Airlines across the globe continue dealing with the fallout of the COVID-19 outbreak. Mexican airlines, however, have seen a small uptick in passenger traffic during the past few months as the country relaxes its confinement measures, which might be the first sign of potential recovery ahead. In its 3Q20 report, Grupo Aeroméxico indicates that its revenue and capacity have increased sharply from the lows it faced in the previous quarter, but the airline is still fighting to return to its pre-pandemic traffic levels.
The COVID-19 outbreak paralyzed a previously booming industry, leading airline industry bodies to call the pandemic the worst crisis in the history of aviation. During the early days of the outbreak, airlines were suddenly forced to ground their fleets as traffic dried up. Grupo Aeroméxico reported a sharp contraction in passenger traffic back in April, as it saw it shrink by 91.1 percent year-on-year. May and June would be similar with 92.4 and 86.1 percent year-on-year decreases, respectively, but July was slightly better with a fall of 73.2 percent. However, during 2Q20, Grupo Aeroméxico saw a total year-on-year drop in demand of 92.6 percent revenue passenger kilometers (RPK) and an 84.5 percent year-on-year contraction in revenue for a total of MX$2.6 billion (US$120 million). These circumstances led Grupo Aeroméxico to undergo a financial restructuration and file for Chapter 11 bankruptcy protection in a US court in late June.
Results for 3Q20 point to more traffic as Mexican authorities relax confinement policies. “Despite the challenging environment, the market has shown encouraging signs of recovery,” the group reports. Grupo Aeroméxico reports that during 3Q20, its capacity increased by 67.6 percent led mainly by the domestic market, which grew by 182.1 percent against 2Q20. Its revenue also grew by 79.1 percent in comparison to the previous quarter, for a total of MX$4.7 billion (US$220 million). While certainly an improvement, these figures are still below the results the company saw during 2019 as they represent a 64.1 percent year-on-year contraction in capacity and a 74.5 percent decrease in revenue. Altogether, the group closed 3Q20 with a negative MX$381 million (US$18.1 million) EBITDAR and a MX$3.6 billion (US$170 million) loss.
During 3Q20, Grupo Aeroméxico has been restructuring its debt and looking for new financing as it continues operating. The company received two approvals from the US Bankruptcy Court for a modification of its aircraft leases in September and a US$1 billion loan in October.