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Mexicana Airlines Bankrupt

Debt-ridden Mexicana files for bankruptcy protection in US and Mexico

Hugo Martín  Aug 03, 2010

Mexicana Airlines, the busiest foreign carrier at Los Angeles International Airport, announced Tuesday that it had filed for bankruptcy protection in the U.S. and Mexico, blaming much of its financial trouble on high labor costs.

The debt-ridden airline made the announcement one day after suspending a total of 31 flights in Mexico and across the U.S., including some of its departures from Los Angeles, New York, Chicago, San Jose, Sacramento, San Francisco and Oakland.

At LAX, the airline put a hold on four of 15 daily flights to Puerto Vallarta, Guadalajara and Mexico City.

The Mexico City-based airline promised to contact passengers with tickets on canceled flights for a refund or to rebook them on another Mexicana flight or with another carrier.

Mexicana also blames its financial woes on the global financial crisis and the H1N1 (swine flu) epidemic in Mexico that has devastated the travel and tourism industry in the country.

Mexicana flies to more than 65 national and international destinations, including the U.S., Canada, Central and South America and Europe. It operates nearly 70 planes and carried 11.1 million passengers in 2009, according to the company website.

The airline's parent company, Nuevo Grupo Aeronautico, also operates two low-cost domestic airlines, Click and Link, which will continue to operate without interruption, according to the airline.

In a statement, the airline said the bankruptcy protection would allow it to restructure its liabilities and "bring its cost structure, particularly labor costs, into line with market conditions."

Mexicana has put most of the blame for its financial crisis on pilot and flight attendant salaries, which the airline says are up to 185% higher than the pay of their counterparts at Mexican airlines like Volaris or Interjet.

The airline has been calling for new contracts that would cut wages for pilots by 41% and impose a 39% wage cut for flight attendants. Mexicana also proposed reducing its overall workforce of pilots and attendants by 40%.

Among other ideas, the airline's management has suggested the unions buy Mexicana for one peso on the condition that the labor groups take responsibility for the airline's debt, an idea the unions rejected.

Lizette Clavel Sanchez, the secretary general of Mexicana's flight attendants union, said Tuesday that the airline's employees were willing to keep negotiating with Mexicana, but only in "transparency and without abuse."

Clavel said the airline's contention that Mexicana workers are paid significantly more than those at other airlines in Mexico is like "comparing pears and apples."

"Those are low-cost airlines that don't have the same service, technology and flight times we do. Airlines like Volaris or Interjet don't make flights longer than four hours. We have flights that are as long as 16 hours," Clavel said. "It is wrong to quantify our salaries that way."

Debt-ridden Mexicana files for bankruptcy protection in  US and Mexico
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