Breaking: Aeromexico Files For Chapter 11 Bankruptcy

Mexican airline Aeromexico is filing for a Chapter 11 bankruptcy in the US. Aeromexico is the third Latin American airline in the last two months to file for Chapter 11. The first two airlines were Avianca and LATAM. Let’s investigate further.

Aeromexico Dreamliner
Aeromexico has filed for a Chapter 11 bankruptcy in the US. Photo: Daniel Martínez Garbuno/Simple Flying.

What did the airline say?

In a statement, seen by Simple Flying, Aeromexico said,

“The Company and some of its branches started today a voluntary procedure under Chapter 11 in the United States. We will continue to operate while being under the procedure. We will offer the same quality service to our clients.”

The Mexican carrier added that Chapter 11 will allow it to strengthen its financial position. Aeromexico will also protect the operations and assets while implementing the necessary changes to face the current coronavirus pandemic.

“Our industry faces challenges we’ve never seen before due to an incredible reduction in passenger demand globally. We are committed to adopting the necessary measures to operate continuously and efficiently under this new reality,” said Aeromexico’s CEO, Andres Conesa.

Aeroméxico MAX 2
Aeromexico has had three consecutive years of financial losses. Photo: Daniel Martínez Garbuno/Simple Flying

Three out of the four most important airlines in Latin America are in Chapter 11

In 2019, LATAM had over 70 million passengers. Avianca transported over 35 million passengers and Aeromexico carried over 20.5 million passengers. By numbers alone, these three carriers are the most important in Latin America, along with Copa Airlines. And, in a couple of months, these three airlines have filed for Chapter 11 bankruptcies in the US. Even though, at first, Aeromexico denied filing for a Chapter 11 bankruptcy.

Both Avianca and Aeromexico had financial troubles even before coronavirus emerged. The Mexican carrier posted consecutive net losses in 2017, 2018, and 2019.

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In 2017, Aeromexico lost $69.2 million pesos (approximately US$3.05 million). The next year, the carrier had losses of over 1.87 billion pesos (over US$83 million). Finally, in 2019, Aeromexico lost 2.36 billion pesos (nearly US$105 million).

During the first quarter of 2020, Grupo Aeromexico toppled the net losses of the three previous years. In one quarter alone, the carrier lost 2.5 billion pesos, over US$110 million. It was in deep trouble.

The carrier received 100 million in fundings. It wasn’t enough

Yesterday, Aeromexico announced it had received additional funding worth $50 million. In a matter of three months, the Mexican carrier received $100 million in funding. Nevertheless, it wasn’t enough.

In a statement, Aeromexico added that it is currently looking for new fundings. These funds are part of the Chapter 11 procedure and are known as DIP financing. The carrier added,

“Aeromexico trusts that it will get through its formal compromises for the DIP financing. These funds, along with the cash available at Aeromexico, and with the approval of the Chapter 11 judge, we will have enough liquidity to fulfill our future obligations in an ordained way.”

Contrary to what has happened around the world, Latin American governments have not given many rescue deals to the airlines in the region. Recently, the regional vice-president for the Americas of the International Air Transport Association (IATA), Peter Cerdá, said that the carriers in Latin America were in deep trouble.

Firstly, he said, the airlines grounded their operations at the end of March. The lack of commercial flights has deeply harmed the Latin American carriers and are on the brink of collapse, he added. Consequently, as of 30 June, these airlines in the region have disappeared: LATAM Argentina, TAME Ecuador, LIAT, and One Airlines, in Chile. Finally, the three most important airlines in the region have filed for Chapter 11 bankruptcies.

What do you think will happen with Aeromexico? Let us know in the comments.