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U.S. aviation regulators

Air-Safety Rating downgraded for Mexico

Jul 31, 2010

U.S. aviation regulators downgraded Mexico's safety ranking, effectively restricting its airlines from partnering with American carriers or expanding service between the two countries.

Mexico does not comply with international air carrier safety standards and has been downgraded by category, meaning it cannot open new air routes to the United States, the US Federal Aviation Administration said Friday.

"While Mexico has been responsive to the FAA's findings and has made significant improvements in recent months, it was unable to fully comply with all of the international safety standards," the FAA said in a statement.
Downgraded from Category 1 to Category 2 rating, Mexico "either lacks laws or regulations" to ensure air carriers comply with International Civil Aviation Organization (ICAO) standards, or its civil aviation authority is "deficient" in some areas.

The new category means "Mexican air carriers cannot establish new service to the United States, although they are allowed to maintain existing service," the FAA said.

The agency said it was "committed to working closely with the Mexican government and providing technical assistance to help Mexico regain its Category 1 rating."

The decision, announced Friday afternoon by the Federal Aviation Administration, was prompted by concerns about lax Mexican government oversight of the country's airlines.

The move is likely to have important economic and symbolic impact, according to U.S. and foreign airline-industry officials. Under the decision, Mexican airlines are restricted from codesharing‚ÄĒor using U.S. as well as Mexican flight numbers‚ÄĒon routes flown in conjunction with U.S. partners, including Delta Air Lines Inc. and AMR Corp.'s American Airlines.

Until the safety downgrade is removed, a process that usually takes at least several months, Mexican carriers also will be restricted from expanding their service to the U.S.

The FAA's move to downgrade Mexico to Category 2 from Category 1 under the agency's international safety assessment program also creates a political embarrassment a close U.S. ally. The last time the FAA took such a step was in late 2008, when it downgraded Israel and faulted its regulators for having a shortage of government inspectors. The FAA's website still lists Israel in Category 2.

The debate over Mexico's downgrade was sensitive enough that officials from the FAA and the Department of Transportation sought White House concurrence, a U.S. industry official familiar with the matter said. A White House spokesman declined to comment.

The U.S. rankings aren't intended to gauge individual airline safety systems or procedures, and aren't directly tied to recent airline accidents or incidents. Instead, FAA safety experts assess the adequacy of laws, regulations and day-to-day oversight of carriers by a specific government. Foreign regulators are briefed on the decision, and in most cases pledge to work with the FAA to correct deficiencies.

In 2009, U.S. citizens made more than 5.2 million air trips to Mexico, down 10.6% from 2008, a drop in travel attributed to swine-flu concerns.

In its announcement Friday, the FAA said Mexico "has been responsive" to the FAA's concerns and "has made significant improvements in recent months," but was "unable to fully comply with all of the [mandatory] international safety standards."

Mexico's Communications and Transportation Ministry said the FAA's decision was prompted in part by questions about the training of regulators and inspections of airlines. Transport Minister Humberto Trevino said growth in Mexico's airline industry over the past decade has outpaced the country's safety-oversight programs, and said the FAA notified the Mexican government in January of its intentions. "We're working hand-in-hand with the FAA on a strategy of corrective actions," he said.

Details of the FAA reviews that led to the decision aren't released. The agency typically doesn't elaborate on its findings. That's partly why such decisions have prompted controversy overseas. Critics in Latin America, Asia and other regions have complained that U.S. carriers are in a position to benefit by picking up additional traffic on certain routes.

Other countries downgraded in the past few years by the FAA include Indonesia, Croatia, Ukraine and the Philippines. Many other countries also are listed by the FAA as deficient in safety oversight, though most of those didn't have any airlines serving the U.S.

The decision to crack down on Mexico, a major trade partner with extensive air links to the U.S., surprised some airline officials. Local regulators apparently hadn't indicated they were having trouble complying with FAA safety-oversight standards, as those in other countries have typically done.

The FAA's primary safety concern, according to one person briefed on the discussions, was the chronic shortage of government inspectors. As late as last week, Mexican officials presented a plan to hire dozens of additional inspectors. But in the end, according this person, the FAA determined that promises weren't enough. An FAA team may return to Mexico and reassess the situation before the end of the year.

The Mexican situation, however, appears unusual because FAA safety officials‚ÄĒlike their counterparts in Europe‚ÄĒgenerally try to avoid punishing countries where they see progress toward safety improvements.Often, threats of a downgrade are enough to prompt governments to shake up the leadership of their aviation agencies and boost safety-oversight budgets. But this time the FAA opted for a stick rather than a carrot, suggesting that senior Mexican aviation officials miscalculated by overly relying on the FAA's patience.

The FAA previously seemed poised to downgrade India and Thailand, two large and fast-growing aviation markets. But both countries avoided downgrades in the wake of extensive consultations with the FAA, and after promising to substantially step up oversight of carriers, hiring large numbers of additional inspectors and taking steps to ensure greater independence for their regulators.

Since then, both countries have suffered high-profile accidents involving carriers they oversee.

Atlanta-based Delta currently places its DL code on about 140 AeroMexico flights a day, representing less than 1% of its global operations. AeroMexico is a member of SkyTeam, the marketing group anchored by Delta and Air France-KLM SA.

If Delta is forced to drop the code shares, passengers who have tickets to fly under a Delta code on an AeroMexico flight would have to be reticketed or could be rebooked on one of the U.S. carrier's own flights. The FAA downgrade wouldn't affect AeroMexico putting its passengers on Delta flights under the code-share arrangement.

A Delta spokesman said the carrier will remove its code from AeroMexico's flights, "will work proactively to reaccommodate any travelers affected by this change" and expects "minimal impact" to passengers. It reiterated that its own Mexico routes won't be affected.

The FAA's decision also is expected to negatively impact business for Mexicana, which may face a financial crunch and last year joined the Oneworld group, led by American's parent. On Thursday, Canadian authorities seized two jets leased by Mexicana de Aviacion, as the company is known, fueling speculation the airline faces trouble in meeting its financial obligations. The airline attributed the seizure of the planes to a "misunderstanding."

US Airways and Continental could benefit from the changes, because of their extensive U.S.-Mexico services, and the impact on Delta could be muted by boosting business for its own flights to and from Mexico.

The move could also derail plans by Southwest Airlines Co. to offer its first international code share as a pact with Mexican low-cost operator Volaris. The arrangement was due to start later this year, some months behind schedule. Southwest didn't immediately respond to a request for comment.

Air-Safety Rating downgraded for Mexico
Source: various sources including Wall Street Journal

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