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News Article

Closed Borders and Fewer Flights Put Aeroméxico in a Pickle

By Alicia Arizpe | Tue, 03/24/2020 - 12:20

Airlines in Mexico and across the globe continue to deal with the consequences of less travel caused by the COVID-19 pandemic. The crisis caused Mexican low-cost airline Volaris to lose millions in stock value, but it was not the only local victim. Mexico’s flagship airline Aeroméxico, which had previously been hit by the global grounding of Boeing 737 Max, is now grappling with the consequences of the outbreak.

Aeroméxico has a long history in Mexico’s skies after building a large portfolio of local flights throughout most of the country. However, the entrance of low-cost airlines Volaris and Viva Aerobus gradually pushed Aeroméxico to the sidelines in local travel. Its international reach, on the other hand, had no rival in Mexico. The airline inaugurated a large number of international flights either under its own name or through shared codes that gave the company international recognition as Mexico’s flagship airline.

Once a competitive advantage, this large number of international flights turned into a weakness as COVID-19 spread across borders. At the beginning of March, Aeroméxico was forced to reduce its flights to Asia as that region was increasingly hit by the outbreak. Later on, the airline started to cancel flights to international destinations hit by COVID-19, including Spain and France. National flights were also hit and by March 19, Aeroméxico had reduced its national flights by 35 percent and its international offering by 50 percent due to a significant reduction in demand. Moreover, the US and several countries in Europe and Latin America have closed borders to contain the outbreak, putting international airlines in a pickle.

The fallout continues to this day. S&P lowered Aeroméxico’s rating from BB- to B+ and Moody’s estimates the crisis will cost the airline 20 percent of its income. Aeroméxico is now trying to cut down losses. For instance, it agreed with its flight attendants union (ASSA) to reduce its workforce by 50 percent starting on April 1 and reduced its international flights to Madrid, Barcelona, Paris, Amsterdam and London. While these measures are expected to halt the hemorrhage of resources, it is still uncertain if they will be enough.

Alicia Arizpe Alicia Arizpe Senior Writer