Delta, Aeromexico to End Codeshare Deal Amid AICM Changes

Summary

  • Delta and Aeromexico established a codeshare agreement for more than 90 daily flights this year, which is currently under review due to regulatory changes.
  • The U.S. Department of Transportation (DOT) has set a preliminary end date for the joint venture to be dismantled on Oct. 26, following directives from the Mexican government regarding the Mexico City International Airport (AICM).
  • These directives and operational changes at AICM have resulted in the need for Delta and Aeromexico to reevaluate their partnership, amidst the absence of a fully liberalized air transportation agreement.

Codeshare Agreement Under Scrutiny

Delta and Aeromexico planned on providing over 90 daily flights between the two nations this year, as part of a codeshare understanding. This accord allows both airlines to sell seats on each other’s flights, announced Delta last October.

In an official statement, the U.S. Department of Transportation (DOT) shared that a tentative discontinuation deadline of Oct. 26 has been proposed, allowing the carriers ample time to dissolve the partnership.

Regulatory Changes Impacting Partnership

Various moves by the Mexican Government have brought about operational overhauls at AICM. The DOT states that these changes have raised questions about the conditions necessary for maintaining the Delta-Aeromexico alliance. The absence of a completely liberalized air transportation agreement in agreement with other U.S. government regulations is of primary concern.

Such an agreement, often referred to as an “open skies policy,” provides airlines with more authority over routes, capacity, and fares.

AICM Operational Changes

In an attempt to decongest AICM, Mexico’s busiest airport, major changes were implemented last year. These included transferring cargo flights to a more advanced airport on the city’s periphery.

Commercial flight slots were subsequently reduced in a further effort to alleviate congestion at the busy hub, thus transitioning operations to the newly constructed Felipe Angeles International Airport, which is still in the preliminary stages of operation.

The eventual impact of these changes on the FX and trading market remains uncertain. However, market participants trading in aviation related assets may potentially experience some effects.

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