Nobody can be surprised to hear that the US government is getting tough on Mexico. After all, we live in an “America First” kind of world these days, for better or worse. The problem with this kind of dogmatic stance, however, is that if followed too rigidly, it can punish the wrong people. And that is what is happening here now that the US has decided to end antitrust immunity for current joint venture partners Aeromexico and Delta. This also suggests the Allegiant/Viva joint venture is going to have to be shelved for now.

Of course, there is one huge caveat to this post. The current US administration loves to throw out big penalties as threats to punish countries around the world. Then they wait for those countries to negotiate and come crawling back, never actually implementing the penalties. If that pattern follows here, then this whole post will be for naught. But let’s pretend that this does actually happen.

The long fight between the US and Mexico is something I’ve covered before. There is a lot going on here, but ultimately the two main issues are:

• Mexico unilaterally forced cargo airlines to move from Mexico City’s main MEX airport to the new AIFA airport which was built as a reliever
• Mexico removed slots from airlines at MEX due to construction, but that work never happened and there is no sign that slots will return

The argument is and has always been that Mexico is violating the Open Skies agreement with the US, and without a valid Open Skies agreement, joint ventures with antitrust immunity between airlines in the two countries would not be permitted. (If you’ve ever wondered why there are no joint ventures with Chinese airlines, well, there’s your answer.) That is the stick that the US has been waving around.

The only joint venture in place today is the one between Delta and Aeromexico. Those two airlines are long-time partners dating back even before the founding of SkyTeam in 2000. But in 2011/2012, Delta invested in Aeromexico and took a board seat. In 2015, they applied for antitrust immunity for a joint venture, and that was put into place during 2017 after approval.

The pandemic took its toll on both airlines, but Aeromexico had to file for bankruptcy and Delta’s share fell from nearly half the airline. Still, it was clearly a very influential minor owner. The bigger problem came in May 2021 when the US downgraded Mexico to Category 2 status for safety issues. That ended Delta’s codeshare on Aeromexico, limited Aeromexico from launching new routes to the US, and prevented Aeromexico from flying new airplanes to the US. Effectively it froze the partnership until September 2023 when Category 1 status was restored.

Once that drama was done, the DOT started to ramp up its fight. Despite the usual bloviating in the current administration’s communications about how the previous administration was a terrible, horrible failure, it was the previous administration that announced plans to end antitrust immunity between Delta and Aeromexico. Delta, obviously, was not pleased. But that didn’t go into effect. Now, DOT is getting more serious with three filings:

• Part 213 Order requiring Mexican airlines to file schedules with tDOT for all their US operations.
• Part 212 Order requiring prior DOT approval before operating any large passenger or cargo aircraft charter flights to or from the US 
• Supplemental Show Cause Order proposing the withdrawal of the Delta/Aeromexico joint venture’s antitrust immunity (ATI), thereby taking corrective action to address competitive issues in the market.

The first two are fairly fluffy, just requiring Mexican airlines to file schedules and require all charters to be approved. That feels more punitive in that they are just creating more paperwork to be annoying. But the third one that would end antitrust immunity for Delta and Aeromexico would be more impactful.

There is a lot in the 40-page order justifying the action, but let’s just set that aside and look at what has happened to capacity between the US and Mexico on Delta and Aeromexico since this began. To start, I want to look at what Aeromexico has done. See, Aeromexico has long been a confused flag carrier. Did it need to fly beach routes? Probably not, but it did long ago. In the last 10 years, it has changed its network to the US. Here is a look at where it flies into the US:

Aeromexico Seats by US Destination Type

^{Data via Cirium}

Aeromexico dabbled in small cities with visiting friends and relatives (VFR) traffic, but that was never a huge part of its business. But look what has happened as the airline has worked to get above pre-pandemic levels, finally. Delta hubs and focus cities now account for more than 50 percent of flying, but the big cities have also seen significant growth. And this really didn’t start kicking in until the upgrade back to Category 1 status. In the last two years, Aeromexico has started service to McAllen, Newark, Philly, Raleigh/Durham, San Juan, and Tampa plus it has returned service to Atlanta, Boston, Phoenix, and Washington/Dulles for the first time in several years.

But now look at where those planes are coming from in Mexico:

Aeromexico Seats by Mexican Origin Type

^{Data via Cirium}

Aeromexico has found its place as THE Mexico City airline. In a place where slots can’t be found, as we all know by now, Aeromexico gives Delta and its passengers a huge opportunity to get to Mexico City from an increasing number of airports in the US.

But what about Delta? Delta has grown seats between the US and Mexico by more than 35 percent since 2015. That is a remarkable amount of growth. Nearly all of it comes in its own hubs, of course, but it has done some non-hub flying to Cancún. I don’t need to show you a chart of this, but what I will show you is what has happened on the Mexican side.

Delta Seats by Mexican Destination Type

^{Data via Cirium}

It looks very different, right? Yes, Delta has grown some in Mexico City over the years, but it is constrained so it can’t really do that much. And Delta has tried non-leisure markets, including the big cities of Guadalajara and Monterrey, but that is all a rounding error. It’s the leisure flying to take Americans to the beach that has grown enormously over the last several years.

If you take away the Delta/Aeromexico joint venture, what do you get? Delta loses the ability to optimize its Mexico City slot usage, and Aeromexico will likely have to divert slots away from going to some of those new cities it added and back to core markets. It also makes it possibly more expensive and more challenging to connect people between the networks without pricing coordination. I really don’t see how ending this would actually help the consumer. Mexicans would continue to fly Aeromexico and Americans would continue to fly Delta, they just wouldn’t have as many good options between the two.

The secondary assumption here is that the end of Aeromexico/Delta also means that the Allegiant/Viva joint venture would never be approved. It has been shelved for years because it got caught in the middle of the political situation, but that one is something of a no-brainer.

The ability for Allegiant and Viva to use each other’s airplanes to serve small and markets could be a big deal. It could also not be anything, but the plan really has no downside for travelers.

Again, I am hoping that this is yet another one of the current administration’s bluffs to try to get something resolved using blunt force. If so, then this whole screed will have been written for no reason. But this isn’t something as critical as massive tariffs, so there’s always that chance that nobody backs down. And that would be bad for Americans.