LONDON – A U.S. bankruptcy court judge has approved Aeromexico’s reorganization plan and paved the way for the airline to exit Chapter 11 bankruptcy protection before the end of the first quarter.
Judge Shelley Chapman of the U.S. Bankruptcy Court for the Southern District of New York has approved the plan from the bench late on Friday after a two-day confirmation hearing.
Her approval followed last-minute settlements to objections from the unsecured creditor’s committee.
Invictus Global Management, and the ad hoc group of OpCo Creditors, the last of which came down minutes before the judge issued her decision.
“I wanted this airline out of Chapter 11 … and have the folks in Mexico know that their flagship carrier had safely made its way through Chapter 11,” Chapman said.
“We’re all going to keep our fingers crossed that Covid isn’t going to throw us any more curveballs and that people can get back on those planes and go to Mexico and enjoy some sunshine.”
Aeromexico is the second biggest Latin-American carrier to restructure in Chapter 11.
Bogota-based Avianca exited bankruptcy in December after its reorganization plan was approved by another judge the month before.
Another South American giant, LATAM Airlines Group, continues to work on building support for its plan despite a hostile takeover bid by its competitor, Azul Airlines.
The management of LATAM however hopes to exit bankruptcy this year.
The plan
Aeromexico will emerge from Chapter 11 as a leaner and more nimble carrier.
The carrier cut roughly $1.1 million in debt and streamlined its fleet, which includes the retirement of the last Embraer E170 through the process.
It is planning to grow with the newer and more efficient Boeing 737 MAX aircraft, for which it committed to 41 from both Boeing and lessors during restructuring, and leverage a strengthened position at its key Mexico City hub.
The airline also plans to build on its joint venture with Delta Air Lines and partnerships with other SkyTeam Alliance carriers, as well as expand its partnership with LATAM Airlines.
Delta, which owned a 51% stake of Grupo Aeromexico before its bankruptcy, announced that it will retain a 20% stake.
Apollo Global Management, which led the airline’s debtor-in-possession financing package, will emerge with a 22.4% stake in the airline.
A group of Mexican investors that previously sat on the board will have a 4.1% stake.
The stakes will be split among creditors and new investors.
Aeromexico CEO Andres Conesa thanked the airline’s staff, plus all those who made the restructuring possible, including the judge, in a statement on Friday. He described the approval of the plan as “giving us wings to fly even higher through the skies of Mexico and the world.”
The recovery has been good for Aeromexico.
Mexican demand has rebounded quickly and domestic travel grew by 17% compared to 2019!
However, in general, the airline’s traffic still remains 18% down due to a steep decline in demand for international travel.
For the full year, Aeromexico carried 38% less traffic than 2 years earlier.
And while Mexican low-cost airlines Volaris and Viva Aerobus have gained domestic shares during the crisis, most – including some creditors – expect Aeromexico to benefit from the closure of low-cost airline Interjet in December 2020.
Aeromexico still faces challenges, not least the uncertain trajectory of the pandemic.
The airline remains unable to add new flights to the U.S. following the FAA’s degrading Mexico’s safety rating to category 2 in May.
The safety rating also blocks partner Delta from selling tickets on Aeromexico-operated flights.
In addition, Viva and Volaris are both stronger competitors than they were before Aeromexico’s filing Chapter 11.
