Mexico's Hot for Low-Cost Carriers

Going forward, Mexico City "is not out of the question, but we have to get Guadalajara under our belt first," Hodas says. Also, he acknowledged, Frontier has looked beyond Mexico into other Caribbean leisure destinations such as San Jose, Costa Rica. "It's by no means imminent, but it would make logical sense," he says.

What's clear is that other low-priced carriers see potential in Mexico. A December expansion of the aviation agreement between the U.S. and Mexico opened 14 cities to increased service, allowing for the recent approval not only of Frontier's service, but also for JetBlue (JBLU Quote) to fly between Cancun and New York's Kennedy International Airport.

The flights, expected to begin in October, would be JetBlue's first to Mexico. The carrier currently flies internationally to Bermuda and to Santiago, the Dominican Republic, and plans to start Aruba service in September. International routes account for about 2% of its flying.

In its request for DOT approval of the Cancun route, JetBlue suggested that its low fares would stimulate travel in the market, increasing the number of daily passengers to 832 from 566 in the second quarter of 2005.

JetBlue spokesman Bryan Baldwin says the company's long-term international aspirations "are to partner with international carriers in nontraditional ways," taking advantage of the proximity to the roughly 100 international airlines at Kennedy, but without adding the cost of standard code-share arrangements.

Meanwhile, AirTran Airways (AAI Quote) was awarded the authority to begin Atlanta-Cancun service last year, but delayed the startup after Hurricane Wilma. The airline will re-evaluate the situation later this summer. It also flies between Atlanta and Freeport in the Bahamas.

Southwest Airlines (LUV Quote) has a code-share arrangement with ATA Airlines, which serves Cancun and Guadalajara from Midway Airport in Chicago. Southwest is readying its reservations system to accommodate international pricing and transactions by 2009.

"Once that is done, an agreement will be in place to code-share on our international flights," said ATA Senior Vice President Josef Loew in a recent interview.

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