Image credits: Image by Madjid H Kouider from Pixabay
/
News Article

Interjet Still Not Out of the Woods

Tue, 11/03/2020 - 12:06

Mexico’s Interjet has been dragging trouble for the past few years but the COVID-19 outbreak made a bad situation worse, leaving the airline in an unstable position as demand for air travel remains low for the foreseeable future. Ricardo Sheffield, Director of the Bureau of Consumers’ Protection (PROFECO), warned that the airline was at the brink of bankruptcy.

In 2018, the airline added several Russian Sukhoi aircraft to its fleet to capture an unattended market segment. Technical problems forced Interjet to ground several of these planes and eventually to phase them out and return to an Airbus-only fleet. However, Interjet still has a debt regarding the Sukhoi aircraft. Later on, the airline would accumulate debt for millions of dollars with several entities. By the end of 2019, Interjet owed MX$220 million (US$9.5million) to the Navigation Services in Mexican Air Space (SENEAM). Through the following months, debt with its private lessors, union and other government entities would come to light. The Mexicans Against Corruption and Impunity (MCCI) organization pointed out that the airline owed government entities millions in rights of use of air space, taxes, jet fuel and customs.

Back in February 2020, SAT had seized bank accounts and other possessions from Interjet due to the airline’s outstanding balance of MX$800 million (US$37.9 million). More embargos were to follow and by late October, SAT pointed that the airline’s debt amounted to MX$2.9 billion (US$137 million).

The COVID-19 pandemic only brought more trouble for the airline as the drought in demand for air traffic led to numerous cancellations and delays. During the first eight months of 2020, Interjet saw its passenger traffic shrink by 66.1 percent, with August being its worst month with a 97.2 percent drop year-on-year. The airline implemented cost cutting strategies and announced it would renegotiate deals with suppliers and lenders. It also reached a deal with its union to cut down salaries by 50 percent. However, investors were reportedly spooked by SAT’s seizures leaving the airline without liquidity to pay workers and suppliers, according to the Mexican Workers Confederation (CTM).

Tensions erupted on Nov. 1 and 2 as Interjet cancelled all its flights, leaving thousands stranded. In response, Sheffield indicated that PROFECO would emit an alert against the airline on Nov. 3 and stated that it was the only Mexican airline facing a collective trial due to flight cancellations. Interjet stated that it “will return to regular operations on Tuesday and laments the affectations caused to users.”