Lessors Reposses Interjet Aircraft

Interjet ceased to operate international flights since the last week of March and lessors have started to take back their aircraft and send it to the US, mostly to Arizona and California. This makes the airline one of the first to lose most of its fleet as a consequence of the COVID-19 situation. It started with 27 aircraft but is expected to be more than 37 in April. According to Bloomberg, the company has replied that those are false rumors and they are only parking the airplanes they are not using in low-cost places, as other airlines are doing.

However, before the pandemic, Interjet had been financially struggling. Since last February Interjet had a past due balance of MX$694 million (USS$29.5 million) owed to AICM and last year had a total net debt of 11.5 times its earnings. According to Bloomberg Aerospace Analyst George Ferguson, the future of this carrier is uncertain and grim. “It was to be expected that weaker carriers would struggle to survive while customers stopped flying. Lessors are deciding on getting back their aircraft to avoid any repercussions in the future as many carriers could not survive in the long-term,” he said. More so if their government does not offer support, which is a key aspect for companies to stay afloat.

Globally, airlines are expected to lose US$250 billion this year as stated by the International Air Transport Association. As stated in El Financiero, Volaris has reduced its capacity by 80 percent while trying to maintain low prices and liquidity. In the case of Aeroméxico, operations were reduced by half and their Moody’s score was revised downward.

Nonetheless, some experts are looking at this as a perfect opportunity for Interjet. According to René Armas Maes, an aerospace consultant, the first thing you need to do as an airline to survive is to reduce your fleet as this reduces costs. In the special case of Interjet, the company had 66 Airbus and 22 Sukhoi. If lessors keep taking back those airplanes, as has been happening, that means the airline is getting rid of them without any penalization or violating any contract. This reduction of fleet means that there is reduction on routes and workers, making it easy for the company to implement the best strategy to handle the crisis that is coming. They could focus on using their small amount of aircraft in strategic flights, such as national trips, as they are easier to control than internationals, Armas said.

There will be other situations like this in the future. This is a window of opportunity for carriers to renegotiate contracts and seek opportunities using the current situation as an argument. It is down to Interjet and other companies to make the right decisions to survive.