PHOTO: André Du-pont.

MIAMI – Amid the ongoing lack of demand, there is talk of Aeromexico (AM) filing for Chapter 11 bankruptcy protection in the U.S. It is very important to note that while it is an option the airline is considering, there is nothing confirmed as of yet.

According to Reuters, Shares in AM fell 6.6% today after a newspaper column claimed the carrier was preparing to file Chapter 11.

Trouble amid the health crisis

In mid-March, due to the pandemic, AM had to reduce international and domestic capacities by 35% and 50% correspondingly, grounding 40 aircraft and adjusting salaries to preserve cash and long term operation.

At the end of April, to offset its financial situation, AM sought a government support line to obtain more liquidity as it evaluated aircraft sales and leasebacks.

The carrier had previously announced a US$102m loss during Q1 2020 as its passenger volume dropped to 17.6% in comparison with the same period in 2019. The financial plunge was about 14%, reaching MEX$14,074.

The Mexican flag carrier is not the only Latin American airline seeking protection amid losses due to the global pandemic. Avianca Holdings S.A. and LATAM Airlines Group S.A. have also sought government protection.

Consequences for Delta

Back in May, Delta (DL) and LATAM signed a trans-American Joint Venture Agreement whose aim is to marry the airlines’ complementary route networks throughout the Americas.

Unfortunately for DL, both LATAM and AM are a big part of its network; DL purchased large shares of AM (up to 49% in Q1 2019) and a fifth of LATAM (20% in Q3 2019).

While DL has served some destinations in Mexico and South America, these airlines are the ones helping connect millions of DL passengers annually to their final destinations in the region.

Chapter 11

It is important to note that these rumors are currently unconfirmed; however, a Chapter 11 bankruptcy filing would not be the end for the airline.

For those who are not aware, chapter 11 is focused on the reorganization of a corporation. Thus, while it would be a low point for the carrier, it would most definitely not be the end of AM.

Aerovias de México, operating as Aeromexico, is the flag carrier of Mexico. It is based at México City Benito Juárez International Airport (MEX). Its secondary hub is located at General Mariano Escobedo International Airport (MTY) in Monterrey.