Aeroméxico Files for Chapter 11 Bankruptcy Protection
Date: Wednesday, July 1, 2020
Source: The Wall Street Journal
Mexican airline says it will continue operating during restructuring
MEXICO CITY—Mexican airline company Grupo Aeroméxico SAB filed Tuesday for voluntary restructuring under chapter 11 of the U.S. bankruptcy code to confront the crisis brought on by the coronavirus pandemic.
Like other airlines, Aeroméxico is reeling from the impact that the pandemic has had on the global travel industry. The carrier’s passenger traffic fell by more than 90% in April and in May, compared with the year-earlier months.
“Our industry faces unprecedented challenges derived from a significant reduction in passenger demand on a global level,” the company said in a filing with the Mexican stock exchange.
“With the chapter 11 restructuring process, we will strengthen our financial position and increase our liquidity, at the same time creating a sustainable platform to allow us to successfully weather the current global economic uncertainty,” it added.
With its filing in a New York court, Aeroméxico became the third Latin American airline to seek bankruptcy protection in the past two months. Colombia’s Avianca Holdings SA filed for chapter 11 in early May and was followed later that month by Chile’s Latam Airlines Group SA, Latin America’s largest carrier.
“The passenger airline sector has been one of the sectors most significantly affected by the shock, given its exposure to travel restrictions and sensitivity to consumer demand and sentiment,” Moody’s Investors Service said in early June when it downgraded Aeroméxico’s credit rating.
Aeroméxico said its operations are continuing, and that in July the airline will double its number of domestic flights and quadruple the number of international flights from June levels.
Mexico has recently begun some limited reopenings after three months of shutdowns of industries and services deemed nonessential, including tourism.
Aeroméxico said it is also in conversations to obtain financing under chapter 11, known as debtor-in-possession financing, as part of the restructuring. The company said it plans to use the financing and available cash, if approved by the court, to meet its future obligations.
Aeroméxico reported net long-term debt including loans and leases of around $2.7 billion at the end of March. It sold $400 million in five-year notes in January.