The US Court approved Aeromexico’s restructuring plan on Friday after the airline signed a deal with the remaining creditors. This achievement clears Aeromexico’s way for it to emerge from bankruptcy after more than a year and a half under a Chapter 11 financial reorganization. Once it exits the proceedings, Aeromexico will have new controlling shareholders, led by Apollo Global Management and Delta Air Lines.
Aeromexico is close to exiting Chapter 11
On January 27, Aeromexico began a court hearing to get the approval of its Chapter 11 bankruptcy plan. One day later, the US Bankruptcy Judge Shelley Chapman gladly announced that the reorganization plan was approved. It will be the second of three Latin American airlines under Chapter 11 to exit the bankruptcy proceedings; the first one was Avianca.
“I could not be more pleased to tell you the plan of reorganization is confirmed,” said Judge Chapman. This was only possible after Aeromexico agreed to pay a settlement to a group of creditors unhappy with the airline’s bankruptcy plan. To resolve these remaining issues, particularly with the airline’s most vocal opponent, Invictus Global Management, Aeromexico agreed to pay US$1.1 million in cash, as reported by Reuters. The airline also agreed to provide a group of junior creditors US$800,000 to cover legal fees.
On January 27, Aeromexico also reached a deal with a group of unsecured creditors, offering them potential distributions from a four-year, US$40 million “contingent value right” note.
Following the plan confirmation, Andrés Conesa, Aeromexico’s CEO, issued a statement that said,
“I feel very proud to announce we reached one of the most important milestones in our Chapter 11 process. Now, we have a clear runway to take off as a more efficient and modern new company.”
The reorganization plan
Aeromexico’s reorganization plan will reduce the airline’s debt by approximately a billion US dollars. Moreover, it will also save about 13,000 jobs, said the airline.
The Mexican flag carrier will receive financing of approximately US$1.4 billion. This amount will help the airline “satisfy the most urgent needs in terms of liquidity.”
Additionally, Aeromexico’s business plan forecasts a passenger growth of 58% by 2025 from pre-pandemic levels, along with an increase in unit revenues.
Aeromexico expects its cost transformation to drive over US$600 million of savings in 2021, with structural savings continuing through the business plan period; therefore, the airline will be positioned for long term success, with EBITDAR going from negative in 2020 to over US$1 billion by 2023, which would be the highest ever for Aeromexico.
The Mexican carrier expects to return to profitability as soon as 2022. Aeromexico should publish its full-2021 financial results in the coming weeks.
2021 traffic results
Last year, Aeromexico carried 16.5 million passengers, a 20.0% decrease compared to 2019 levels prior to the COVID-19 pandemic. Unlike its low-cost competitors, Viva Aerobus and Volaris, Aeromexico was unable to grow in 2021.
Nonetheless, if we only take into account Aeromexico’s December traffic levels, the airline closed the year with nearly a full recovery. Last month, the carrier had 1.7 million travelers, only a 1.1% decrease compared to December 2019.
Domestically, Aeromexico closed the year with an 11.6% increase compared to December 2019 (and, overall, a 5.7% decrease in the whole year). But, internationally, Aeromexico had 509,000 travelers, a 22.5% decrease compared to December 2019. Overall, Aeromexico handled 4.1 million international travelers in 2021, a 44.7% decrease.
What do you think about Aeromexico’s latest Chapter 11 developments? Let us know in the comments below.
