Wednesday, March 2, 2011

Mexicana remains grounded

The latest plan to put troubled airline Mexicana back in the skies has flopped after a tiny boutique investment firm interested in buying the company failed to inject the money needed to restart operations.

A business plan from relatively unknown PC Capital was chosen by a judge-appointed mediator in November as the best option to relaunch debt-ridden Mexicana. The pick was backed by Mexico's communications and labour ministries.

In a joint statement released on Wednesday, the ministries said they regretted PC Capital had not produced investors to restructure Mexicana and were suspending talks with the firm.

Mexicana de Aviacion was one of Mexico's two major airlines. It ceased operations in late August, swamped by its financial liabilities, grounding passengers in Mexico and abroad and leaving thousands of ground workers, pilots and flight attendants with no jobs. Its affiliated carriers, Link and Click, also stopped flying.

The three companies were granted creditor protection in Mexico and the United States but have unsuccessfully tried to restart operations as several investors approached them with aggressive staff-cutting plans, but with insufficient money to pay lagging salaries and severance.

The company needed to restructure at least USD$800 million in debt, according to the latest available information.

Mexicana is one of the oldest carriers in Latin America and its demise in 2010 led competitors to sharply increase ticket prices as demand for international routes were suddenly left unserved. The airline controlled many routes into the United States which were its most valuable assets.

Domestic airlines AeroMexico, Interjet and Volaris have increased market share in recent months.


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