A federal appeals court blocked the DOT from ending Delta and Aeromexico’s partnership, allowing the airlines to continue coordinating flights between the U.S. and Mexico.
Delta Air Lines can continue to partner with Aeromexico on flights between the U.S. and Mexico, a federal appeals court ruled last week, in spite of a DOT order that the two airlines suspend their alliance on antitrust concerns involving access to Mexico City’s airport.
The DOT had required the two airlines to dissolve their partnership last fall.
The court did not weigh in on the merits of the DOT’s complaint about access to Mexico City’s Benito Juarez International Airport, or the larger concerns about whether the agreement was anti-competitive. The ruling only said that DOT’s stated reasoning for requiring the airlines to end the partnership relied on speculation and unsupported facts, was internally inconsistent, and didn’t consider alternatives.
An antitrust-immunized agreement is essentially a government waiver to certain aspects of U.S. antitrust law, which normally prohibits competing businesses from colluding on pricing and business practices. Under the terms of the approved agreement, Delta and Aeromexico can coordinate flight schedules and fares and pool revenues earned from their codeshare flights between them. Together, Aeromexico and Delta account for just over 20% of total air seat capacity between the U.S. and Mexico, making it the second largest seller of flights between the two countries after the Mexican discount airline Volaris, which holds nearly a quarter of the seat capacity.
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The court was also concerned that the DOT seemed to apply a much narrower set of criteria for evaluating the Delta-Aeromexico joint venture than it did other, similar joint ventures involving other airlines and other countries. The 11th Circuit Court held that the DOT’s decision was “arbitrary and capricious” (which is legalese for “unnecessarily mean”), and that the DOT’s legal team “did not reasonably explain why it conducted a far more limited market analysis in this case than it has always done in the past.”
A spokesperson for Delta told AviationWeek: “For nearly a decade, Delta’s joint cooperation agreement with Aeromexico has provided greater choice, more seamless travel and increased connectivity for consumers while supporting U.S. jobs and economic growth. We appreciate the 11th Circuit’s careful review and remain focused on ensuring our customers, employees and communities continue to benefit from this longstanding partnership.
The appeals court noted that the original decision to grant antitrust immunity to Delta and Aeromexico involved a broad market assessment of the U.S.-Mexico air travel market. The court ruled that renewing authorization of antitrust immunity should be held to the same rigor as the original decision to grant it, and the DOT failed to do so, relying instead only on a more limited view of the situation at Mexico City’s airport.
Missing from the DOT’s final order, according to the appeals court, were updated figures for airline market shares, forecasts describing how competition would change if the JV continued, or a city-pair share-shift analysis.
In response to the ruling, a DOT spokesperson told AviationWeek: “The department is committed to protecting competition and achieving the best outcomes for the traveling public. Even as we review the Court’s decision and consider all available legal options, we will continue to work with the Mexican government to ensure it fulfills its obligations and treats all U.S. carriers fairly. We are encouraged by recent conversations with the government of Mexico and look forward to Mexico’s full compliance with the agreement.”
For travelers, that means shopping on both airlines’ websites will offer a wider range of destinations and flights, making it easier for customers to buy itineraries involving both airlines on a single ticket and baggage check, lowering overall fares and speeding up connections between flights from one carrier to the other.
Aeromexico is Mexico’s oldest airline, in operation since 1934.