This is done by traffic-choked roads, and it can open up that freight to security concerns.

Airlines are slowly, begrudgingly moving their operations regardless of how they feel about it. The US, however, is not happy. There have been attempts at discussions between the US and Mexican governments. Transportation Secretary Buttigieg even went down to México at one point. Why is this so important? It’s all about precedent.

The US has “open skies” agreements that allow generally-unfettered access to each country by airlines from the other country. There are carve-outs due to slot controls or airport congestions, but the agreement between the US and México (or any other country) just doesn’t allow one party to make sweeping changes that contradict what’s in the agreement.

The US has continued to press the Mexicans on this, but they aren’t getting anywhere. So now, it’s time to ratchet up the pressure.

Allegiant and Viva Aerobus have been trying to get a joint venture approved that would eventually allow them each to greatly expand flying across the border. (In Allegiant’s case, the airline would start flying across the border….) This application has been slowly making its way through the process, but now it has been pushed into procedural hell. On July 31, the Department of Transportation (DOT) issued a notice that it was suspending its review of the joint venture.

This has nothing to do with Allegiant or Viva Aerobus. Instead, it’s that pesky cargo situation.

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.

DOT says it is working on the issue and will take a look at the application once this kerfuffle is in the past. Allegiant is obviously not thrilled by this, but in a statement provided by a spokesperson, the airline makes it clear that it knows it is just a pawn in this whole game.

We hope the United States and Mexico can resolve their differences over the bilateral agreement quickly, so travelers from both countries can benefit from the Allegiant/Viva joint venture. Through that venture, the public will gain greater access to affordable airfares and more convenient travel options that will allow them to enjoy the incredible leisure and entertainment experiences that await them in both countries.

Let’s not forget that for over two years, México has been designated a Category 2 country due to not having the proper safety practices and procedures in place. With that designation, Mexican airlines can’t start new service to the US nor can they codeshare with US carriers. The joint venture between Delta and Aeromexico sits in a state of flux.

México has supposedly been close to moving back up to Category 1 for many months, but here we are two years later and nothing has happened. Even if it gets close now, I have to wonder if the US would hold back approval further just to keep the pressure up.

This doesn’t seem to be something that will be resolved soon. In general, countries around the world don’t like when the US tells them what to do, and the US does that a lot. But if agreements aren’t upheld, then what’s the point of them in the first place? We’ll see who budges first.