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Grupo Aeroméxico Reports MX$23.4 Billion Operating Loss in 2Q20

By Alicia Arizpe | Wed, 07/29/2020 - 12:21

Grupo Aeroméxico’s troubles mirror those of other airlines in the country, which were also forced to greatly reduce capacity to protect their finances. The company, which operates Aeroméxico and Aeroméxico Connect, has been in cost-cutting mode since the start of the outbreak. In its 1Q20 report, Grupo Aeroméxico indicated a 14.0 percent year-on-year decrease in revenue for a total MX$14.1 billion (US$620 million). This drop in revenue led the airline to end the quarter with a MX$2.5 billion (US$110 million) net loss, leaving it with a 17.8 percent negative margin. Demand continued to plunge during the following months. In April, the airline transported 91.1 percent fewer passengers year-on-year with the sharpest drops being felt in international travel, which decreased by 87.7 percent. The trend continued in May and June, when Grupo Aeroméxico saw a 92.4 and 86.1 percent decreases year-on-year, respectively. 

While the airline implemented several cost-saving measures such as salary cuts of up to 65 percent for many of its pilots and flight attendants, eventually Grupo Aeroméxico filed for Chapter 11 bankruptcy protection to restructure its finances and later on agreed to return 19 aircraft to its lessors. The group continues operating 118 aircraft, not counting six Boeing 737 Max which have been grounded since early 2019. Grupo Aeroméxico explained that its financial restructuration includes the potential acquisition of additional debtor-in-possession (DIP) financing, which would allow the airline to continue operating as it pays off debt.

In its 2Q20 report released yesterday, Grupo Aeroméxico reported a 92.6 percent drop in demand measured in revenue passenger kilometers (RPK) and a total contraction in passengers of 89.9 percent for the period. These circumstances led the airline to report a decrease of 84.5 percent year-on-year in revenue for a total of MX$2.6 billion (US$120 million), which led the airline to report a MX$23.4 billion (US$1.1 billion) operating loss and a negative MX$5 billion (US$230 million) EBITDAR.

The COVID-19 outbreak has landed a severe hit to Mexico’s aviation industry. As local restrictions begin to lift, airlines expect to gradually increase their capacity to begin to recover. “Aeroméxico will continue to operate in accordance with existing permits and concessions throughout this process and remains committed to continuing to safely expand flight service in the coming months, in line with local regulations and customer demand, in full compliance with the highest health standards and protocols,” said the airline.

Alicia Arizpe Alicia Arizpe Senior Writer