Mexicana suspends international flights

by B. N. Sullivan

Less than a week ago, Compañía Mexicana de Aviación (CMA), AKA Mexicana Airlines, filed for bankruptcy protection, but said it would continue to operate while undergoing reorganization.  Nevertheless, the carrier suspended ticket sales a day later.  Now the situation appears to have deteriorated even further as Mexicana announced today that it will suspend many of its international flights, beginning tomorrow, August 9, 2010.   Its domestic operations, MexicanaClick and MexicanaLink also are at risk.

Quoting from a press release issued by Mexicana on August 8, 2010:

Mexicana Airlines today announced that its financial situation has deteriorated substantially in the last week due to a series of events that have strangled the cash flows the airline needs to finance its day-to-day operations. One such event was IATA’s decision to suspend the carrier’s BSP sales channel, forcing it to suspend the sale and issuing of tickets indefinitely, with serious repercussions for MexicanaClick and MexicanaLink sales. Other sources of revenue have either dried up or are being retained by financial institutions following the company’s recent decision to file bankruptcy proceedings.

Consequently, Mexicana Airlines will be forced to cancel certain flights over coming days to optimize available resources and ensure that priority is given to homebound passengers.

Beginning tomorrow, August 9,2010, Mexicana will suspend flights on most international routes. [Click here to view a list of suspended flights.]

Mexicana's most recent press statement says, "It is hoped an agreement will be reached with union leaders and that additional resources can be obtained to secure the financial viability of the carrier."

Sadly, it also says, "If you are planning on traveling by air in the immediate future, Mexicana Airlines suggests you consider alternatives, where possible."

Mexicana files for bankruptcy protection, blames labor costs

by B. N. Sullivan

Compañía Mexicana de Aviación (CMA), AKA Mexicana Airlines, filed an insolvency petition today with a Mexico City district court.  Mexicana also filed a Chapter 15 bankruptcy petition in New York.  The airline intends to continue operating while it reorganizes.  Domestic subsidiaries Click and Link are not a part of the bankruptcy filing.

According to a press release issued today by Mexicana, the filings were made "in order to obtain bankruptcy protection and injunction relief in both countries."  The 'Concurso Mercantil' filed with the Mexican courts is similar to Chapter 11 bankruptcy in the U.S. in that it guarantees the operation of the company while it restructures.

Mexicana said yesterday that "the company's financial and labor situation is no longer sustainable," and the airline proposed drastic cuts to crew pay: 41% for pilots and 39% for flight attendants.  Mexicana also proposed to lay off about 40% of its present crew work force.  Quoting from the Aug. 2, 2010 press release:

...Concerted efforts have been made over the last four and a half years to restructure costs, efforts that have translated into savings of some US$800 million as a direct result of investment in IT systems, new routes and more efficient aircraft, but have not been sufficient to offset its crew costs.

Although the airline’s operating costs excluding crew labor costs are 30% lower than the average of legacy airlines in the United States, these non competitive labor costs are the main reason why the company has continued to suffer losses, to the extent that it is now financially non-viable. According to company sources, CMA’s pilots earn 49% more than the average wage paid by legacy airlines in the United States and 185% more than the average pilots flying Airbus A320s for other Mexican low cost airlines like Volaris or Interjet. Likewise, Mexicana Airlines flight attendants earn 32% more than the U.S. average and 165% more than their Mexican counterparts employed by the same airlines.

Numbers confirm, that if the CMA’s collective contracts had been more competitive, instead of registering losses of US$350 million from 2007 to date, the company would have posted profits of US$350 million, illustrating that CMA does indeed have the potential to be a profitable, financially viable carrier.

However, in light of the current situation, CMA has presented its pilots’ and flight attendants’ unions with two alternatives.

The first is the option to enter into a new collective contract to secure the CMA’s long-term financial viability. This would imply accepting cuts of 41% and 39% in wages and fringe benefits for pilots and flight attendants, respectively. This alternative also calls for additional cost-cutting measures, including downsizing 40% of the airline’s pilots and flight attendants. On the upside, it incorporates a profit-sharing plan whereby the unions would get a percentage of any operating profits that exceed 5% of the company’s total revenues.

As a second alternative, stockholders have offered to sell CMA to its unions for the token sum of $1 peso, proving them convinced of the vital role these labor organizations will play in the future of the company. As the only entities capable of turning the situation around, CMA’s management have stated that it would be willing to transfer control of the airline to its unions. The transaction would require further and more detailed negotiations with the unions, but in broad terms would require NGA to assume liabilities of US$120 million in bank credit lines, while the unions would have the option of retaining a BANCOMEXT loan for US$80 million or transferring this credit line and its respective sureties to NGA. The unions would also be given a six-month permit for the use of the Mexicana Airlines brand name, among other measures designed to allow for a smooth transition.

In response to statements by representatives of the pilots union (ASPA) to the effect that both proposals outlined by CMA would be rejected, the company said that it is time to acknowledge reality, that the paradigm of commercial aviation has changed worldwide and that only airlines that operate at competitive costs can hope to survive and continue flying. CMA will continue to negotiate with its unions.

A short time ago, Reuters published an article about the Mexicana situation, reporting that crews "already gave up multiple benefits in 2006, saving Mexicana around $35 million per year," and thus are reluctant to accept the pay cuts proposed this week.  The Reuters article included comments attributed to crew union leaders:

"We don't have any other option than continue negotiating," Fernando Perfecto, head of the pilots' union told Reuters on Tuesday after learning Mexicana had filed for creditor protection.

