Aeromexico is denying reports that it will be initiating bankruptcy proceedings. The Mexican carrier made the statement on June 19th after there were whispers of the carrier heading towards a Chapter 11 filing per the United States Bankruptcy Code. While the airline is not yet considering restructuring under Chapter 11, the airline is still in search of funding.
No bankruptcy, but in need of funds
In an informational update viewed by Simple Flying, Aeromexico flatly denied that any interest in restructuring under Chapter 11– for now. The carrier stated the following:
“The Company hereby informs that it has not initiated, nor has it made the decision to initiate, a restructuring procedure under Chapter 11 of the Unites States Bankruptcy Code. We are currently identifying additional sources of financing to strengthen operating cash flows. We are also analyzing different alternatives to successfully achieve, in the short and medium term, an orderly restructuring of financial commitments, without affecting or disrupting operations. The above in full coordination with unions, creditors, lessors and in compliance with the obligations derived from our licenses and concessions.”
The carrier, like just about every other airline in the world, has been walloped by the current global health crisis. Aviation, in particular, took a massive hit after countries closed borders and wreaked havoc on schedules. Not to mention, many airlines were doling out millions of dollars in refunds– with even more expected to come.
Most airlines have turned to various sources of additional funding. Some have raised private liquidity, others have turned to governments, and still, some have been forced into bankruptcy proceedings.
A grim situation for Aeromexico
As one of Mexico’s largest airlines, the SkyTeam member is the only carrier based in the country to conduct long-haul operations using Boeing 787 aircraft. This gives the airline a unique position in the market. But, it also made the carrier especially vulnerable to the current crisis.
Looking forward, the carrier is still far from a recovery. In a May traffic update, the airline saw a whopping 92% decrease in passengers. This is compared to the more than 4.4 million passengers carried in May 2019. Aeromexico’s May 2020 passenger count of 135,000 is quite dismal and indicative of a bad situation for the airline. Last month was even worse for the airline than April.
In the first quarter of 2020, Aeromexico posted a loss of over $100 million– a staggering sum for the carrier. This has kept the airline’s future fluid as the Mexican government has not yet stepped in to provide any support.
Latin American airlines hit hard
As the current health crisis moves from Europe into the Americas, Latin American airlines have been hit especially hard. Governments have not provided the same level of support to airlines as European, and North American governments did.
A combination of factors led two other South American giants, LATAM and Avianca, to file for bankruptcy. Aeromexico, the next big giant, has thus far been able to escape similar action. However, if the situation does not start to improve soon- or the airline does not get the requisite funding it needs, then there could be a very different outlook for the carrier in a few months.
Unfortunately for airlines, much of the situation is out of their control. Until governments start to resume international and domestic travel with few restrictions, airlines will have to get creative with finding streams of revenue. Already, Aeromexico has flown a solid number of cargo flights– including the longest flight in Mexican history. How this impacts the airline’s financials, however, will be better known when the airline releases its second-quarter results.
Do you think Aeromexico will be able to avoid bankruptcy successfully? Do you believe Aeromexico should file for bankruptcy? Let us know in the comments!