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Aeromexico becomes latest Latin American airline to file for bankruptcy

Aeromexico becomes latest Latin American airline to file for bankruptcy
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An airplane of Aeromexico sits on the tarmac at Mexico City’s international airport, on November 28, 2017.

PEDRO PARDO | AFP | Getty Images

Mexican airline Aeromexico said on Tuesday it had begun restructuring under Chapter 11 proceedings, the latest Latin American airline to run into serious trouble as the coronavirus pandemic wreaks havoc on tourism and business travel.

In a statement, Aeromexico categorized the Chapter 11 process as “voluntary” and said it was sticking to its goal of boosting operations in the coming weeks.

Aeromexico is the third airline to file for bankruptcy protection in Latin America, where carriers have been more affected by the crisis than anywhere else in the world.

The Mexican firm said it was maintaining its plan of quadrupling its international flights and doubling domestic flights next month as the coronavirus lockdown eases. Tickets, reservations, electronic vouchers and Premier Points remain valid, the airline said.

Aeromexico said it was in talks to obtain new, preferential financing as part of the Chapter 11 restructuring, known as debtor-in-possession financing.

Latin America’s two largest airlines, Chile’s LATAM Airlines Group and Colombia’s Avianca Holdings, filed for Chapter 11 restructuring in May.

Unlike in the United States or Europe, Latin American governments have so far declined to bail out airlines, straining their finances.

Analysts predict many airlines in Latin America could disappear due to the effects of the pandemic, leading to weaker competition and higher ticket prices.

Investment holding company Aimia threw Aeromexico a $50 million financial lifeline on Monday, after loaning it $50 million in May.

Delta Air Lines holds a 49% stake in Aeromexico and a 20% stake in LATAM, and their bankruptcy processes put the U.S. carrier’s investment at risk of suffering a severe reduction in value or worse.

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