Interjet Calls Extraordinary General Meeting To Discuss Bankruptcy

The Mexican airline Interjet announced today it will hold an Extraordinary Stakeholders Meeting on April 26 to approve the filing of a bankruptcy process. This move is part of an attempt to restructure financially under Mexican law.

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Interjet is looking to start a bankruptcy process in Mexico. Photo: Getty Images.

What do we know?

Interjet stopped flying last year, on December 11. After years of net losses, the airline faced enormous financial pressure, which was aggravated by the COVID-19 pandemic.

In 2020, Interjet lost most of its fleet after lessors repossessed nearly the 66 Airbus aircraft it had (the ones that stayed did because they weren’t in airworthiness condition). The airline had to reuse its Sukhoi fleet to keep flying a skeleton route, but that wasn’t enough. In the meantime, the two low-cost carriers in Mexico, Volaris and Viva Aerobus, have seized the gap left by Interjet.

In July, Interjet received new management, which attempted to invest US$150 million. Now, this new administration is filing for an Extraordinary Stakeholders Meeting to analyze Interjet’s future. In a statement, Interjet said,

“We’ve announced a Stakeholders Extraordinary General Assembly for the approval of the launch of a bankruptcy process.”

The objective is to successfully reorganize the company’s debts, bring certainty to providers and employees, and forge a solid ground that allows the airlines’ recovery and future viability, added Interjet.

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Currently, Aeromexico is under a Chapter 11 bankruptcy process in the US. Interjet intends to do the same in Mexico. Photo: Getty Images.

What will they do at the Assembly?

The Stakeholders Extraordinary General Assembly will take place on April 26, at 11:00 in Mexico City. This day Interjet’s management and stakeholders will discuss and possibly approve six items before filing for the bankruptcy process.

These items are:

  1. Presentation and approval of 2020’s financial results
  2. Take note of the current social structure at the airline
  3. Presentation and approval of an experts opinion regarding the possibility of going into a bankruptcy process under the Mexican law
  4. Presentation and approval of the law and financial firms that will assist in the process
  5. Proposal and approval of the revocation of powers within the company
  6. Final resolution on the authorized members to lead the bankruptcy process.

Last month, Interjet’s management said that the plan is to reactivate the airline. The goal is to fly between June and July, with a starting fleet of 15 aircraft. Additionally, the airline was looking for new investors that could supply approximately USD$1 billion. Nevertheless, these goals may be unreachable.

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The most important airline to file for a Mexican bankruptcy in recent years was Mexicana; it didn’t come out of the process. Photo: Getty Images

Is it possible to come out from a Mexican bankruptcy process?

At some level, Mexico’s bankruptcy process is similar to Chapter 11 and Chapter 7 in the United States. Likewise, there are two possible exits from the Mexican bankruptcy process: financial reorganization or cessation of operations.

Nevertheless, it is far more complex to come out of the Mexican bankruptcy process financially reorganized than in the US. According to Government data, between 2000 and 2020, a third of all bankruptcy processes in the country ended in the cease of operations.

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In the last few years, the most famous bankruptcy process for a Mexican airline was Mexicana’s in 2010. As we know, the oldest Mexican carrier didn’t come out of it, as it folded operations in August 2010.

This kind of process is difficult in Mexico because it establishes a very strict timetable that is hard for companies to comply with. This is even harder now, during the COVID-19 pandemic, because Mexican judges are working at a slower pace.

Therefore, according to several knowledgeable sources regarding Mexican bankruptcy laws, Interjet has a difficult road ahead of successfully implementing its reorganization process.

Do you expect Interjet will fly again? Let us know in the comments.