Aeromexico Files For Chapter 11 Reorganization

Aeromexico, Mexican flag carrier found in 1934, filed late on Tuesday for Chapter 11 bankruptcy reorganization in the United States.

The airline hopes to reorganize under bankruptcy protection that allows them to shed assets and obligations. Aeromexico’s Latin American counterparts of LATAM (read more here) and Avianca (read more here) have both previously filed.

You can access Aeromexico’s site for reorganization here.

Here’s a video released by the CEO:

Here’s the release from Aeromexico:

Download (PDF, 89KB)

Here’s an infographic from the airline:

Download (PDF, 608KB)

Conclusion

Aeromexico will likely use the reorganization to reject some plane leases and to renegotiate its debt obligations. Shareholders are usually wiped out during bankruptcies, and debt holders take over.

It is difficult to see how any airline can survive the current pandemic without additional equity or guaranteed debt support from their respective governments.

We are now six months into this Covid-19 that will likely take 18 to 24 months to play out. It will take 3 to 5 years to get back to the December 2019 traffic levels.

Delta owns (before bankruptcy) 49% of Aeromexico and 20% of LATAM after recently starting to invest in partners. United did the same with Avianca. All these investments have now soured, and United already wrote down its Avianca investment.

Let’s wish that Aeromexico manages to come through this process mostly intact. The airline has promised to honor all existing tickets, credits, and miles.