Grupo Aeromexico totaled a consolidated net loss of US$2.1 billion during 2020 due to the heavy impact of the COVID-19 crisis. The airline, currently under a Chapter 11 bankruptcy process, expects to have a turnaround in 2021.
How will it have a turnaround?
On June 30, 2020, Grupo Aeromexico filed voluntary Chapter 11 petitions in the United States. The bankruptcy process allows the airline to implement a financial restructuring while continuing to serve customers.
So far, the airline has successfully received approval from the United States Bankruptcy Court for up to US$1 billion of DIP Financing. This amount is distributed in a Tranche 1 facility of US$200 million and a Tranche 2 facility of US$800 million.
Aeromexico has already withdrawn US$375 million of its DIP Financing.
Additionally, the airline has satisfactorily concluded negotiations in Collective Bargaining Agreements of its four workers Unions. Aeromexico said that these agreements were “essential to face the adverse effects caused globally to the airline industry by the COVID-19 pandemic.”
Moreover, the Mexican carrier says that it has managed its network on a flight by flight basis to ensure that its operations are cash generative.
During the fourth quarter, Aeromexico benefited from the domestic recovery in the Mexican aviation market. It also expanded its operations between Mexico and the US across several routes from Mexico City. Additionally, it increased frequencies to Guatemala City, Sao Paulo, Buenos Aires, San José, Santo Domingo, and Medellín in Latin America. Aeromexico stated,
“The company remains committed to safely expand flight service in the coming months, in line with local regulations and customer demand, in full compliance with the highest health standards and protocols.”
Aeromexico’s billionaire losses
Despite the seemingly more robust results during the final quarter of 2020, Aeromexico had record net losses during the last year.
The airline had a consolidated net loss of US$2.1 billion after seeing its total revenues fall by 58.5% between 2019 and 2020. The earnings before interest, taxes, depreciation, amortization, and restructuring or rent (EBITDAR) of Aeromexico was negative 6.8 billion pesos. The loss per share in Mexican pesos, was 62.33 (about US$3 per share).
During 2020, Aeromexico’s capacity fell by 50%, while its demand decreased by 61.3%. The load factor on scheduled flights was 70.3%. The oldest Mexican carrier transported 9.48 million passengers, losing over 11 million travelers compared to the previous year.
According to the airline, its restructuring costs (that is, the Chapter 11 reorganization) have had a toll of 1.715 billion pesos (approximately US$85 million so far).
Aeromexico closed the fourth quarter with a cash balance of 8.2 billion pesos, equivalent to US$399 million, including restricted cash.
What do we know about the fleet?
Unfortunately, Aeromexico hasn’t been very informative regarding the future of its fleet. The airline closed the year with a fleet comprised of 106 aircraft. It had 19 Boeing 787 Dreamliner, five B737-700, 30 B737-800, six B737 MAX 8, and 47 Embraer E-190.
Nevertheless, in January, Aeromexico rejected the lease contract of one Boeing 787-8, reducing its long-haul fleet.
Aeromexico expects to further reduce its fleet during the following months. In a recent motion turned to the United States Bankruptcy Court, Aeromexico stated,
“The months ahead will be focused on many time-consuming tasks, including rationalizing the Debtors’ aircraft fleet and workforce, claims analysis, and formulating the Debtor’s Chapter 11 plan.”
Plus, we still have to see how Aeromexico will rearrange its standing orders for 737 MAX and 787 Dreamliner units.
What do you think of Aeromexico’s financial results? Let us know in the comments.