"We are not going to stop working, on the contrary, we will continue business as usual," he said, knocking down any possibility of a strike.

Lizette Clavel, who heads the flight attendants union, told Reuters on Tuesday the creditor protection filings came as a surprise to unionized employees.

Commenting on the option presented to crews to buy out Mexicana, Ms. Clavel said, "We reject the fraudulent intention of making Mexicana de Aviación file for creditor protection since this means sharing the losses while privatizing the gains by leaving Click and Link out of the proceedings."

UPDATE Aug. 4, 2010: Reuters is reporting that Mexicana suspended ticket sales this afternoon.

UPDATE Aug. 8, 2010:  Mexicana  has announced the suspension of international flights, beginning August 9, 2010.

MexicanaClick Fokker 100 emergency at Monterrey, Mexico

by B. N. Sullivan

On the evening of February 11, 2010 a MexicanaClick Fokker 100 aircraft (registration XA-SHJ) made an emergency landing at Mariano Escobedo International Airport in Monterrey, Mexico after its main landing gear failed to deploy properly. The crew and passengers evacuated the aircraft on the runway via emergency slides, and one person is said to have sustained minor injuries. According to the company, there were four crew members and 92 passengers on board.

According to a statement on Mexicana's Web site, the aircraft, operating as MexicanaClick Flight QA7222, had been en route to Nuevo Laredo from Mexico City when a "mechanical fault" with the landing gear was detected. The crew chose to divert to Monterrey because of "the length of the runway and the installed capacity of emergency response teams," the company's statement said. The aircraft landed at 8:42 PM local time.

In news photos from the scene, the aircraft appears to be resting on its belly. News media in Mexico are reporting that the airport at Monterrey was closed immediately after the accident, and was expected to remain closed overnight.

[Photo Source]

UPDATE Feb. 12, 2010: This morning, a few more details about this accident have emerged. The Aviation Herald reports that while on approach to Nuevo Laredo, the crew of MexicanaClick Flight QA7222 "received an unsafe gear indication, entered a holding to trouble shoot the problem and after being unable to resolve the problem performed a low approach to have the landing gear inspected which revealed, that both main gear had not extended." After landing on runway 29 at Monterrey, the aircraft " skidded off the runway and came to a stop on soft ground turned around by nearly 180 degrees."

Labor federation says Mexicana cabin crew denied right to collective bargaining

The International Transport Workers' Federation (ITF), a federation of unions representing workers in the transportation industry worldwide, claims that the Mexican government has breached its own labor laws after cabin crew working for Mexicana Airlines, the Mexican national carrier, were denied the right to collective bargaining.

A news item posted on the ITF website says:

Mexicana Airlines cabin crew, represented by the ITF-affiliated Asociación Sindical de Sobrecargos de Aviación (ASSA), were informed by the labour authorities that they could not review their collective bargaining agreement. The move follows a lawsuit by the airline against the workers, which argued that they should not be allowed to review their agreement as wages and benefits were the main reasons for the company’s lack of viability. The labour authority’s decision to back the company runs counter to Mexican labour law, which guarantees collective bargaining rights. It also breaches International Labour Organization Convention 98 on the right to collective bargaining, one of the eight core labour conventions.

Antonio Rodriguez Fritz, ITF Americas Regional Secretary, commented: "Once again the Mexican Labour Secretary is violating human and trade union rights to benefit the corporate sector. In theory, the labour authority is obliged to respect the law, not violate it and interpret it in a prejudicial way against workers’ rights. This attitude is an offence against the cabin crew, who play a key role as safety professionals, and their families. There could also be an impact on passengers if safety is compromised."

The ITF notes that the ASSA will lodge an appeal against the labor authority’s decision.

Mexicana Airbus A320 runway overrun at Chicago-O'hare Airport

A Mexicana Airlines Airbus A320 aircraft overran a runway at Chicago's O'Hare International Airport (ORD) on July 18, 2008, just after 7PM local time. According to the airline, the aircraft, operating as Mexicana Flight MXA802 from Mexico City, had 138 passengers and 7 crew members on board. News reports say that one flight attendant was injured and was taken to the hospital. The flight attendant's injuries are said to be "not life-threatening."

Many news reports have stated that the aircraft "overshot the runway," but, technically speaking, this is not true. The aircraft apparently landed on ORD runway 22L, but then overran the end of the runway and was stopped by the runway's arrestor bed. At the time of the overrun incident, the weather was reported to be rainy, with strong and gusty crosswinds. It is not known at this time if the weather played a causal role in the incident.

Passengers evacuated through an aft door of the aircraft, and descended to the runway via a stair truck. They were transferred from the runway to the terminal by bus.

This incident illustrates the value of arrestor beds at the end of runways. Arrestor beds have been installed just recently at both Chicago Midway Airport and O'Hare International Airport. The arrestor beds, officially known as Engineered Material Arresting Systems (EMAS), are areas of crushable material -- usually a mixture of water, foam and concrete -- beyond the threshold of a runway. The material is designed to crush under the weight of an aircraft, absorbing energy and gradually reducing the airplane's forward momentum until it stops, similar in concept to runaway truck ramps.