Delta and Aeromexico have accepted government restrictions and agreed to move ahead with a joint venture partnership.
When the Transportation Department initially approved the airlines’ application for antitrust immunity last month, it said they would have to give up several slots at New York JFK and Mexico City to preserve competition in the market. Delta and Aeromexico balked at that mandate, and suggested they might drop the whole idea.
But DOT held firm in its demands and now the two carriers have agreed to abide by the restrictions and will move forward with a joint venture for transborder operations. That means they will be able to coordinate routes, schedules, pricing, and sales activities, and “enhance the alignment of their respective frequent flyer programs,” DOT said.
But the airlines must give up enough takeoff and landing slots next year to provide new competition on 24 daily transborder flights from Mexico City and four from New York JFK. “The Department found these conditions necessary to prevent harm to consumers that would result from the carriers’ dominant positions at MEX and JFK and the inability of new entrant carriers to access slots at the airports,” DOT said. The agency also set a five-year time limit on the grant of antitrust immunity.
Delta CEO Ed Bastian said the new partnership “will make it possible for us to offer customers more flights to more destinations, with more choices every time someone travels across the border.” Both airlines are members of the SkyTeam alliance.
Delta also holds a minority stake in Aeromexico, which it has been increasing in recent months. It’s part of Delta’s global strategy to expand through partnerships that include partial ownership in foreign carriers. The airline also holds equity stakes in Virgin Atlantic, Brazil’s Gol and China Eastern Airlines.
The Transportation Department has been getting tougher with airlines’ antitrust immunity. Last month, the agency turned down a request by American and Qantas for immunity that would allow them to more closely cooperate on transpacific schedules and fares. The two airlines initially got immunity in 2011, but at that time American didn’t fly to Australia and the two airlines had no overlapping routes.
That changed in the years since, with American starting new routes from Los Angeles to Sydney and Auckland and Qantas adding Dallas flights, so their antitrust immunity needed a new approval. DOT said a new approval of immunity would create an anticompetitive environment since the two carriers now provide almost 60 percent of the seats in the U.S.-Australia market.