Southwest Airlines says Volaris Costa Rica’s application for permits to start U.S. flights should be discounted as they claim Volaris doesn’t fulfill ownership requirements under the existing U.S.-Costa Rica air transport agreement, as reported in airline industry news recently.

The Dallas-based airline file an objection with the U.S. Transportation Department (DOT), arguing that the bilateral agreement requires Costa Rican citizens to have “substantial ownership and effective control” of an airline in order to qualify for an exemption and an air carrier permit.

Southwest contends that Volaris Costa Rica (Volaris CR) is not a Costa Rican company but is wholly owned by their Mexican parent airline, Volaris, thus failing the requirements for a Foreign Air Carrier Permit (FACP) and Exemption Authority.

Volaris CR seeks a permit under the 1997 US-Costa Rica Air Transport Agreement, and their application states they are wholly owned by Controladora Vuela Compania de Aviacion, a publicly-traded Mexican company, but explains that Volaris CR will be managed and operated by Costa Rican citizens, with the board and senior management to be predominantly Costa Rican.

Based on this, Volaris is asking the DOT to waive the ownership requirements and cites past examples of this practice with other airlines.

However, Southwest said those cases differ substantially in that most of those airlines had at least 50 percent ownership by their homeland, whereas Volaris CR has no Costa Rican ownership.

Southwest’s objects to Volaris’ petition saying the company, which has no Costa Rican shareholders, is attempting to use its Costa Rican subsidiary to gain special privileges that will place U.S. carriers at a disadvantage against their Mexican counterparts.

 

The U.S. carrier also criticises Volaris CR’s claim that it will be controlled by Costa Rican citizens when no Costa Rican President or CEO have been named, and the two Costa Rican board members are over the age of 70. The third board member, Mexican Jaime Esteban Pous Fernandez, is also the Chief Legal Officer of Volaris.

Southwest adds in their complaint that none of the senior key management officials named by Volaris CR hold any strategic positions, and claims the petition is an attempt by the Mexican company to gain seventh freedom rights between Costa Rica and the United States, undermining the latest U.S. – Mexico bilateral air services agreement.

Seventh freedom rights, in airline terminology, refer to the right to carry passengers or cargo between two foreign countries without any continuing service to one’s own country.

 

Volaris CR positioned itself as a budget carrier in late November last year and currently offers regular flights from its San José Juan Santamaría hub to Guatemala City, San Salvador, and Managua.

Chief Commercial Officer of Houston Airport System, Ian Wadsworth, welcomed Volaris CR’s application, saying that “air services between Latin America and Houston are a vital element in the City’s global web of international air transportation.”

The matter is still under consideration by the DOT.