United States and Mexico Reach Modernised Aviation Agreement

The new agreement made by the US Department for Transportation will allow unlimited market access for US and Mexican carriers.

Improved intermodal rights and pricing flexibility, as well as increased economical ties between the two countries will all become apparent due to the new agreement, which will enter into force until January 1, 2016.

Some city-pair markets will see the entrance of new carriers for the first time in many years, and airlines will have the opportunity to offer new services to destinations they would not have been able to previously, as well as offering services from the U.S to Mexico and further afield.

US Transportation Secretary Anthony Foxx said: “Travellers, shippers, airline and the economies of both countries will benefit from competitive pricing and more convenient air service,” he said.

“This agreement is the result of the commitment on both sides of the border to strengthen the strong bonds of trade and tourism between our two countries, and demonstrate our shared commitment to a competitive, market-based international economic system.”

Anthony Foxx
U.S Transportation Secretary

The agreement not only expand opportunities for air services and passengers, but it will encourage price competition between airlines. Cargo airlines, for the first time, will also have expanded opportunities to provide service to new destinations that were not available under the current agreement.

"This agreement is the result of the commitment on both sides of the border to strengthen the strong bonds of trade and tourism between our two countries, and demonstrate our shared commitment to a competitive, market-based international economic system," added Foxx.

Airports Council International-North America (ACI-NA) President and CEO Kevin M. Burke welcomed the move, saying that cooperation and collaboration is an essential part of the global aviation system.

“The historic air transport agreement between the United States and Mexico, when implemented, will provide new opportunities for U.S. and Mexican airports through increased access to price and service competition for passenger travel and cargo shipping," he said.

The Mexico-US trans-border market has particularly emerged as a key battleground as Mexico’s low-cost carriers and Aeromexico try to regain some of the market share lost by Mexican carriers since the collapse of Mexicana in 2011.

The current bilateral restrictions limit access between the US and Mexico and this restriction is highly regulated by each Government.

Low-cost Mexican carrier, Interjet airlines which emerged in 2005, picked up a proportion of Mexicana’s seat capacity from 2011, and Mexican low-cost carrier, Volaris has also seen a significant increase in seats from the same year as Mexicana’s collapse.

American Airlines has the dominant share of capacity (17.9 per cent), but if we include the US Airways capacity, taking into consideration its integration with AA in the coming year, this rises to 25.2 per cent.

US carriers such as AirTran and JetBlue have seen a substantial increase in capacity since 2010, with AirTran (now part of Southwest Airlines) registering a 233 per cent increase in capacity between 2010 and 2014.

In the chart, below, we highlight the ten largest O&D city pairs between Mexico and the United States based on bi-directional O&D passenger demand in 2013.  The enormous potential of this market is clear when you consider these ten routes account for just one fifth of the total passenger demand between the two countries last year.

Data provided by Sabre