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Compania Mexicana de Aviacion

Ticket sales suspended by Mexicana

Ken Parks  Aug 05, 2010

MEXICO CITY - Mexican airline Compania Mexicana de Aviacion has suspended ticket sales as it seeks to pressure the unions representing its workers to accept deep cuts to salaries and benefits.

Mexicana, as the airline is known, stopped selling tickets at 7 p.m. EDT Wednesday, but will continue to operate its international flights in order to protect those customers who already purchased tickets, the company said in a press release.

Mexicana's holding company, Nuevo Grupo Aeronautico, will continue to provide domestic air service through its low cost subsidiaries MexicanaClick and MexicanaLink.

"The decision affects only Compania Mexicana de Aviacion ticket sales. MexicanaClick and MexicanaLink are independent carriers and will therefore continue to sell and operate domestic flights as normal," Mexicana said.

Mexicana, which filed for protection from its creditors in Mexico and the U.S. on Monday, cancelled or trimmed several international and domestic routes earlier this week.

The troubled airline is seeking to reduce its crew staffing by 40%, slash pilots' wages and benefits by 41% and cut flight attendants' salaries by 39% in order to become financially viable. Unions representing pilots and flight attendants have rejected management's demands.

The company is also fighting to keep its aircraft from being seized by creditors. Two of Mexicana's 64 planes were grounded last Friday by a court in Canada at the request of creditors, while a third was grounded in Chicago.

Mexicana traces its roots to the 1920s and, along with Aeromexico, is one of Mexico's two legacy carriers. The government rescued both companies following Mexico's 1995 financial crisis and sold them to private investors about a decade later. Mexican hotel chain Grupo Posadas bought Mexicana in 2005 for $165.5 million plus debt and other obligations, implying an enterprise value of about $1.46 billion.

Mexicana came under financial distress last year amid a deep recession and an outbreak of A/H1N1 influenza that scared off foreign tourists. Its financial situation became critical after state development bank Bancomext refused to guarantee a portion of a proposed $250 million debt issuance in May.

The airline said it had lost $350 million since 2007 and listed debt of more than $1 billion in its bankruptcy petition. Mexico's No.3 banking concern, Grupo Financiero Banorte SAB, said Wednesday that it had a loan for 1.58 billion pesos ($126.1 million) outstanding with a company related to Compania Mexicana de Aviacion.

Ticket sales suspended by Mexicana
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Source: Dow Jones Newswires

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