Delta and Aeromexico will accept the terms dictated by the
Department of Transportation (DOT) for approval of an antitrust-immune joint
venture. But they aren't making the decision happily.
In the order finalized Dec. 14, the DOT required the
Delta-Aeromexico partnership to give up 24 daily departure and landing slots at
Mexico City's Benita Juarez Airport, where they currently control nearly half
The partnership must also divest of four daily slots at
capacity-constrained Kennedy Airport in New York.
In order to boost competition, all the slots have to be
turned over to low-cost carriers.
Per the DOT, the slot divestitures are to occur over the
spring and fall of next year.
The joint venture, under which Delta and Aeromexico can
coordinate on marketing, scheduling and pricing flights between the U.S. and
Mexico, can begin once the carriers have completed transfer agreements on the
first 14 slots at Benito Juarez and the first two slots at Kennedy. The
partnership also applies to domestic and international connections from both
countries. The grant of antitrust immunity will last for just five years.
Delta and Aeromexico sounded off to the DOT in a letter
Wednesday even as they formally accepted those terms.
"In markets with robust competition, the public
interest is not served by the government favoring a particular type of
competitor, imposing a redistribution of assets, and deciding who should
compete where," attorneys for the two companies wrote.
They went on to say that the DOT has set a well-established
precedent of recognizing the consumer benefits of joint ventures, even when the
airline partners would control a much larger share of the marketplace than the
25.4% of the U.S-Mexico market that Delta-Aeromexico will control.
"If [antitrust immunity] policy has changed such that
[antitrust immune] alliances will only be approved after a reengineering of
competition, the cost of such alliances will become so high that it will create
serious questions about how [antitrust immune] alliances are formed in the
future and jeopardize the substantial consumer benefits associated with such
alliances," the carriers said.
In a press release Wednesday, Delta said the regulatory
approval is an important milestone in its effort to acquire up to 49% of
Aeromexico. Delta currently owns less than 5% of the carrier.
"Together, Delta and Aeromexico are stronger in the
U.S.-Mexico market than either airline can be on its own," Delta CEO Ed
Bastian said in prepared remarks. "The partnership will make it possible
for us to offer customers more flights to more destinations, with more choices
every time someone travels across the border."