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Mexicana Seeks Creditor Protection in Mexico, U.S.
 Cyntia Barrera Diaz & Chelsea Emery - Reuters
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August 03, 2010
Mexico City/New York - Troubled Mexicana de Aviacion has filed for creditor protection in Mexico and the United States after management and employees failed to agree on wage and staff cuts to keep the debt-ridden airline flying.
"On Aug. 2, 2010, Mexicana initiated the Concurso Proceeding ... by submitting its voluntary petition to commence a case under the Mexican Business Reorganization Act," the company said in a New York filing dated Monday.
Mexico's insolvency law is called "Concurso Mercantil." Additionally, Mexicana filed for Chapter 15 bankruptcy in New York.
"Mexicana faces financial and operational hurdles," the company said in the filing.
Except for a few tweaks to some international routes and the grounding of three planes on creditors' requests, Mexicana continued to operate normally. The company only owns nine of the 64 aircraft in its fleet.
Talks between the managers and union workers of Mexicana de Aviacion reached an impasse on Monday.
Managers of the 89-year-old Mexican airline, with a debt of close to 10 billion pesos ($796 million), want to sharply cut wages and staff to keep the company running, but workers refuse to have their benefits shrink further.
Mexicana said on Monday that to keep the airline afloat, pilots' and flight attendants' wages need to be slashed 41 percent and 39 percent, respectively.
Pilots and attendants are reluctant to accept a new round of pay cuts since they already gave up multiple benefits in 2006, saving Mexicana around $35 million per year.
"We don't have any other option than continue negotiating," Fernando Perfecto, head of the pilots' union told Reuters on Tuesday, after learning that 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.
(Reporting by Cyntia Barrera Diaz in Mexico City and Chelsea Emery in New York; Editing by Gerald E. McCormick and Maureen Bavdek)
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