The FAA just downgraded Mexico's air safety rating. Here's what that actually means.

The U.S. Federal Aviation Administration said on Tuesday that it would downgrade Mexico's aviation safety rating from Category 1 to Category 2 on its aviation safety scale, a move that could have major consequences as travel demand to Mexico reaches an all-time high.

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The downgrade comes following a review of Mexico's civil aviation regulators that took place from October 2020 to February 2021. News of the coming downgrade was first reported by Reuters on Friday.

Countries designated as Category 2 are considered by the FAA to not meet international safety standards set by the International Civil Aviation Organization (ICAO), the United Nations body overseeing global air travel.

Under the Category 2 designation of the FAA's International Aviation Safety Assessment Program (IASA), Mexican airlines could continue to operate existing service to the U.S. However, they would be barred from launching new routes or frequencies, and could not codeshare with U.S. airline partners.

Notably, according to a source at the FAA who is familiar with the matter, Mexican carriers are allowed to continue to operate any flights that were previously authorized. That means that if an airline had suspended frequencies or routes due to the pandemic, but were still authorized to operate them, they are still allowed to bring that service back despite the Category 2 downgrade.

However, those airlines would be required to continue using the previously authorized aircraft type, meaning they would have no flexibility to upgague or downgague the aircraft to adjust capacity that way.

The news has the most immediate implications for Delta Air Lines, which code-shares extensively with fellow SkyTeam member and joint venture partner Aeromexico. Delta owns a 49% stake in the Mexican flagship airline. The two airlines plan to operate about 4,000 flights between Mexico and the U.S. in June, according to data accessed through Cirium, and more than 4,300 in July.

Speaking at the Wolfe Research Transportation and Industrials conference on Tuesday, ahead of the FAA announcement, Delta President Glen Hauenstein said that even without the codeshare the airline would continue to offer connections with Aeromexico, and expressed confidence in the carrier.

"We believe Aeromexico is incredibly safe," Hauenstein said. "This is about the Mexican version of the FAA having some of the right protocols in place."

"We have no issue with the safety of Aeromexico itself," he added, noting that Delta frequent flyers would continue to earn SkyMiles and elite credit on Aeromexico flights.

Passengers who were already booked on flights sold by Delta but operated by Aeromexico under a Delta flight number will likely have their tickets reissued, a spokesperson for Delta said.

"For customers who have booked a flight with Delta that is operated by Aeromexico, Delta may reissue their reservation onto the corresponding Aeromexico-operated flight," the spokesperson said in a statement. "Delta apologizes for any inconvenience this may cause our customers, and will continue to coordinate with Aeromexico to minimize any disruptions."

Reuters previously reported that the FAA's concerns involve Mexico's oversight of airlines, rather than acute flight safety issues or problems with any individual or group of carriers.

The FAA said in a statement that it was "fully committed to helping the Mexican aviation authority improve its safety oversight system to a level that meets ICAO standards," at which point the country could return to a Category 1 rating.

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Mexico has been among the most popular destinations during the COVID-19 pandemic. U.S. airlines have redirected capacity to the market from other, less-feasible markets, such as Europe and Asia.

The FAA downgraded Mexico in 2010, but returned the country's Category 1 rating within about four months.

As of May 25, there were eight Category 2 designations, aside from Mexico, on a list maintained by the FAA: Bangladesh, Curacao, Ghana, Malaysia, the Organization of Eastern Caribbean States, Pakistan, Thailand and Venezuela. Countries are removed from the Category 2 list after four years if they do not have service to the U.S., do not codeshare with U.S. airlines, and do not have any significant interaction with the FAA.