Earlier this week, the Federal Aviation Administration (FAA) downgraded Mexico’s safety rating to Category 2 from Category 1. This decision has all kinds of implications for the Mexican airline industry going forward. Let’s investigate further.
Why does the FAA evaluate other countries’ civil aviation authorities?
The FAA has an audit called the International Aviation Safety Assessment (IASA). This process allows the FAA to determine whether another country’s oversight of its air carriers that operate or seek to operate into the US or codeshare with a US airline complies with safety standards established by the International Civil Aviation Organization (ICAO).
FAA focuses on the country’s ability, not a single airline. Going back to what happened earlier this week in Mexico, this means the Mexican airlines aren’t dangerous. Instead, it means that the Mexican Government can’t comply with ICAO’s international standards.
The IASA program was launched in 1992 and divided countries into two categories, one and two.
As it says on FAA’s website,
- Carriers from Category 1 countries are permitted to operate into the US and/or codeshare with US operators.
- Carriers from Category 2 countries that operate into the US have such services limited while they remain under that assessment.
- Additionally, carriers from Category 2 are prohibited from launching new commercial services into the US or codeshare with US airlines.
Meanwhile, US airlines can launch new routes to these countries but they can’t operate their codeshare agreements. In Mexico’s case, Aeromexico and Delta’s codeshare will be at only 50% while the new assessment goes on. The same goes for Volaris and Frontier’s codeshare, both in benefit (oddly enough) for the Mexican airlines, which can get on the revenues earned by the agreement.
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Which countries are under Category 2?
The FAA has audited 92 countries worldwide with the IASA program. So far, 14 have Category 2 grades, according to IASA stats. These are:
- The Organization of Eastern Caribbean States: Antigua & Barbuda, Dominica, Grenada, St. Lucia, St. Vincent and the Grenadines, and St. Kitts and Nevis.
Moreover, countries are removed from the list after four years if they don’t provide air transport services to the US. Therefore, Venezuela will disappear from this list, most likely.
What can Mexico do now?
Unlike Venezuela or any other country on the list, Mexico does have a strong air transport service relationship with the US. This international market has had the strongest rebound from the COVID-19 pandemic.
Therefore, it is essential for the Mexican authorities to regain the Category 1 status as soon as possible, and they know it.
Since the announcement, every single key player in the Mexican industry has issued a statement. The likes of Aeromexico, Volaris, and Viva Aerobus have called the government to act quickly. They have also offered their expertise to solve the 28 deficiencies found by the IASA audit.
Some international organizations like IATA and ALTA have also made public statements. They’ve said that this downgrade will heavily impact the Mexican airline industry. It is unknown how much it will cost the country to regain Category 1 status. Eleven years ago (yeah, it is the second time it happens!) Mexico invested nearly 600 million pesos. It took four months to regain the status.
The Mexican carriers can’t grow in the US market for the foreseeable future; this could only benefit US operators who already hold the majority of the market share.
Volaris and Viva Aerobus have already stated that they will focus on growing in the domestic market and elsewhere (Colombia, for example), while Mexico remains in Category 2. Meanwhile, sources at Aeromexico have said that FAA’s downgrade will not impact its Chapter 11 bankruptcy process. Nevertheless, the airline may reject more leasing contracts to cope with the lost market in the US.
How long do you think it will take Mexican authorities to regain Category 1? Let us know in the comments.