After filing for bankruptcy protection yesterday in both Mexico and the United States, Mexicana, the oldest airline in North America, has ceased ticket sales in most markets. This cessation occurred at 7pm EDT today, August 4, 2010. The company insists that it will continue to operate flights for passengers who have already booked seats but that seems increasingly unlikely as the ability to generate further revenue to fund operations has been terminated.
The bankruptcy filing yesterday was half of a double-whammy of pain that the airline recently incurred, The US government also downgraded the ratings of the entire aviation operation in Mexico, effectively terminating all code-share flights for Mexican airlines. This move drastically reduced the number of passengers and the revenue flow on trans-border flights.
The airline is seeking to rewrite pilot and cabin crew contracts, slashing them by huge amounts in an effort to compete with lower cost carriers at home and abroad. The unions were not particularly amenable to such cuts so the airline is now looking to rewrite the contracts while in bankruptcy.
The move could not come at a worse time for Mexicana’s global alliance partners in oneworld. The major players in the alliance, American Airlines and British Airways just received approval of their anti-trust immunity application, a move that was expected to significantly increase revenues for the two in the transatlantic market. Losing a major partner for Latin America will definitely hurt their alliance and revenues. Considering that American was one of the only carriers in the USA to post a loss last quarter, suffering a blow like this does not engender much confidence in the near-term financial outlook.
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