Mexico’s flag carrier is the latest airline to file for bankruptcy due to the COVID-19 pandemic. As of yesterday, Aeromexico has filed for Chapter 11 reorganization and will be restructuring their business. This move is described as “voluntary” as the carrier seeks a firmer financial position facing these unprecedented times.
Aeromexico’s Future
Aeromexico will maintain regular operations during bankruptcy. Mexico is opening up to more tourism and the flag carrier is still planning to quadruple international ticket sales and double domestic sales over the coming weeks. This plan is unaffected by the decision to enter bankruptcy. All tickets remain valid.
The carrier has received $100 million in two loans of $50 million each from Aimia Inc, but this hasn’t been enough to stave off the financial repercussions from the unprecedented drop in demand. Aeromexico’s chapter 11 bankruptcy will allow the flag carrier to secure better financing.
From the press release:
“We are committed to taking the necessary measures so that we can operate effectively in this new landscape and be well prepared for a successful future when the COVID-19 pandemic is behind us. We expect to utilize the Chapter 11 process to strengthen our financial position, obtain new financing and increase our liquidity, and create a sustainable platform to succeed in an uncertain global economy.”
I don’t expect Aeromexico to become completely insolvent. This seems like a proactive move. But any airline entering bankruptcy is always concerning. Mexico’s flag carrier is still in a fragile financial situation.
Final Thoughts
Delta could actually be hard hit by this decision, as the U.S. carrier holds a 49% stake in Aeromexico. More than once I’ve heard Aeromexico described as Delta’s “vassal.” The two carriers closely align flights and schedules and have a joint cooperation agreement in place. I’m not sure what effect Aeromexico bankruptcy will have on Delta, but it could impact my favorite U.S. airline.
As of last year, Delta was the most valuable airline in the world. With the LATAM bankruptcy and now Aeromexico, Delta could be hard hit financially. Latin American countries have been among the least willing to bail out their airlines, and this choice is leading to the results we’re seeing. With the LATAM investment, I’ve seen Delta as the most well positioned option for upcoming travel to Latin America in general. This may not be the case in the future. We’ll see how things play out.
