Aeromexico Reports A $136 Million Loss For Q3

The Mexican carrier Aeromexico posted a US$137 million net loss during 2020’s third quarter due to the current crisis of the COVID-19 pandemic. While the airline performed better than in the second quarter, there is still a long way to achieve a full recovery. Let’s investigate further.

Aeromexico JFK Jets
Aeromexico has posted consecutive net losses in the three quarters of 2020. Photo: Vincenzo Pace | JFKJets.com

Aeromexico increased its revenues

During the third quarter, Aeromexico obtained 4.7 billion pesos in revenues (US$223.36 million). The revenue flux increased 79.1% compared to the second quarter of 2020. Despite the increase, Aeromexico’s gains are still 74.5% below 2019’s levels due to the COVID-19 crisis.

Aeromexico posted a negative Earnings Before Interest, Taxes, Depreciation, Amortization, and Restructuring (EBITDAR) of 381 million pesos (US$18 million). This was an increase from the abysmal results during the second quarter of 2020. In all, we can say that Aeromexico’s finances reached the bottom between April and June.

Additionally, Aeromexico generated 108 million pesos (US$5.12 million) in positive cash flow from operating activities. This means that Aeromexico’s liquidity is approximately US$352 million, according to the airline.

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Aeromexico JFK Jets
During the third quarter, Aeromexico increased its liquidity. Photo: Vincenzo Pace | JFKJets.com

How were the market conditions during the third quarter?

The Mexican aviation industry had its worst performance during the second quarter of 2020. Since then, the Mexican airlines have recovered, with some like Volaris, doing better than others. Aeromexico has had a slower recovery due to its current Chapter 11 reorganization.

About the market conditions during the third quarter, Aeromexico said,

“In spite of the current challenging environment, the market has shown encouraging signs of recovery. Aeromexico’s third-quarter deployed capacity increased by 67.6% compared to second-quarter 2020.” 

There were substantial improvements in the domestic market, which increased by 182.1% compared to the previous three months. Additionally, by the end of the third quarter, many South American countries had reopened their borders, allowing Aeromexico to operate flights again.

Moreover, Aeromexico’s flights’ load factors increased from 69.3% in July to 75.4% at the end of September. These numbers are still low compared to 2019 standards, but it is a good sign.

So far, Aeromexico has transported 6.57 million passengers, a 57.8% decrease from what it had between January and September of 2019. Despite that, things are looking good for Aeromexico:

  1. Aeromexico recently got approval for its US$1 billion Chapter 11 funding
  2. In October 2020, it is restarting operations to cities like San Jose (Costa Rica), Guatemala City, Lima (Perú), Medellín and Bogotá (Colombia) and, maybe (and that’s a big maybe), Buenos Aires (Argentina).
  3. It also increased frequencies to cities like Seoul (South Korea), Santo Domingo (Dominican Republic), Paris (France), Quito (Ecuador), Sao Paulo (Brazil), Miami, and Sacramento (US).
Aeromexico JFK Jets
Photo: Vincenzo Pace | JFKJets.com

What about the fleet?

Finally, let’s talk about the fleet. Aeromexico recently signed a petition to reduce its monthly aircraft and engine costs. It will do it by shifting its leases into temporary Power By Hour Agreements (PBH). These agreements will allow “to reset monthly lease costs based on the utilization of equipment at today’s market rates.” Therefore, Aeromexico will have significant monthly savings and reduce its cash outflows.

But also, Aeromexico recently rejected the leasing contracts of some older planes. It ended the third quarter with a fleet of 107 aircraft. When 2020 started, Aeromexico had 131 aircraft. Now, the Mexican airline fleet is composed of:

  1. Boeing 787: 19
  2. Boeing 737-700: five
  3. Embraer E-190: 47
  4. Boeing 737-800: 30
  5. Boeing 737 MAX: six

We expect the airline to reduce further its fleet in the following months. We think that the five remaining B737-700 will go, as well as some B737-800 and E190 aircraft.

What do you think of Aeromexico’s results? Let us know in the comments.


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