NAFTA Airlines

by Aaron Karp
Dec 07, 2017

“A big part of our mission here is making the world a smaller and smaller and smaller place.” —Delta Air Lines CEO Ed Bastian, Oct. 18, 2017

This quote from Bastian, uttered as he fielded questions from reporters in Atlanta to witness the public debut of Delta’s first Airbus A350-900 in mid-October, reverberated after Delta and WestJet announced their preliminary agreement to form a US-Canada transborder joint venture. Coming just seven months after Delta and Aeromexico kicked off a transborder JV on the US’s southern border, a Delta-WestJet tie-up could lead to the creation of a de facto trans-North American airline with an extensive network spanning the continent.

WestJet CEO Gregg Saretsky has already signaled an interest in using the prospective Delta-WestJet JV as a door to cooperation with Aeromexico (and other Delta global partners, for that matter). Aeromexico is 36%-owned by Delta, which effectively added Mexico City, Monterrey and Guadalajara to its North American hub network of Atlanta, Detroit, Los Angeles, Minneapolis-St. Paul, New York JFK, Salt Lake City and Seattle when it launched the US-Mexico transborder JV. WestJet, with its roots as a point-to-point LCC, is just starting to develop a hub-and-spoke network fueled in part by feeder traffic from its WestJet Encore regional subsidiary.

If the WestJet-Delta JV launches in 2019 as planned, Delta will at least add WestJet-base Calgary to its hub network. But Canada’s second-biggest airline, which will start taking delivery of Boeing 787-9s in 2019 and has its eyes on transpacific flights to China, surely will continue to build its presence across Canada, including in Vancouver and Toronto.

From an air transport perspective, the Mexico-US and US-Canada borders are largely artificial. Were it not for ownership and control restrictions, an “Air North America” would already exist and treat Canada, the US and Mexico as a single market. Delta is pushing in this direction.

The combination of antitrust-immunized JVs across both US borders—with airport facilities co-located and costs and revenue pooled—creates a potentially powerful network that touches not just North America’s major cities, but gives Delta and its partners access to passengers in small markets in all three countries. Those passengers, in turn, get access to an immense global network. You won’t have to live in Atlanta or Mexico City or Toronto to, with perhaps just one connection, get to a Delta A350 headed for Seoul or an Aeromexico 777 headed for Madrid or a WestJet 787 headed for Shanghai.

Expect talks to quickly heat up again to revive the Air Canada-United Airlines transborder JV idea the carriers scrapped in 2012 after regulators, particularly in Ottawa, required too many concessions. The Canadian government has signaled it will start looking at airline antitrust-immunity cases with a broader “public interest” perspective and not nit-pick route-for-route, as it did with Air Canada-United earlier this decade.

Bastian said the Delta-Aeromexico JV has super-charged growth for both carriers on transborder flying. “We’re growing our traffic into Mexico at a double-digit clip and Aeromexico is growing their traffic into the US at a double-digit clip,” he said, adding that the JV is expected to continue to grow “in a significant way.” Imagine the potential of adding another JV traversing the US-Canada border to the equation.

Aaron Karp

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