Troubled Airline Mexicana Ceases All Flights

August 30, 2010

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Mexicana de Aviacion, one of Mexico's two major airlines, ceased operations on Saturday as unions and new owners continue attempts to find fresh cash to keep the ailing company alive.

"At midnight, a gradual shutdown will begin," Transport Minister Juan Molinar said at a news conference on Friday. "By Saturday at noon, operations will definitively cease."

Two budget carriers affiliated with Mexicana, Link and Click, will also stop flying, he said, but added that the measure was only temporary.

Last week, Tenedora K purchased a 95 percent stake in Nuevo Grupo Aeronautico, which controls Mexicana, Click and Link. But the new owners declined to inject capital into the holding after concluding that its financial situation was too precarious.

Fernando Perfecto, head of the pilots union, said at the same conference that workers and management will keep looking for investors but gave no indication as to when the airlines could resume operations.

Mexicana had already halted dozens of domestic and international routes and stopped selling tickets after requesting creditor protection earlier this month under Mexico's insolvency law, which is called concurso mercantil.

The 89-year-old airline has also requested creditor protection in the United States, but has yet to be declared bankrupt in Mexico.

It has struggled to find a buyer willing to help restructure its USD$800 million debt load.

Plans for getting rid of some 1,366 of its flight attendants to facilitate a takeover by Tenedora K were blocked last week by the government.

Mexicana controls many routes into the United States which would be among its most valuable assets. But restrictions by US aviation authorities on Mexico due to safety lapses mean Mexican airlines are not able to take over these routes for now.

Mexicana is part of the Oneworld alliance.

(Reuters)