Southwest Airlines Co. (NYSE:LUV) has announced plans to expand its services in Mexico. The announcement comes following the approval on revised bilateral agreement between the US and Mexico by the Mexican senate last week.
CEO Gary Kelly said while addressing employees: “This is major progress and certainly welcome news…. We have plans in the works for additional service to and from Mexico, so we’ll look forward to making those announcements just as soon as this agreement becomes fully effective.”
Under the ratified air-services agreement between the two countries, a number of restrictions on air travel will be lifted — opening up skies for potential new routes to the airline’s list of destinations. Although the agreement was originally announced in November 2014, it faced numerous hurdles before receiving a legislative sign-off.
Approval from the Mexican Senate was a major hurdle, and according to Mr. Kelly, there still are a few things left in the process. He further said: “It’s pretty much done, but the bilateral agreement is not effective yet….. So just a note of caution as there’s still some diplomatic work to be done between the two countries.”
The airline operates flights to four Mexican cities, including Mexico City, Cabo San Lucas, Cancun, and Puerto Vallarta. If it adds more flights to Mexico, travelers from its main hub Dallas will have to connect through a different US city before entering Mexico.
Lately, Southwest has been vigorously working to strengthen its position in international air travel, especially in Central America and Mexico. The airline has also added new domestic destinations, such as flights to LA Basin, Pittsburgh, Portland, San Diego, Milwaukee, Sacramento, Baltimore, Nashville, and Charlotte.
Delta Air Lines has also been looking to expand operations in Mexico. It recently gained conditional approval from the Mexico’s federal competition commission to sign a code-sharing agreement with Aeromexico. Under the agreement, both parties will have to give up some of their slots at Mexico City International Airport.
Southwest posted strong first-quarter results despite industrial and forex headwinds. It was the only airline to report growth for the quarter, excluding gains from low fuel costs throughout the industry. It is also actively working to introduce new technology to improve overall efficiency. We advise investors to keep a close eye on Southwest stock, as it looks to improve its position in the US airline industry.
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Southwest Airlines eyes Mexico for future growth
