Mexicana Files for Bankruptcy Protection

The Associated Press (AP) reports that Mexicana, Mexico's largest airline, has filed for bankruptcy protection in both Mexico and the United States after failing to reach a new agreement with its pilots and flight attendants. The airline will continue flying for the time being, though on a reduced schedule.

According to the AP, "The airline has proposed salary cuts of 41 percent and 39 percent for pilots and flight attendants, respectively, and a 40 percent staff reduction to keep the company afloat." This follows salary cuts and benefits reductions accepted by pilots and attendants in 2006. Airline employees blame upper management for Mexicana's woes.

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As for Mexicana's operations, The L.A. Times describes an airline in chaos: "Confusion seemed to reign at the airline on Monday, as phone operators and a company spokeswoman offered differing information on which routes or flights were in fact canceled." Mexicana posted a list of affected routes, some of which have been suspended. Among the suspended flights are several from California.

So what's in Mexicana's future? Well, considering three of its aircraft have already been seized by aircraft owners and lessors (Mexicana only owns a few of its 60-plus planes), it seems bankruptcy protection was a last-ditch effort to save the carrier. Unlike carriers in Chapter 11, Mexicana must also file a court order to keep its planes from being repossessed.

So, quite frankly, the future is murky. The airline claims it needs major concessions from its pilots and flight attendants, and in the meantime must fend off attempts to reclaim its aircraft. As an alternative to the proposed cuts to salary and benefits, the Wall Street Journal says "stockholders have offered to sell the airline to its unions for the token sum of one peso," and that "the airline's management has stated that it will be willing to transfer control of the airline to its unions."

For consumers, it's probably wise to keep an eye on Mexicana during the next few weeks. If you have reservations with the airline, there is an FAQ on Mexicana's website, and numbers you can call to discuss your options.

Editor's Note: CrankyFlier has a great post on the Mexicana situation. His conclusion? "If you’re a passenger, I would not book on Mexicana right now because of the volatility. If you work for Mexicana, I’d start sending my resume out right now." Yikes!

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