The Big Reason Hawaiian and JetBlue Oppose Delta’s Aeromexico Joint Venture

Hawaiian Airlines and JetBlue Airways are objecting to Delta Air Lines’ proposal for antitrust immunity with Aeromexico, arguing the deal would set a precedent that may undercut future Open Skies agreements.

If the U.S. Department of Transportation approves Delta’s application, it and Aeromexico could coordinate on schedules and prices, while also sharing revenues. Delta has similar agreements with Air France, KLM, and Alitalia.

In opposing Delta’s application, the two carriers are reprising their roles as boosters of the Open Skies agreements the United States maintains with more than 100 foreign entities. Each airline has aggressively moved to defend the agreements the United States has with Qatar and the United Arab Emirates, pitting them against United Airlines, American Airlines, and Delta, which argue Gulf airlines have an unfair advantage because they may receive government subsidies.

The Mexico case is different. In two recent filings, Hawaiian and JetBlue objected to the Delta/Aeromexico tie-up because they say Delta would be the first U.S. carrier to receive antitrust immunity with an international airline before the United States has reached an Open Skies agreement with the foreign carrier’s government.

The U.S. and Mexico recently liberalized their air service treaty, allowing more airlines to launch more flights. But some restrictions remain, and the skies are not fully open, as they are with the European Union, Japan, and many other countries.

JetBlue objects to Delta’s application in part because it seeks more access to Mexican airports, and it argues the Delta/Aeromexico joint venture without Open Skies will stifle competition.

JetBlue asked the U.S. Department of Transportation to follow “… its well-settled 20 year precedent of requiring an Open Skies agreement before considering a grant of [antitrust immunity], and by only granting [immunity] when there are clear public benefits and competitive entry is guaranteed.”

Hawaiian does not fly to Mexico, so it is not concerned about a direct effect on its business. But Open Skies agreements have been helpful to Hawaiian, allowing it to build a robust a trans-Pacific hub network in Honolulu, with flights to Sydney, Brisbane, Auckland, Tokyo, and Osaka, among others. It wants the U.S. government to negotiate more agreements.

“Granting their request before a true Open Skies agreement has been reached will make it more difficult to reach such an agreement with Mexico and, perhaps more importantly, other countries,” Hawaiian said in a July 6 filing. Hawaiian asked the U.S. Department of Transportation to be, “extremely skeptical,” in considering Delta’s application.

In its initial application, Delta argued the new liberalized air agreement with Mexico satisfies the U.S. government’s typical requirements.

“The existence of liberalized agreements with the United States has long been a public interest factor that is a prerequisite to approval of an [immunization] application,” Delta said.

Both Hawaiian and JetBlue suggested this issue goes beyond Mexico.

Looking Eastward

In making its argument, Hawaiian may be looking ahead to a larger prize – an Open Skies agreement with China. Today, Hawaiian has just one China route, flying three times per week between Honolulu and Beijing. But it may want to expand, and someday an Open Skies agreement would help make that possible.

What Hawaiian would not want, however, is for its competitors to have the chance to win antitrust immunity with Chinese carriers before the U.S. and China reached an Open Skies agreement. If Hawaiian could not find a partner, its business could suffer.

While Hawaiian did not mention China in its filing, JetBlue raised the country in a footnote.

“Such a precedent would extend beyond Latin America,” JetBlue said. “The United States’ other international aviation partners, particularly China, would welcome such a relaxation of the United States’ heretofore consistent requirement for Open Skies before consideration of an [immunity] grant.”