Mexicana's new owner secures union concessions required for re-launch

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Mexicana's unions have approved new contracts with the grounded carrier's new owners, moving Mexicana one step closer to potentially re-launching operations.

PC Capital emerged earlier this month as a potential new investor in Mexicana and unveiled a new business plan envisioning a mid-December resumption of operations. The plan was contingent on significant concessions from Mexicana's three unions, which were quickly forged and have now been approved.

A spokesman for pilots union ASPA confirms a new contract was approved by Mexicana pilots yesterday while a spokesman for flight attendants union ASSA says a new contract was approved by Mexicana flight attendants last night. ASPA and ASSA say Mexicana's ground personnel union, SNTTTASS, also has approved a new deal.

The ASPA spokesman says that now PC Capital has secured the concessions it required for it to formally invest in re-launching Mexicana it expects the Mexico City-based investment bank will move forward this week with preparing the carrier for resuming operations. He says all the required approvals to begin ticket sales are expected by the end of this week.

"They are supposed to be working this week to start selling tickets and start flying December 15th," he says.

ASPA says Mexicana's pilots have agreed to a 40% reduction in salaries as well as a reduction in benefits. Productivity will also be increased by increasing flying hours and reducing rest hours. PC Capital has committed to hiring 280 of the 1,167 pilots that had worked Grupo Mexicana, with all the hires coming from the mainline unit rather than regional units Click or Link.

"It's a very weak contract for the workers but it's also a good contract," the ASPA spokesman says.

PC Capital has agreed to hire 375 flight attendants as part of the new contract with ASSA. But the ASSA spokesman declined to provide details on the concessions.

PC Capital's new business plan calls for an operation of 30 aircraft, which is less than one-third of Grupo Mexicana's previous fleet. But an ASPA spokesman acknowledges the initial fleet may only include the nine A320s which were owned by Mexicana.

It is unclear how PC Capital will secure additional aircraft as leasing companies have already remarketed nearly all the other A320 family aircraft previously operated by Mexicana. Some of Bombardier CRJ200s and Boeing 717s previously in Grupo Mexicana's fleet are more likely to still be available but PC Capital's business plan calls for only operating A320 family aircraft.

The plan includes resuming services on some domestic trunk routes but focussing primarily on US routes. Domestically Mexicana's void has already been filled by Aeromexico and Mexico's three low-cost carriers. But Mexico's remaining carriers have been unable to fill Mexicana's void on US routes because Mexico currently falls under Category 2 in the FAA's International Aviation Safety Assessment (IASA) programme. Mexicana was by far the largest player in the US-Mexico market.

The new Mexicana, if it succeeds at launching, will follow more a low-cost model rather than a traditional legacy model. The Mexican government is not directly providing any capital but the ASPA spokesman say the government has agreed to give new owners concessions in the form of credits for fuel, air traffic control services and airport taxes.

Mexico's other carriers have vehemently opposed any form of government support for Mexicana, claiming such support would create an unlevel playing field. Mexico's remaining carriers also do not see any need for the government to interfere because they believe they can adequately fill the void left by Mexicana.

Many in Mexico remain sceptical that Mexicana will be able to re-launch even with the union concessions and some indirect support from the government. Over the last three months several investors have expressed interest in re-launching Mexicana but withdrew when it came time to put in capital.

PC Capital also has not yet put in any funds but has pledged to invest over $100 million. The investment bank has shown the government and unions it has the funds but will need to make the first instalment within the next few days if Mexicana is to have any chances at re-launching next month.