Aeroméxico Asks Authorities to Terminate Labor Contracts

Aeroméxico requested the termination of its agreements with pilot and flight attendant unions as part of the financial restructuration the company has been undergoing due to the COVID-19 crisis. The move, which the airline claims is essential to “face the adverse financial, operational and structural effects on the airline,” comes after weeks of failed negotiations with its labor unions.

Mexico’s flagship airline has been in savings mode since the COVID-19 outbreak drastically shrank demand and cash flow, which forced the airline to file for Chapter 11 bankruptcy protection in June 30 after months of dragging traffic, reported MBN.

Back in April, Grupo Aeroméxico reported that passenger traffic had shrank by 91.1 percent year-on-year. The following months would be similarly slow, with air traffic shrinking by 92.4 percent in May and 86.1 percent in June. In its 2Q20 report, Grupo Aeroméxico indicated an 84.5 percent year-on-year contraction in revenue for a total of MX$2.6 billion (US$120 million).

While 3Q20 was better with a 67.6 percent increase in capacity in comparison to the previous quarter, the airline was still facing lower demand than the previous year and it ended up closing 3Q20 with a negative MX$381 million (US$18.1 million) EBITDAR and a MX$3.6 billion (US$170 million) loss, as mentioned in a previous MBN article. Traffic remained low for the rest of 2020. Grupo Aeroméxico closed the year with 1.12 million passengers in December, 36.7 percent less than the previous year, but the passenger droughts of the previous months caused the airline to report a 54.2 percent contraction in passenger traffic during 2020. In better news, the airline reactivated its Boeing 737 Max during December after local authorities lifted the aircraft’s 20-month grounding. The plane is now flying to Mexico City, Cancun, Guadalajara, Monterrey and Tijuana.

As part of its financial restructuration, Grupo Aeroméxico reached an agreement with investment firm Apollo Global Management Inc. for a US$1 billion loan, which would require the airline to renegotiate contracts with its workforce, according to Reuters. Aeroméxico has been in talks to renegotiate its Collective Bargaining Agreements (CBA) with pilot and flight attendant unions ASPA and ASSA, respectively, to be able to access this loan. However, the unions have rejected previous offers which include a five-year salary freeze and changes to their benefits. The deadline to reach an agreement was Dec. 31, after which the airline had a seven-day grace period that has also expired, leading Aeroméxico and Apollo Global Management to agree to a 20-day extension, reported the airline.

Under these circumstances, Aeroméxico has filed with local labor authorities to terminate contracts with its unions. “The company has decided to request termination due to force majeure that undoubtedly affects the current CBA with the ASPA and ASSA unions, which has been duly submitted, on this date, to the competent labor authorities in full compliance with the applicable provisions of the Federal Labor Law,” reported Aeroméxico in a press release.