Delta-Aeromexico Venture Faces Scrutiny Amid US Investigation into Mexico's Airspace Violations.

Delta-Aeromexico's joint venture is under scrutiny as the US targets Mexico for airspace violations. The US has issued several warnings to Mexican airlines, including Aeromexico, for violating US airspace. The Delta-Aeromexico partnership faces challenges in navigating these regulatory issues, potentially impacting the venture's operations and reputation.

The Delta-Aeromexico joint venture, a significant player in the US-Mexico aviation market, is under scrutiny as the US targets Mexico for alleged violations of airspace agreements. The US Department of Transportation (DOT) has implemented several measures against Mexican airlines, including Aeromexico, citing violations of the 2015 US-Mexico Air Transport Agreement.

The DOT has accused Mexico of disregarding the agreement since 2022, leading to actions that have impacted US carriers. Mexican authorities rescinded slots at Mexico City International Airport (MEX) in August 2022, citing capacity constraints and operational limitations. However, the DOT argues that no major construction works have been initiated, and the slots were never restored. In February 2023, Mexico ordered all cargo carriers to exit MEX, further exacerbating the situation.

The DOT has introduced three "America First" actions: mandating Mexican airlines to file flight schedules in advance, imposing approval requirements for Mexican carriers, and removing antitrust immunity from the Delta-Aeromexico joint venture. The latter move could force Delta and Aeromexico to cease common pricing and revenue sharing [1].

The actions taken by the DOT have sparked concerns about the future of the Delta-Aeromexico partnership. Wall Street analysts predict a potential upside of 17.11% for Delta's stock price if the antitrust immunity is revoked, but GuruFocus estimates indicate a 19.93% downside based on GF Value metrics [2]. The joint venture, which began in 2017, has faced challenges since early last year, with the airlines arguing that ending their agreement would jeopardize nearly two dozen routes and $800 million in benefits to both countries' economies [3].

The DOT's actions come amid a broader trend of the US monitoring other countries for alleged treaty violations, particularly European nations that have imposed operational restrictions on US carriers. The US has criticized the Netherlands for not abiding by the Balanced Approach process for noise abatement at its airports [1].

The regulatory challenges faced by the Delta-Aeromexico joint venture highlight the complexities of international aviation agreements and the potential impact of regulatory actions on airline partnerships. As the US and Mexico continue to navigate these issues, the future of the joint venture remains uncertain.

References:
[1] https://simpleflying.com/us-action-against-mexico-disregard-abuse-bilateral-agreement/
[2] https://www.gurufocus.com/news/2988960/delta-dal-faces-antitrust-immunity-challenges-amid-usmexico-aviation-dispute
[3] https://abc7.com/post/trump-administration-imposes-limits-mexican-flights-threatens-delta-alliance-trade-dispute/17210799/