New liberal air service agreement between US and Mexico set to fly in 2016

The US government has signed a liberalised air services agreement with Mexico that will significantly increase future trade and travel between the United States and Mexico and facilitate additional air service access between the two countries. The new agreement will take effect following internal ratification procedures by Mexico’s Senate.

The signing of this important agreement by US Transportation Secretary Anthony Foxx and his Mexican counterpart Gerardo Ruiz Esparza took place at Mexico’s embassy in Washington last week. Although the exact details of the agreement have not been revealed, it is likely to end all restrictions on the number of carriers allowed to operate on routes between the two countries ending the current restriction to just two carriers from each country.

In a joint statement Anthony Foxx and US secretary of state John Kerry said the new agreement will benefit US and Mexican airlines, travellers, businesses, airports and localities “by allowing increased market access for passenger and cargo airlines to fly between any city in Mexico and any city in the United States”.

This new air transport agreement further elevates and strengthens the dynamic commercial and economic relationship between the United States and Mexico. By allowing air carriers to better meet increasing demand in both countries, the agreement will help drive economic growth in sectors beyond aviation, including tourism and manufacturing.

The news has been welcomed by airlines in both countries, especially by US major, Delta Air Lines, which recently expressed its intention to significantly increase its holding in Aeromexico as it further strengthens its partnership with its fellow SkyTeam alliance member.

The airlines this year filed an application with the Mexican Comision Federal de Competencia Economica (Federal Economic Competition Commission) and US Department of Transport for a Joint Cooperation Agreement on flights between the United States and Mexico. This antitrust immunity application marks a significant step in the process to further deepen the commercial relationship that both airlines have had for over 20 years.

According to schedule data from OAG, Aeromexico and Delta are the number three and four carriers in the market between Mexico and the USA by capacity behind United Airlines and American Airlines. However, when you combine their operations as per the proposed co-operation they grow to become market leader with a 27.0 per cent share, based on published schedules for 2015.

The schedule data shows that overall capacity between Mexico and the United States will grow to over 30 million annual seats this year with a forecasted rise of 10.3 per cent – this follows a 9.0 per cent rise in 2014 and a 9.9 per cent growth in 2013. The size of the market is similar as that between the UK and Spain (36.5 million seats in 2015), but when you factor in the additional connection options Delta and Aeromexico could offer through the cooperation it grows significantly.