The Airline Industry is a really tough competitive environment with no room for sentiment. But I have been watching with considerable sadness the rapid and accelerating decline of Mexicana. The 89 year old Airline has been in serious financial straits for a long while and to turn this into a potentially fatal crisis needed a trigger to be pulled and on the 29th July it was: Canada cancels 2 flights on creditor request. This was followed by a further seizing of an Aircraft in Chicago by the leasing company AerCap.
The Company has been struggling with the Unions to persuade them to accept further Job and Benefit cuts. This is a major issue for the Airline as if labour costs are removed, and then Mexicana has a 30% advantage over similar US Operators. But put the labour costs back in and suddenly that advantage not only disappears, but immediately puts Mexicana at a disadvantage. For example: Mexicana Pilots earn 49% more that their US Equivalents, but more telling is their 185% salary advantage over Pilots for other Mexican Airlines such as Volaris or Interjet. For Cabin Staff the situation is similar with salaries 32% above US Equivalents and a 165% above the Mexican Airlines mentioned earlier. Despite this the Unions having already seen a major cut in Benefits back in 2006 are resisting any further changes.
On 3rd August the Airline announced its latest Restructuring Plan a major part of which would be the cutting of Aircrew Salaries: For Pilots 41% cut in Combined Salary and Benefits, or Cabin Staff 39%, but in addition major redundancies of the order of 40% in both categories. As an alternative the Company offered to sell the Airline and its massive Debt to the Unions for 1 Peso!
The Unions reacted swiftly by rejecting both options (A Shorter article here: Mexicana Workers, Management at Impasse).
The Airline began cancelling services on a relatively wide scale with a statement on its website reporting that Mexicana "financially non-viable" and this was reported by ABTN amongst others.
On the 2nd August the Airline filed for Bankruptcy Protection in both Mexico and the USA and on the 4th further announced it had suspended Ticket Sales and to add insult to injury the FAA announced it was downgrading Mexico's Air Safety rating from 1 to 2, nothing to do with Mexicana Woes, but not something to inspire confidence.
The Pilot's Union responded to the Bankruptcy Filing by a demand that the Airline open its books for inspection. Already the impact of the situation is being felt as Mexico's Airports begin to calculate the implications.
Mexicana is part of the OneWorld Airline Alliance and the 5th August, the OneWorld Cockpit Crew Coalition (made up of Flightdeck Crew from all the member airlines) issued a Press Release Voicing Support for Mexicana Pilots.
Meanwgile three Leasing Companies are attempting to recover their Aircraft via a US Court: Creditors Seek to Get Their Planes Back from Mexicana. In the view of AerCap (who aren't involved in the Court Case) there is a ready demand for Mexicana Aircraft
So can Mexicana find a way out this, well I was wrong about Alitalia whose situation back in 2008 had many similarities and although still making losses showing signs of recovery , however going further back in the past, Sabena was in destroyed by Union intransigence and very high costs and in part by the failure of the Swissair Investment. My head tells me that Mexicana it on the point of becoming History, but in my heart I hope it not only makes its 90th year, is still in business for its centenary!
In this Blog see:
A (belated) Happy Birthday Alitalia which has links back to my 'doom and gloom' posts.
External:
What Goes Up Must come down - Economist 5th August
The Company has been struggling with the Unions to persuade them to accept further Job and Benefit cuts. This is a major issue for the Airline as if labour costs are removed, and then Mexicana has a 30% advantage over similar US Operators. But put the labour costs back in and suddenly that advantage not only disappears, but immediately puts Mexicana at a disadvantage. For example: Mexicana Pilots earn 49% more that their US Equivalents, but more telling is their 185% salary advantage over Pilots for other Mexican Airlines such as Volaris or Interjet. For Cabin Staff the situation is similar with salaries 32% above US Equivalents and a 165% above the Mexican Airlines mentioned earlier. Despite this the Unions having already seen a major cut in Benefits back in 2006 are resisting any further changes.
On 3rd August the Airline announced its latest Restructuring Plan a major part of which would be the cutting of Aircrew Salaries: For Pilots 41% cut in Combined Salary and Benefits, or Cabin Staff 39%, but in addition major redundancies of the order of 40% in both categories. As an alternative the Company offered to sell the Airline and its massive Debt to the Unions for 1 Peso!
The Unions reacted swiftly by rejecting both options (A Shorter article here: Mexicana Workers, Management at Impasse).
The Airline began cancelling services on a relatively wide scale with a statement on its website reporting that Mexicana "financially non-viable" and this was reported by ABTN amongst others.
On the 2nd August the Airline filed for Bankruptcy Protection in both Mexico and the USA and on the 4th further announced it had suspended Ticket Sales and to add insult to injury the FAA announced it was downgrading Mexico's Air Safety rating from 1 to 2, nothing to do with Mexicana Woes, but not something to inspire confidence.
The Pilot's Union responded to the Bankruptcy Filing by a demand that the Airline open its books for inspection. Already the impact of the situation is being felt as Mexico's Airports begin to calculate the implications.
Mexicana is part of the OneWorld Airline Alliance and the 5th August, the OneWorld Cockpit Crew Coalition (made up of Flightdeck Crew from all the member airlines) issued a Press Release Voicing Support for Mexicana Pilots.
Meanwgile three Leasing Companies are attempting to recover their Aircraft via a US Court: Creditors Seek to Get Their Planes Back from Mexicana. In the view of AerCap (who aren't involved in the Court Case) there is a ready demand for Mexicana Aircraft
So can Mexicana find a way out this, well I was wrong about Alitalia whose situation back in 2008 had many similarities and although still making losses showing signs of recovery , however going further back in the past, Sabena was in destroyed by Union intransigence and very high costs and in part by the failure of the Swissair Investment. My head tells me that Mexicana it on the point of becoming History, but in my heart I hope it not only makes its 90th year, is still in business for its centenary!
In this Blog see:
A (belated) Happy Birthday Alitalia which has links back to my 'doom and gloom' posts.
External:
What Goes Up Must come down - Economist 5th August
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