MIAMI – Aeromexico (AM) announced it has not satisfactorily concluded negotiations of the Collective Bargaining Agreements (CBAs) with with Pilot/Flight Attendant unions Asociación Sindical de Pilotos Aviadores de México (ASPA) and Asociación Sindical de Sobrecargos de Aviación de México (ASSA).

The airline states that acceptance by said unions of the adjustments presented by AM to the CBA is essential to face “the adverse financial, operational and structural effects caused globally to the airline industry by the COVID-19 pandemic.” As such, the CBA must:

  • Comply with the commitments and objectives required by the DIP lenders under the Senior Debtor in Possession Credit Facility (“DIP Financing”), obtained within the Company’s voluntary financial restructuring process, under Chapter 11 of the Bankruptcy Code of the United States of America
  • Comply with the necessary conditions to have access to the next disbursement under Tranche 2 of the DIP Financing, resources that are essential not only to preserve the ordinary course of business but to avoid generalized defaults on AM’s obligations with financial creditors under the DIP Financing.
Photo: Kochan Kleps/Airways

Aeromexico’s Financial Plan

The carrier was able to obtain an extension to the terms provided in the corresponding Credit Agreement to comply with the DIP Financing conditions and obligations. The new terms will now expire on January 27, 2021.

However, the pandemic and the consequent continuation of restrictions derived from the declaration of force majeure issued by government authorities in Mexico and abroad continue to reduce the demand for flights and undermine the AM’s finances.

Thus, Am warns that it requires ongoing access in a timely manner to the DIP Financing funds to meet its payments and commitments with key suppliers, authorities, and contributors.

Consequently, the airline has decided to request termination of the current CBA with the ASPA and ASSA unions, which has been submitted to the competent labor authorities “in full compliance with the applicable provisions of the Federal Labor Law,” according to the carrier’s press release.

Aeromexico Boeing 787. Photo: Kochan Kleps

Dialogue with Unions Has Come to a Halt

Based on the force majeure situation in which AM is in at the moment, it has requested termination of the collective bargaining relationship, as well as the individual agreements with a certain number of Pilots and Flight Attendants to reflect the new operating reality of the Mexican airline.

A common, cost-cutting strategy for airlines now, AM would need to carry out a workforce reduction as a consequence of the decrease in its ordinary activities. Still, the carrier reiterates that it is willing to continue conversations with both ASPA and ASSA to find schemes that comply with the necessary conditions “to continue accessing the available resources.”

Aeromexico says it will continue with the voluntary process of its financial restructuring under Chapter 11, operating and offering services to its customers, and contracting from its suppliers the goods and services required for said operations.

Likewise, AM will keep using all the available instruments at its disposal “to avoid going from the current financial restructuring situation to a liquidation situation,” which in the end would entail staff cuts affecting thousands of direct and indirect jobs.

Featured image: Aeromexico Boeing 787. Photo: Alberto Cucini – @ac_avphoto