Mexico approves Aeromexico-Delta joint venture; U.S. approval awaited

Mexico’s federal competition commission (Cofece) approved Aeromexico’s deal with Delta with certain conditions, Aeromexico said in a statement on Monday May 2.

Aeromexico and Delta are seeking a broader alliance, and they have asked the U.S. government for immunity from antitrust law so they can coordinate better flight connection times and prices.

Delta expects to increase its stake in Aeromexico during the second half of 2016, to seize the economic opportunities offered by Mexico, the incoming Delta chief executive, Ed Bastian, said.

“The reason why we are investing in Aeroméxico and are excited Aeroméxico, is that (Mexico’s) a wonderful country with 120 million people, is one of the closest in the world trading partners,” Bastian said at a recent news conference.

Delta, with 17% of the outstanding shares of the Mexican company, seeks to raise its stake to 49% of the shares.

This would be achieved through a public equity offering, an operation that was conditionally approved by the antitrust authority in Mexico, the Federal Competition Commission (CFC).

This aims to improve the position of Delta in Latin America, which also benefits customers of Aeromexico, the US company said.

Bastian, who takes over as CEO of Delta on May 2, said Aeromexico is growing at a faster rate00 than Delta; coupled with this is the fact that Mexico City is the world’s largest metropolis, so Delta wants to access and take advantage of the opportunities offered by the proximity to the city.

On April 26, the Mexican Senate approved the new air transport agreement between the two countries, which opens the door for deeper alliance between both airlines.

Although the agreement does not open the skies between the US and Mexico, the CEO is confident that this will happen soon and will allow Delta to work more closely with Aeromexico.

He added that he hopes the union with Aeromexico will close in the third or fourth quarter of 2016.

HOW HAS THE RELATIONSHIP BEEN BETWEEN BOTH COMPANIES?

The relationship between the two companies began in 1994 with the signing of an agreement on trade cooperation. In 2000, Delta and Aeromexico participated in the SkyTeam, which today is an alliance of 20 airlines.

In 2006, Delta signed an alliance with Aeroméxico maintenance services (MRO in Guadalajara) and in August 2011, the companies announced an exclusive long-term trade agreement.

Today Delta and Aeromexico offer a total of 103 destinations through codeshares representing more than 900 daily flights in six countries.

In 2012, Delta invested $65 million USD in Aeroméxico allowing it to acquire 4.17% of its shares and have a seat on the board.

In March 2014, both airlines inaugurated TechOps Mexico, located near the International Airport of Queretaro.

A year later, on March 31, 2015, the companies disclosed that they submitted to the US Department of Transportation (DOT) and to the CFC a request for a new cooperation agreement on flights between Mexico and the United States.

Sources:

reuters.com

expansion.mx

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