Mexicana bankruptcy will benefit US carriers

Possible bankruptcy for one of Mexico's two major airlines could benefit US carriers, reported Reuters.

Mexicana de Aviacion, saddled with mounting debts and high employee costs, filed for creditor protection with Mexican and US authorities this week after it failed to get employees to accept further wage cuts.

On Wednesday, Mexicana suspended ticket sales, raising questions about whether it can stave off bankruptcy – and how long it can continue to operate. On Thursday, the company said its petition for insolvency had been admitted by a Mexico City district judge.

Mexicana's woes could be good news for US airlines flying to popular beach destinations like Cancun and Acapulco.

"There are three big airlines with exposure in Mexico: American , Delta and Continental, and they are kind of your big winners" if Mexicana goes bankrupt, said New York-based analyst Helane Becker, with investment bank Dahlman Rose & Co.

Mexicana belongs to the Oneworld alliance, which also has American, British Airways and Lan among its members.

Mexican low-cost airline Volaris, which recently tapped the US market with flights to California, and Mexicana's main rival, AeroMexico, also stand to gain, but only up to a point.

That would be a boon for those airlines, which like Mexicana were battered by Mexico's severe recession in 2009 and by the H1NI flu outbreak the same year.

But the US Federal Aviation Administration's recent decision to downgrade Mexican airlines, on grounds local authorities were not fully complying with global safety standards, will damage their efforts to capture Mexicana's international routes, Moody's Investor service said.

"AeroMexico and Volaris can't put the US airlines codes on their flights now, but they can continue feeding traffic to the US airlines," Becker said.

Analysts think it could take up to four months for Mexico to get off the FAA's problem list.
(Source:www.cargonewsasia.com)