News: AMX UPDATE 2-US raises Mexico air safety rating in boost for country's airlines

(Updates with FAA confirmation in paragraphs 1 and 4, background in paragraphs 5-7, 9)

The Federal Aviation Administration (FAA) said on Thursday it has upgraded Mexico's air safety rating, a move that will allow Mexican carriers to expand U.S. routes and add new service.

Reuters reported the planned announcement earlier Thursday.

The May 2021 downgrade by the U.S. regulator was a major blow to Mexico carriers, as U.S. airlines were able to scoop up market share. Mexico overhauled its civil aviation law, but faced several hurdles and spent months in recovering the Category 1 rating.

The return of Mexico to the highest aviation safety rating followed "more than two years of close work between the countries' civil aviation authorities," the FAA said.

Airlines like Aeromexico and Volaris VOLARA.MX can now add new U.S. routes and potentially carry out marketing agreements with U.S. carriers. The upgrade also means U.S. airlines can resume marketing and selling tickets with their names and designator codes on Mexican-operated flights.

Mexico remains the top international destination for U.S. airline passengers. Through July, 23.4 million passengers were on U.S.-Mexico flights, significantly more than the 17.4 million between the U.S. and Canada, the second biggest destination.

Mexico was downgraded by the FAA to a Category 2 safety rating in 2021 after the agency found the country did not meet International Civil Aviation Organization (ICAO) safety standards.

The FAA provided expertise and resources to "resolve the safety issues that led to the downgrade."

The Biden administration had told Mexico last week it would officially recover its Category 1 rating, Mexican President Andres Manuel Lopez Obrador said on Friday.

In a June audit, the FAA raised concerns about Mexico's process for post-accident investigations and for carrying out medical exams for sector employees, meeting minutes obtained by Reuters showed.