MEXICO GOVERNMENT LEFT FUMING AS MEXICANA RESTRUCTURING IS LEFT WITHOUT CAPITAL

Mexicana de Aviacion suffered a major setback yesterday when the private equity group that had secured agreements for a restructuring failed to come up with the capital to buy the shares from the current owners by the deadline.  PC Capital said in a press release late yesterday that the transfer of funds to buy Mexicana’s holding company Nuevo Grupo Aeronautico, (NGA), wasn’t made by the deadline set by current owner Tenedora K.

Tenedora K took over Mexicana last year after the airline filed for bankruptcy protection and was grounded, but failed to secure labor and other agreements that would have made the airline viable.

PC Capital came up with a business plan for the airline which government authorities approved, and secured agreements with all staff that included significant layoffs. PC Capital, which hasn’t publicly identified the would-be investors, said it would facilitate the transfer of the restructuring process to any other group of investors interested in capitalizing the airline. The Mexican Labor Ministry and the Communications and Transport Ministry said in a joint statement that they “deplored” the fact PC capital failed to comply with its commitment to identify investors solvent enough to complete the process, and that talks with the firm’s representatives were terminated. The ministries said the conciliator in the restructuring process will analyze other investment proposals.

Oh dear! In this uncertain market and with Mexican government financially stretched it looks like Mexicana may have missed its 2010 window of opportunity due to PC Capital. This does not look good for Mexicana employees. White knights are needed fast as the restructuring plan is actually a good one and with the FIFA world cup and the Olympics in Brazil in a few years traffic between there and Mexico will boom. A great deal for investors could now be on the table as Mexico gets desperate to solve the problem.

IATA REPORT: CAPACITY RUNNING AHEAD OF GROWTH

Scheduled airline results for January showed a year on year 8.25 surge in passenger traffic and a 9.1% increase in freight, IATA said yesterday. The numbers are based on an average annual oil price of $84 a barrel, while oil prices now average more than $100 a barrel. For each rise of $1 in the oil price, global airlines must try to recover $1.6 billion in extra costs, IATA calculates. Even with the good January traffic news, 2011 is starting out as a very challenging year for airlines,” said IATA’s CEO Giovanni Bisignani.

Air travel volumes in January were 6% above the pre-recession peak of early in 2008. But the January passenger increase of 8.2% was outstripped by a 9.1% gain in industry capacity, raising fears that seat supply growth is running ahead of demand.