Failing Mexican airline gets bankruptcy protection

Mexico City, Agency
A judge extended bankruptcy protection to Mexicana de Aviacion, giving the beleaguered carrier a chance to restructure its debts and resume operations, Mexico's transport secretary said Tuesday.

The government will soon appoint a mediator to advise the judge, the company and its creditors, Juan Molinar Horcasitas told a press conference in the capital.

"The Department of Communications and Transportation will name a conciliator and an administrator so we can be in a position starting in the coming weeks to continue this process ... on the way to a possible private restructuring of the company," he said.

Grupo Mexicana de Aviacion, which includes Mexicana as well as regional carriers Click and Link, filed for bankruptcy Aug. 2 in both the Mexican and U.S. courts while asking airline employees to agree to sweeping layoffs and big pay cuts.

After several weeks of scaling back flights, all three carriers ceased operation during the last weekend of August.

Since the bankruptcy filings, the Posadas hotel group sold 95 percent of Nuevo Grupo Aeronautico - which controls Mexicana, Click and Link - to Mexican investment group Tenedora K for the symbolic price of 1,000 pesos ($77).

The remaining 5 percent is in the hands of the ASPA airline pilots union.

Tenedora K said it would not consider injecting more capital into the struggling airline until after the Mexican court ruled on the bankruptcy petition.

"There are interested, serious, firm investors ready to inject money into Mexicana de Aviacion to move it forward," Molinar said Tuesday.

Mexicana has debts of roughly 11 billion pesos ($846 million) and needs between $100 million and $150 million to resume flying, according to the Posadas group.

The new investors will have a "guarantee" that the restructuring of Mexicana will include the negotiation of new labor contracts, Molinar said.

Tenedora K says it plans to fire all of Mexicana's employees and rehire only about a quarter of them.