Anthony Foxx, U.S. transportation secretary, says, “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.”
Starting Jan. 1, 2016, U.S. cargo airlines will have a greater opportunity to grab a larger piece of the air freight trade between Mexico and the United States.
Carriers from the two countries have been restricted by the number of flights, but not any more. In addition to removing the city-pair barriers spelled out in a 2005 revision to the first air services agreement between the two nations — which was created in 1960 — the U.S. Transportation Department said the pact includes “improved intermodal rights, pricing flexibility and other important commercial rights.”
With a new air services agreement between the U.S. and Mexican governments, air cargo carriers will even be able to use Mexico’s airports as a jumping-off point for routes into Latin America, something not allowed under the previous agreement.
According to DOT, by removing the limit on the number of flights into a city and opening up the entirety of the two countries to flights, new carriers could start flying into Mexico, and vice versa. The agency also pointed to the possibility of new services being added in Mexican cities that only receive limited routings due to the outdated restrictions.
“Travelers, shippers, airlines and the economies of both countries will benefit from competitive pricing and more convenient air service,” Transportation Secretary Anthony Foxx said in a statement. “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.”
According to the Commerce Department, total trade with Mexico by air grew from $1.95 billion in 1990 to $13.47 billion in 2000 (a peak that wasn’t surpassed again until 2009). In 2010, trade between the United States and Mexico had topped $18 billion, but three years later, air trade equaled just more than $15 billion, the last year in a steady downfall from 2010’s result. Of course, air freight is one of the smallest pieces of a transportation puzzle that reached $506.61 billion in 2013. The biggest part, by far, is trucking, which resulted in $335.51 that year.
In its latest World Air Cargo Forecast, Boeing predicted air trade between Mexico and the United States and Canada will grow by 5.4 percent annually until 2035.
Aviation industry players widely celebrated the recent move between the United States and Mexico. In a statement, the group Airlines for America said granting carriers the ability to fly more routes into Mexico will help the U.S. economy.
“U.S. airlines are critical drivers of economic growth and jobs, and opening the Mexican market fully to all U.S. carriers at major tourist destinations benefits customers, employees and our overall economy,” the group stated.
Kevin Burke, president and chief executive officer of Airports Council International-North America, pointed to the importance of collaboration between governments to ensure a top-notch supply chain.
“Today’s 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 in a statement. “This modernized agreement, which will boost tourism and trade, strengthens the important economic relationship the United States shares with Mexico.”
For express carrier UPS, the agreement will strengthen its intermodal network between Mexico and bordering U.S. states. Officials stated that when implemented next year, the pact will help UPS continue the strong growth it has recently experienced in Mexico, where it currently operates international services from 60 airports.
Jim Barber, president of UPS International, said the agreement will foster “competitiveness and connectivity in the global supply chain.”
According to news reports out of Mexico, pilot unions aren’t pleased about the new developments. Venezuela-based TeleSUR reported these unions believe that the air services agreement could eventually lead to the decline of national airlines because of competition from U.S. carriers. Protests occurred in Mexico City during negotiations between the U.S. and Mexican governments, with the news service reporting that protesters feared Mexican airlines would lose in the deal.
Japanese airline All Nippon Airways is also looking to gain a bigger foothold in the U.S. market and has asked for approval to start a joint venture with United Airlines for air freight flights between Asia and the United States. In November, ANA filed an antitrust immunity application with Japan’s Ministry of Land, Infrastructure, Transport and Tourism. The application asked that the carriers be able to “jointly manage transpacific air cargo business activities including scheduling, pricing and sales,” according to an ANA press release.
In 2010, Japan approved ANA’s application to work with United Continental Holdings on transpacific flights geared at the passenger segment. On Oct. 6, 2010, DOT gave the plan the unofficial go-ahead. The carriers launched the joint venture in 2011. At the same time, DOT had granted preliminary approval to a link-up between American Airlines and Japan Airlines.
ANA and Lufthansa Cargo received antitrust immunity from the Japanese government in September to create a similar cargo agreement. The carriers are to launch a cargo joint venture between Japan and Europe.
This column was published in the January 2015 issue of American Shipper.