The U.S. government has told airline companies Delta Air Lines (DAL) and Aeromexico to end their nearly 10-year partnership by January 1. This joint venture, which began in 2016, lets them coordinate flight times and pricing on routes between the U.S. and Mexico. However, the Department of Transportation argues that the partnership gives them too much power, especially in the U.S.-Mexico City market, which hurts competition and could be bad for consumers and other airlines.
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In response, both airlines said they are disappointed and are reviewing the decision. Delta warned that the move could hurt American jobs, local communities, and travelers who fly between the two countries. Nevertheless, Aeromexico added that even if the joint venture ends, passengers will still be able to book flights with either airline and earn or use frequent flyer miles on both. Interestingly, the Biden administration had also considered removing the legal protection that allowed the partnership to operate.
This order follows months of back-and-forth over cross-border airline competition. In July, the Department of Transportation proposed ending the deal, but Delta and Aeromexico pushed back by saying that the partnership added $310 million to the U.S. economy and that losing it would benefit their competitors instead. It’s worth noting that this ruling does not affect Delta’s 20% ownership stake in Aeromexico.
Is DAL Stock a Good Buy?
Turning to Wall Street, analysts have a Strong Buy consensus rating on DAL stock based on 12 Buys assigned in the past three months, as indicated by the graphic below. Furthermore, the average DAL price target of $70.13 per share implies 20.7% upside potential.
