Photo credit: The Detroit News
The Detroit News
March 21, 2024
Luke Ramseth
Delta Air Lines Inc. says several direct routes from Detroit Metropolitan Airport to Mexican cities — flights often used by the Motor City’s three automakers — are at risk of cancellation after a U.S. Department of Transportation decision.
Since 2016, a partnership between Delta and Aeromexico has allowed the airlines to coordinate on routes, scheduling and pricing between the countries. The joint venture has resulted in 18 new routes, including from Detroit and expanded service on some existing routes, the carriers say.
But a tentative DOT order issued in late January said the agency wouldn’t renew antitrust protections that allow the cross-border business agreement to work. The agency cited concerns with how the Mexican government has been managing Mexico City International Airport as the reason it wants the two carriers to unwind their connected operations by late October.
Delta said the end of its Aeromexico agreement means more than 20 routes between the United States and Mexico could come to an end — including active Detroit flights to Mexico City and nearby Querétaro, as well as Monterrey. A direct flight from Detroit to Guanajuato is also in the works but would not happen if the agreement ends, Delta said. And a flight to Guadalajara, which recently began but is set to pause next month due to aircraft issues, would likely not return if the deal ends.
Other heavily impacted cities include Atlanta, which could see five Mexican routes cut, and Salt Lake City with four, Delta said.
“You’d be creating a world where instead of being able to fly directly from Detroit to Monterrey, for example, you’d have to connect somewhere, probably Atlanta or Houston, in order to get there,” Peter Carter, Delta’s executive vice president for external affairs, told The Detroit News. He said Detroit is the top corporate market served by the Delta-Aeromexico joint venture.
The prospective move is drawing scrutiny. Eleven members of Michigan’s congressional delegation signed a letter this week raising concerns with the DOT’s order to end the agreement. The bipartisan group said it respected the agency’s concerns over recent actions by the Mexican government, but “we firmly believe that more direct diplomatic actions can be taken to resolve these issues.”
“The Department’s actions would disrupt seamless leisure and business travel between the U.S. and Mexico and would harm Michigan’s economy,” the lawmakers wrote in the letter addressed to Secretary of Transportation Pete Buttigieg, noting that Mexico is Michigan’s second-largest trade partner and trade with Mexico supports 136,000 jobs.
Ford Motor Co., General Motors Co. and Stellantis NA combined sent almost 15,000 passengers on Delta flights from Detroit to Mexican cities last year, the airline said, with Ford notching the most customer trips, at 8,228. All three automakers have multiple manufacturing facilities as well as corporate offices in the country.
“It’s bad for Michigan businesses, particularly with as much manufacturing as we’re doing down in Mexico,” Brad Williams, vice president of government relations for the Detroit Regional Chamber, said of the tentative end of the agreement.
Canceling multiple routes also could put a big dent in Michigan tourism, he noted. That’s because about 500,000 Mexican tourists visit the state annually and spend on average about $1,500 here.
The Detroit chamber and the three automakers were among several dozen companies, organizations and politicians from around the country that formally submitted letters to the DOT opposing the decision in recent weeks, according to an online docket. The DOT did not respond to a request for comment, including about its timeline for a final decision.
“The automotive industry is heavily reliant on trade with Mexico and Stellantis has significant operations in the country, so efficient and affordable air travel between the U.S. and Mexico is a vital part of our business,” Stellantis spokesperson Jodi Tinson said in a statement. “We are currently assessing all options to ensure continued flexible, reliable and cost-effective travel to Mexico.”
GM and Ford did not comment to The News on the DOT decision. But both said in letters to the federal agency that they had “significant concern” with the end of the Delta-Aeromexico deal, adding that reducing flights to Mexico would hurt the economy and travelers, as well as the communities that rely on the flights.
Not all direct flights from Detroit to Mexico would be threatened by the end of the agreement. A Wayne County Airport Authority spokesperson said Delta would still offer nonstop service to vacation destinations, such as Puerto Vallarta, San Jose del Cabo, and Cancun. Spirit Airlines also offers direct service to Cancun.
In its order tentatively ending the Delta agreement with Aeromexico, the DOT explained it has long had concerns with how Mexican officials handled airline traffic and “slot allocation” at the Mexico City airport, including certain practices it viewed as anticompetitive.
Most recently, the federal agency said the Mexican government had violated terms of the joint agreement between Delta and Aeromexico by cutting off cargo operations to the city’s primary airport, routing that traffic to an airport outside the city, and reducing passenger traffic into the airport overall. Capacity at the airport “has been reduced over the last [three seasons] to the detriment of both current air carriers and potential new entrants,” agency officials wrote.
Delta and Aeromexico responded in February that the two companies “have no responsibility to control” the Mexican government’s changes at the Mexico city airport, adding such concerns should be addressed using other means.
“The department’s generalized displeasure with the actions of a foreign government — devoid of concrete details as to why those actions supposedly contravene the applicable bilateral agreement or harm U.S. aviation interests — is not a legitimate basis to rescind an (agreement) that has been in place for over seven years,” Delta and Aeromexico attorneys wrote.
The companies said ticket prices on many routes between Mexico and the United States would rise if the companies can no longer coordinate their planning and aircraft usage, adding that “$800 million in annual consumer benefits would evaporate.”
“It’s about as capricious a decision as we’ve ever seen out of the DOT because it’s not the way one would typically address this type of concern (with an airport),” Carter, the Delta executive, told The News.
Mexico officials say its moves to cut traffic at the Mexico City airport shouldn’t impact the Delta and Aeromexico deal.
“We strongly object to DOT’s suggestion that because we have had to take practical measures to address the widely acknowledged congestion at MEX, Mexico is no longer in compliance with its obligations under our bilateral air services agreement,” Rogelio Jiménez Pons, Mexico’s undersecretary of transport, wrote to the DOT earlier this month. He added the U.S. decision would damage “the commercial situation of Mexican airlines” as well as hurt passengers.
Carter said that trying to unwind the company’s joint venture with Aeromexico would be like “unscrambling an egg,” given how the two carriers coordinate their transborder flights and business operations. Delta also holds a 20% stake in Aeromexico.
Ending the agreement would also put jobs at risk, he said, pointing to a report commissioned by the airline that estimated 3,779 U.S. jobs could be at risk if the agreement ended, potentially affecting pilots, flight attendants and reservations staff, as well as non-airline service jobs.
“What ends up happening is all these direct flights that can be supported with the flows that we share (with Aeromexico) end up connecting through hubs, and being one or two-stop flights,” Carter said. “You’ll still be able to get where you want to go, you’ll just have to connect, as opposed to flying directly, which adds a lot of costs and inefficiencies to customers and businesses.”
The DOT’s concerns about the Mexico City airport operations and its move to end the joint agreement have the backing of American Airlines, a Delta rival. That carrier submitted comments saying that Mexico’s noncompliance with the so-called “Open Skies” agreement between the countries justifies the end of the deal. American said it shared the department’s concerns with the Mexican government’s recent actions to curb traffic in Mexico City.
But budget carrier Allegiant Air took Delta and Aeromexico’s side. Its proposed cross-border partnership with Mexican airline Viva Aerobus was put on pause by the DOT for the same reasons that the agency plans to pull antitrust protections for Delta and Aeromexico.
“American has an obvious interest in preserving its leading position in the transborder market,” Allegiant and Viva Aerobus wrote. “And its comments ignore the harm — increased prices and reduced service for U.S. consumers — that would result from DOT’s decision to terminate or withhold (protection) from the Delta-Aeromexico and Allegiant-Viva alliances.”