Delta Air Lines prepared to file suit as ‘last resort’ if DOT terminates its Aeromexico deal

Delta Air Lines is prepared to take legal action against the U.S. Department of Transportation if the federal agency plans to follow through on its January order to terminate the airline’s joint venture with Mexico’s largest airline, Aeromexico.

Aeromexico is the largest airline in Latin America and its home airport, Mexico City’s Benito Juarez International Airport, is the region’s busiest. The federal agency’s order would sever the routes connecting passengers from Minneapolis-St. Paul and other U.S. cities to Benito Juarez International Airport as of Oct. 26, ending the flow of millions of dollars in economic impact from thousands of passengers who use the routes each year.

In 2016, the DOT granted antitrust immunity for the $1.5 billion alliance, the largest partnership between a Mexican and U.S. carrier. Through the agreement, Delta gained a larger presence in Mexico City, Monterrey and Guadalajara, while Aeromexico got access to new markets at Delta’s main hubs, including Atlanta, Detroit, Los Angeles, Minneapolis-St. Paul, New York, Salt Lake City and Seattle.

In January, though, the DOT issued an order to tentatively dismiss the application of Delta and Aeromexico to renew the department’s approval and grant of antitrust immunity for their joint cooperation agreement. The agency cited actions taken by the Mexican government that broke terms of the previous agreement. U.S. officials claim Mexico’s government prohibited cargo operations at Benito Juarez, relegating those operations to airports outside of Mexico City. The government also reduced capacity at the airport over the last three years, “to the detriment of both current air carriers and potential new entrants,” the order reads.

Delta officials say the U.S. government is overstepping.

“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,” said Peter Carter, Delta’s executive vice president of external affairs. “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.”

Delta is readying itself to file a suit as a last resort, Carter said.

“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,” Carter said.

The Atlanta-based airline was not given reasonable time to respond to the order, Carter said. He received a call from the department a few minutes before the order was issued. The DOT said it gave Mexico’s government ample time to address the issue and stated in the order the actions taken by the Mexican government were raised by the U.S. government, “with counterparts at the highest levels within the government of Mexico in formal consultations.” When the Mexican government did not “alter course,” the DOT concluded Mexico no longer adhered to obligations of the agreement.

DOT declined to comment as the order is tentative and hasn’t been finalized.

The situation is a case of airlines and customers becoming collateral damage in government-to-government battles, aviation analyst Robert Mann said.

“In this case, it is Delta, Aeromexico and their customers, and the U.S. to [Benito Juarez International Airport] and beyond markets, who stand to lose as the U.S. and Mexico argue over U.S. carrier access to the key Mexico City airport,” Mann said.

Mexico City airport access has always been difficult, Mann said, leading to far less convenient airports being developed and fewer airlines willing to serve it.

Delta flew between the Twin Cities and Mexico’s capital city for several years, but didn’t have enough passengers to support the route and ceased service in August 2011. In 2018, the carrier relaunched nonstop service between Minneapolis-St. Paul International Airport (MSP) and Mexico City through the joint venture with Aeromexico.

Should the joint venture be terminated, 23 nonstop flights on 21 routes into Mexico from Delta’s main U.S. hubs would end. In 2023, Delta reports 86,000 passengers flew to Benito Juarez via MSP.

Several elected officials and regional economic development groups have written letters to the DOT. Gov. Tim Walz, Minnesota’s congressional delegation and Minnesota’s U.S. senators Amy Klobuchar and Tina Smith have asked the agency to reconsider.

“What we’re trying to do is ultimately convince the Department of Transportation that they made a mistake in issuing the tentative order,” Carter said.

If the DOT finalizes the order, it would put an estimated 3,779 jobs at risk, Delta says. Those jobs include pilots, flight attendants, reservations staff, maintenance staff, customer service staff, and management, but also non-airline jobs for people whose employers sell goods and services to airlines. It could also impact the $201 million Mexican tourists spend annually in the U.S.

“That’s something we hate to see as a company,” Carter said.

Delta could ask for more time to wind down the joint venture beyond the October deadline, he said.

“If we don’t hear from them in the coming weeks, we would have to. These things are complex and you can’t do them overnight.”