Rivals vie for Mexico routes

Frontier, United expect to benefit under new pact

By Chris Walsh, Rocky Mountain News
October 15, 2005

Rival airlines United and Frontier have launched a host of new flights from Denver to Mexico in recent years, pushing their competitive battle south of the border.
But a new aviation agreement between the U.S. and Mexico could turn out to be a mixed blessing for the carriers.

The agreement essentially allows three airlines from each country to fly between any U.S. city and any of 14 Mexican destinations. In the past, only two airlines from each country were allowed to serve any of the routes.

The aim of the expanded agreement is to increase service, boost competition and reduce ticket prices.

"This was meant to liberalize the market and enable more service between the two countries," said Bill Mosley, a spokesman for the U.S. Department of Transportation. "Lowering fares certainly is a major part of it."

The agreement unlocks new opportunities for United and Frontier - Denver's two largest carriers - to launch service to Mexico from other U.S. cities.

But it also means the carriers could face more competition on their Mexico routes from Denver because they might face a third rival on some routes. Mexico also has seen a rise in low-fare carriers that might expand service to the U.S., which could put further pressure on United and Frontier.

"This certainly might create price competition in Denver, which could cut the growth of the Mexico opportunity" for Frontier and United, said Mike Shonstrom, an analyst with Shonstrom Research Associates in Denver.

Both carriers acknowledge the competitive threats but say they expect to benefit from the agreement.

United, which plans to increase its flights from Denver to Cabo San Lucas and add service to Cozumel this winter, said it now has the opportunity to apply for routes it couldn't serve before.

"Generally, we view the agreement as good news," said United spokesman Jeff Green. "We definitely hope to see some opportunities, as we can pursue markets that were unavailable to us."

Frontier is optimistic, as well.

"Moving up the limit to three carriers won't affect us too horribly," said Frontier spokesman Joe Hodas. "We don't expect to see a tremendous surge by a third party to come in here and become more competitive than Frontier and United already are."

Both airlines are making efforts to capitalize on the agreement, which is scheduled to go into effect later this month.

Frontier has applied for the third slot to provide service from Chicago to Cancún, previously blocked off because American and ATA already fly the route. It's also trying to get the third spot on the Los Angeles-Cabo route, which American and Alaska serve.

It's part of the carrier's move to expand outside its Denver hub, particularly from U.S. cities to Mexico destinations.

But Frontier already faces competition just trying to get approval to fly the routes. Delta also is applying for the third slot on the Los Angeles-Cabo routes, and two other airlines have applied for the last Chicago-Cancún route.

United plans to apply Monday for the right to fly from Chicago to Cancún and Puerto Vallarta and from Los Angeles to Puerto Vallarta and Cabo, according to documents filed with the U.S. Department of Transportation. It also is waiting for a decision on its bid for Los Angeles-Cancún service.

When several airlines vie for an open slot, the DOT chooses a carrier based on "what's in the best public interest," Mosely said.

The criteria vary depending on the situation and are not set in stone. Some carriers win the rights to a route because they plan to start service immediately, while others are approved for other reasons.

Stuart Klaskin, an aviation consultant in Miami, said he thinks Frontier and United will see increased competition from other carriers in one form or another. But he said that could be offset by rising overall demand for flights to Mexico nationwide.

Klaskin also believes the new agreement is beneficial for the entire airline industry.

"What's happening is that there's this rising tide of demand on both sides of the border," Klaskin said. "So anything that goes toward expanding capacity between the countries, both in terms of trade and tourist links, is a good thing."

More options to Mexico

Denver's two largest airlines fly from Denver InternationalAirport to several hot spots in Mexico.

UNITED

• Current Destinations: Cabo San Lucas, Cancún, Puerto Vallarta and winter service to Ixtapa/Zihuatanejo

•Upcoming(in December): Cozumel

FRONTIER

•Current Destinations: Cabo San Lucas, Cancún,Ixtapa/Zihuatanejo, Mazatlán, Puerto Vallarta.

• Upcoming(in December): Cozumel, Acapulco

A new agreement between the U.S. and Mexico allows three airlinesfrom each country to fly between any U.S. city and any of 14 cities inMexico: Acapulco, Cancún, Cabo San Lucas, Cozumel, Guadalajara,Huatulco, Ixtapa/Zihuatanejo, Loreto, Manzanillo, Mazatlán, Merida,Monterrey, Oaxaca, Puerto Vallarta.

walshc@RockyMountainNews.com or 303-892-2744