DOT ISSUES TENTATIVE DISMISSAL OF DELTA – AEROMEXICO APPLICATION TO RENEWAL GRANT OF ANTITRUST IMMUNITY
February 2, 2024
On January 26, 2024, the Department issued an order to show cause tentatively dismissing an application previously filed by JV partners Delta and Aeromexico seeking to renew their grant of antitrust immunity for their transborder joint venture. The two carriers first applied for antitrust immunity covering the joint venture in 2015. Immunity was granted in 2016, allowing them to launch new routes between the U.S. and Mexico and collaborate to set prices among other things. In awarding immunity DOT placed a number of conditions on the joint applicants, including slot divestitures at MEX and JFK airports and that immunity had a five-year limit. The Department settled on the five-year period for immunity after considering the Government of Mexico’s efforts to build additional airports near MEX that would have provided additional capacity in the region. The Department determined that the five-year limit would provide flexibility to address competition and future market developments and therefore it was decided that the five-year period would be followed by a de novo review by the Department of the joint venture.
In tentatively deciding to dismiss the application, DOT relied heavily on the fact that recent actions by the Government of Mexico limiting capacity at MEX airport are “fundamentally out of compliance with the existing bilateral air service agreement and international norms governing capacity management at airports.” DOT alleges that the Government of Mexico prohibited all-cargo operations from MEX and reduced capacity at MEX over the last three IATA traffic seasons. In communications with the Government of Mexico, DOT alleges it was told that no additional capacity would be added at MEX considering operational and technical limitations currently afflicting the airport. DOT also noted that “despite further formal engagement with the Government of Mexico, no progress has been made at this time on resolving core issues related to the implementation of the US-Mexico Air Transport Agreement.” This is also the reason why DOT issued a Notice on July 31, 2023, suspending consideration for an antitrust immunity application from American carrier Allegiant and Mexican carrier Via Aerobus. DOT further noted that “the elements defined in Order 92-8-13 between the home countries of the Joint Applicants is the fundamental prerequisite needed to allow for consideration of an immunized alliance”, which DOT ultimately found to be absent. Delta and Aeromexico are required to wind-down their joint venture which is tentatively scheduled to end at the end of the IATA traffic season on October 26, 2024. In order to minimize the impact on consumers, DOT requires that two carriers to submit a wind-down schedule to the Director of the Office of Aviation Analysis “specifying the timetable for termination of the immunized agreement.” DOT requested that any interested parties submit objections or comments no later than 14 calendar days from the service date of the order, or by February 9, 2024.
If you have any questions, please contact Evelyn Sahr at 202.659.6622 or esahr@eckertseamans.com; Drew Derco at 202-659-6665 or dderco@eckertseamans.com; Jay Julien at 202.659.6648 or jjulien@eckertseamans.com, or any other attorney at Eckert Seamans with whom you have been working.
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