Aeroméxico Denies Bankruptcy, Looks for Financing
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Aeroméxico Denies Bankruptcy, Looks for Financing

Photo by:   Image by Lorenzo Cafaro from Pixabay
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Alicia Arizpe By Alicia Arizpe | Senior Writer - Mon, 06/22/2020 - 11:42

Mexico’s flagship airline, hurt by the COVID-19 outbreak, looks for new financial sources to weather the pandemic, while categorically dismissing rumors that it is seeking bankruptcy protection.

Aeroméxico, like many other airlines in the country and abroad, has been in crisis management mode since the start of the COVID-19 outbreak. The crisis is expected to cost the global aviation industry US$434 billion in lost revenue during 2020, while airlines in Mexico are in the way of losing US$6.4 billion in what is now being called the worst global crisis the industry has faced in history. Latin American airlines have been hurt particularly badly by the prolonged border closures of major hubs in the region, which alongside the lowest governmental support from local governments has led to the bankruptcy filing of the two largest airlines in the region, LATAM Airlines and Avianca. Under these circumstances, it is perhaps unsurprising that rumors of bankruptcy filing by another major airline took flight and upset markets.

On Friday 19, an anonymous source told Bloomberg that Aeroméxico was considering filing for Chapter 11 bankruptcy protection in a US court. The news, promptly dismissed by the airline, came after months of sharp drops in demand and caused the airline’s stock to fall by 4.9 percent to MX$6.66 (US$0.30). Aeroméxico’s latest report indicates that demand for May was down by 94.4 percent revenue passenger kilometers (RPK) year-on-year, while capacity shrank by 76.6 percent available seat kilometers (ASK). That month, the airline transported a total of 135,000 passengers, 92.4 percent less that in May 2019.

Aeroméico, however, was quick to deny that it was filing for bankruptcy protection. “The company hereby informs that it has not initiated, nor has it made the decision to initiate, a restructuring procedure under Chapter 11 of the US Bankruptcy Code. We are currently identifying additional sources of financing to strengthen operating cash flows,” said Aeroméxico in a press release. The airline is instead looking for additional financing to weather the crisis. “We are evaluating alternatives to move towards a better financial position after the impact of this crisis faced by all airlines across the world.”

The airline has been analyzing different cost saving measures as most of its fleet has been grounded due to low demand, heavily hurting its cash flow. The airline had negotiated salary cuts of up to 65 percent for many of its pilots, although pilot and flight attendant unions are now looking to revise this agreement. The airline, in its report, indicates that it expects to weather the current crisis. “Every member of the great team that makes up Aeroméxico is certain that with the support of investors, financial creditors and key suppliers, we will emerge stronger, maintaining at all times passenger rights, with the business operating as a going concern, public service and source of employment.”

Photo by:   Image by Lorenzo Cafaro from Pixabay

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