Aeromexico Plans To Reject 19 Aircraft Lease Contracts

Grupo Aeroméxico filed a motion to return up to 19 leased aircraft to reduce its fleet and save costs. Currently, the Mexican carrier is under Chapter 11 bankruptcy in the US. Both the airline and the United States Bankruptcy Court Southern District of New York will have a hearing on 20 July. What does this mean for Aeromexico? Let’s investigate further. 

Aeroméxico B737 NG y Aeroméxico Connect Embraer
Aeromexico is getting rid of some of its older Boeing 737-700 airplanes, including the one in the picture. Photo: Daniel Martínez Garbuno/Simple Flying

What aircraft will exit the airline?

Aeroméxico expects to return up to 19 leased aircraft in the coming days. Even though the hearing won’t happen until July 20th, the effective date of rejection of the leasing contracts is set to occur between July 1st and 15th. Aeroméxico said in a filing seen by Simple Flying, 

“In consultation with their advisors, the Debtors (Aeroméxico) have determined that the Excess Leased Equipment is not necessary for the Debtors’ continued operation or successful reorganization, and the Debtors seek to eliminate rental, insurance, storage and other costs associated therewith.”

The Mexican carrier is trying to return five Boeing 737-800, five Boeing 737-700, and nine Embraer E170. Additionally, the airline plans to return four General Electric CF34-8E5 engines. 

The leasing company Falko Regional Aircraft Limited possesses four of the E170, Aldus Limited has two, Nordic Aviation Capital has two and GECAS has one. 

Meanwhile, the B737-800s belong to Aercap, AirCastle, BBAM, and JP Lease Products & Services (which has two). Finally, the B737-700 are leased with BBAM (2) Genesis Aircraft Services (2) and Willis Lease Finance Corporation. 

Aeromexico Connect
Aeromexico Connect is the domestic branch of the carrier. It has an Embraer-based fleet. The E170 in this photo is also leaving the company. Photo: Daniel Martínez Garbuno/Simple Flying

Before the Chapter 11 filing, Aeroméxico had a fleet of 125 aircraft, which included nine E170, 47 E190, six B737 MAX, 35 B737-800, nine B737-700, and 19 B787. Aeromexico owned 25 planes. The rest of the fleet was under operating leases. 

Avianca and LATAM Airlines Group, which are also in Chapter 11 bankruptcies, will also reduce their fleets in the coming months.

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The carrier had over 100 employees per aircraft

In the dockets presented to the US Court, Aeroméxico has shed some light on the state of the airline. Before the pandemic, Aeroméxico had 14,744 fulltime employees. It also had a fleet of 125 aircraft, which means it had 117.9 employees per aircraft.

This number of employees per plane is high, as any airline should have less than 100 workers per airplane. Nevertheless, Aeromexico has not announced any firing. 

Monthly, Aeroméxico pays approximately $24,450,000 in wages. By July, the carrier estimated that it owed approximately $4,000,000 in payments to employees. 

Additionally, Aeroméxico paid $36 million each month in rent for aircraft under operating leases. The carrier added, 

“As of the Petition Date, the Debtors (Aeroméxico) had $1.3 billion in short and long-term aircraft-related lease liabilities.”

Aeroméxico MAX 2
Aeromexico has six Boeing 737 MAX grounded in Mexico City Airport. Photo: Daniel Martínez Garbuno/Simple Flying

Aeromexico’s shrinking fleet

Over the last few years, Aeromexico has gradually reduced the size of its fleet. In 2017’s first quarter, Mexico’s oldest active airline had a fleet of 133 planes. Three years later, for several reasons, the size of the fleet will be 106 aircraft. 

First of all, Aeromexico has had issues with the Boeing 737 MAX crisis. The carrier has six MAXs grounded in Mexico City. It expected to receive eight in 2019 and many more in 2020. Nevertheless, the grounding of the MAX continues, and Boeing can’t deliver any new aircraft. After Boeing recertifies its MAX, how many airplanes will Aeromexico receive? That’s a question we don’t have an answer for, yet.

Additionally, Aeromexico is renewing its Connect fleet. For example, the carrier started 2017 with 12 Embraer ERJ-145, which are now no longer part of the fleet. 

Aeromexico has also eliminated a few E170 out of its fleet. In 2018, it still had 13 of them. But it seems that the carrier is set to discontinue its operation totally during this Chapter 11 procedure. Before the pandemic struck, Aeromexico was weighing the possibility of an Airbus A220 order or an Embraer E195-E2 order. That future order is now gone. 

Finally, the B737 NG fleet has also shrunk. In 2017, Aeromexico had 19 Boeing 737-700 and 34 Boeing 737-800. By 2020’s first quarter, the carrier had nine 737-700 and 35 737-800. 

Do you expect that Aeromexico will get rid of more planes in the future? Let us know in the comments.