Summary
- Delta Air Lines threatens legal action against DOT if joint venture with Aeromexico is terminated, risking millions and passenger convenience.
- DOT issued order to dismiss application citing Mexico gov’t actions as breaching terms, Delta believes it’s overstepping boundaries.
- Potential termination of venture could halt 23 flights, affect 86,000 passengers, risk 3,779 jobs, and make $800 million consumer benefits vanish.
Delta Air Lines (DL) has said that it is prepared to take legal action against the US Department of Transportation (DOT) if the agency follows through with its January order to terminate Delta’s joint venture with Aeromexico, Mexico’s largest airline.
The venture brings in millions of dollars and serves many people who travel on these direct flights. If the venture is canceled, it will stop this valuable income stream and negatively impact passengers, who will have to find other, more roundabout routes to and from these destinations.
Background
In 2016, the DOT granted a $1.5 billion alliance, leading to the largest partnership between a Mexican and US carrier. Delta gained a larger presence in Mexico City, Monterrey, and Guadalajara through the deal. Aeromexico was granted access to many of Delta’s main hubs, including Atlanta, Detroit, Los Angeles, Minneapolis-St. Paul, New York, Salt Lake City, and Seattle.
Photo: Delta Air Lines
When it came time to renew the agreement, the DOT issued an order to dismiss the application tentatively, citing “recent actions” by Mexico’s government to remove its consideration of antitrust immunity (ATI).
According to the DOT, the Mexican government’s actions broke the terms of the previous agreement. Officials claim that the Mexican government prohibited cargo operations at Benito Juarez Airport, instead moving them to airports outside Mexico City. The DOT also said that the government reduced capacity at the airport over the last three years.
Delta’s response
Delta believes that the US government is overstepping its bounds. Peter Carter, Delta’s executive vice president of external affairs, said this about the possible lawsuit in a statement to ArcaMax:
Photo: Aeromexico
“When the federal government takes an action that impacts a private party, there’s certain administrative procedures that have to be followed and usually there’s a process and they take evidence and there’s a lot of discussion with that private party. The fact that this came out of the blue put this in a category that our lawyers have said to us, and we’ve said publicly, it’s really arbitrary and capricious. If, in fact, we ended up with the final order that contemplated termination of this joint venture, we, I think, have no choice but to obviously protect ourselves and pursue our legal remedies.”
According to Carter, Delta wasn’t given a reasonable response notice before January’s order was issued. He received a call about the government’s actions only a few minutes before the order was issued.
Far-reaching effects
If the order goes through and the venture has to shut down, the following will happen:
Photo: The Global Guy | Shutterstock
- 23 nonstop flights on 21 routes from Mexico to Delta’s main hubs will cease.
- More than 86,000 passengers will be affected.
- More than 3,779 jobs will be at risk.
- $800 million in annual consumer benefits will disappear.
There were expansion plans that will also be put in jeopardy. Delta announced plans to increase transborder seating by 30% in October last year. Aeromexico was also planning to launch 17 routes from seven Mexican destinations.
Voters are also not happy about the move. More than 10 members of Congress have penned letters to the DOT asking to keep the partnership going. In addition, 65% of US voters don’t want the partnership terminated, and over 80% feel it would jeopardize thousands of jobs.
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