Proposed Delta-Aeromexico antitrust immunity faces opposition

Delta Air Lines and Aeromexico can set prices and coordinate schedules for flights between the U.S. and Mexico, the U.S. Department of Transportation (DOT) tentatively ruled last Friday, but the ruling comes with caveats and faces challenges from other U.S. carriers. The proposal grants the airlines partial immunity from U.S. antitrust law. In addition, the U.S. DOT proposed giving up valuable slots at busy airports slots to bolster competition.

If finalized, the decision will increase Delta and Aeromexico’s control over the second-busiest market for international travel to and from the U.S. The deal has the potential to involve cargo operations as both carriers have extensive international and domestic airfreight networks. A summary of the JV agreement filed with the DOT excluded cargo-only flights and private charters, but did allow for “coordinated cargo activities.”

Opponents of the tentative ruling have until Nov. 30 to raise objections, but Hawaiian Airlines and JetBlue Airways have already spoken out against the proposal. The opposing carriers argue that the deal would undercut future open skies agreements because it grants a U.S. carrier antitrust immunity with an international carrier before the U.S has reached an open skies agreement with the carrier’s home country – in this case Mexico.

The U.S. DOT seems to be hedging its bets on this one, and proposed limiting antitrust immunity for the carriers to five years. The department noted that long-term viability hinged on Mexico’s ability to carry out its own adaptions and reforms.

Mexico City slot allocation depends “on confusing and often unwritten rules, making it extremely difficult for new entrants,” the department told Reuters. “This remedy would allow for new, competitive entry at these airports that would not otherwise be possible.”

The department is proposing that Delta and Aeromexico divest 24 takeoff and landing slots in Mexico City and six at New York’s John F. Kennedy International Airport. The slots would be given to budget airlines to add flights that compete on other routes.