By delaying its initial public offering, the holding company Cintra has dodged calls for separate offerings of shares in Aeromexico and Mexicana, but it still faces heat from several quarters.

AeroCalifornia, one of Mexico's two major independent airlines, has become the most outspoken critic of Cintra's practices and ties to the government. Raul Antonio Arechiga, AeroCalifornia's chief executive officer, told the tourism and commercial commission in Mexico's Chamber of Deputies that Cintra's monopoly not only relates to its size but also a concerted strategy by Cintra affiliates and associates to make things difficult for independent airlines.

According to Arechiga, Cintra is using government influence to create 'unfair and artificial bureaucratic barriers for the purpose of impeding the independent Mexican airlines'. Arechiga claims that the Director General of Civil Aviation gave AeroCalifornia certain domestic routes last year but did not approve actual operation of its aircraft. Within 90 days of awarding the routes, the DGCA then took the routes away and also cancelled routes between Mexico City and Durango and services from Guadalajara to Monterrey, hours before AeroCalifornia planned to start operations.

Arechiga claims that ties between Cintra and the government are far too close. Mexican banks were Cintra's only shareholders when authorities approved its joint ownership of Aeromexico and Mexicana in 1996. Since then the government has assumed a more direct role in Cintra's management when it and various agencies stepped in with loans and took over a guarantee fund designed to protect consumer savings. The government's stake in Cintra is now 10 per cent, but its combined share with quasi-government agencies is some 55 per cent.

Meanwhile, AeroCalifornia claims a local DGCA inspector incorrectly reported a safety problem on one of AeroCalifornia's DC-9s in retaliation for public criticism of Cintra. In December AeroCalifornia withdrew from Mexico's air transport association because it claimed Aeromexico and Mexicana were using it as a soapbox to criticise the independent airlines. When Aeromexico was heading the association, it allegedly tried to pressure AeroCalifornia to convert its fleet to Stage 3 aircraft earlier than required by law.

Overall, AeroCalifornia accuses Cintra of trying to improve its image and increase profits solely to enhance the value of its proposed public offering. AeroCalifornia claims Aeromexico and Mexicana are behind a campaign designed to stop AeroCalifornia from codesharing with American.

Mexico's secretary of communications and transport has entered the fray, suspending its award of the Mexico City-Dallas route to Mexicana to review the competition commission accusations of Cintra's monopolistic practices. AeroCalifornia applied for the same route a year ago, but the SCT did not act, claiming the applicant had failed to furnish all necessary papers. AeroCalifornia insisted it had filed all the papers but officials had misplaced them because they wanted to give the route to Mexicana.

Now, in the clearest signal that the government wants to distance itself from Cintra, SCT undersecretary Aaron Dychter says the government will try to sell its interests when Cintra makes its public offering, forecast for early this year. Cintra has not indicated whether it will offer Aeromexico and Mexicana shares separately.

David Knibb

Source: Airline Business