Struggling Mexicana airline halting all operations

Mexico's largest fleet of aircraft is forced to shut down in "a process that should lead to restructuring"

Published August 27, 2010 10:49PM (EDT)

Debt-ridden carrier Mexicana airline is halting all operations as of midnight Friday as it seeks to restructure costs, Mexico's transportation secretary said.

The country's biggest airline was forced to shut down because it does not have enough money to keep flying, Juan Francisco Molinar Horcasitas told reporters.

But Mexicana da Aviacion "is in a process that should lead to restructuring," he said.

The airline filed for bankruptcy protection in Mexico and the United States on Aug. 2, and later stopped selling tickets and suspended some flights.

In court filings, Mexicana said it was badly hit by the swine flu outbreak last year that scared away travelers for months and by the global economic slowdown. The airline added that high jet fuel prices and labor costs contributed to its financial troubles.

Before the bankruptcy filing, the company unsuccessfully sought union agreement on pay cuts of 41 percent for pilots and 39 percent for flight attendants, along with a 40 percent reduction in employees, saying both were needed to keep the company afloat. Labor leaders rejected the proposal, saying their members already agreed to cuts in 2006.

Executives said this month that the company needed an infusion of at least $100 million to keep flying, and on Aug. 21 a group of Mexican investors called Tenedora K announced it had bought a 95 percent stake in the holding company that controls Mexicana and the domestic airlines Mexicana Click and Mexicana Link.

Mexicana flies to more than 65 national and international destinations, including the United States, Canada, Central America, South America and Europe. It transported 11.1 million passengers in 2009, according to the company's website.

By Associated Press

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