PHOTO: AeroMexico Artwork.

MIAMI – Aeromexico (AM) announced today it had begun restructuring under Chapter 11 proceedings, joining Chile’s LATAM Airlines (LA) and Colombia’s Avianca (AV) as the COVID-19 pandemic continues to take its toll on the industry.

As the third Latin American airline to file for bankruptcy protection, AM says that it has done so voluntarily and expects to keep serving its customers and double the number of domestic flights and quadruple those of international ones as compared to June.

The company does not expect “any changes to employees’ day-to-day job responsibilities, and employees will continue to be paid and receive benefits in the ordinary course of business.”

Bankruptcy after a Bailout after a Rumored Bankruptcy

Back in April, the Mexican airline sought a state liquidity support line. But Latin American governments have refused to bail out airlines, and the Mexican state was no different in that regard.

However, on June 29, Canadian investment company Aimia Inc. gave AM an additional US$50m advance from PLM through pre-purchases of award tickets, provided with the execution of the amendments to the commercial agreement PLM and AM came to, bringing the total support to US$100m.

The deals came after rumors circulated that the Mexican airline was considering filing for Chapter 11 bankruptcy protection in the United States, which caused the airline’s stock to tank.

At the time, the airline brushed off the rumors as just that. In hindsight, it now seems that reality does take the longest to realize.

Additional Preferential Financing

As part of the restructuring process known as “debtor-in-possession” or “DIP financing,” the Mexican carrier is also in talks to obtain new preferential financing.

Aeromexico is optimistic that it will finalize formal DIP financing agreements that, together with the cash it now has and the approval by the Court, will provide the adequate liquidity to satisfy its obligations in the future.

Delta Air Lines (DL) owns a 49% stake in AM and a 20% stake in LATAM; their combined bankruptcy proceedings put the investment of the U.S. airline at risk of value reductions that could go from bad to nill.