Mexico labor minister not optimistic about Mexicana prospects

MEXICO CITY – Mexico’s Labor Minister, Javier Lozano, said he isn’t optimistic about the prospects of a group of investors for saving airline company Mexicana from bankruptcy, and rejected a proposal by the new owners to lay off three-quarters of the carrier’s flight attendants.

An investor group known as Tenedora K singled out flight attendants union ASSA from the rest of Mexicana’s workforce Tuesday for demanding labor conditions that it said would make a rescue of the Mexicana airline group “inviable.” Tenedora K said flagship airline Mexicana de Aviacion’s costs are 32% higher than those of U.S. legacy carriers and twice those of low-cost Mexican carriers.

Tenedora K, which at the weekend said it had taken a 95% stake in Mexicana holding company Nuevo Grupo Aeronautico, or NGA, hasn’t publicly given details on its plans for solving Mexicana’s financial and operating problems.

ASSA rejected Tenedora K’s assertions, saying in a statement that the flight attendants, rather than making demands, had offered a series of economic proposals including annual savings of around $15 million.

Lozano, speaking late Tuesday on the local Radio Formula station, said the investors’ proposal to lay off all 1,360 of flagship carrier Mexicana de Aviacion’s flight attendants and then rehire 25% of them with reduced salaries, was excessive. ASSA described the proposal as “inadmissible and illegal,” adding that the severance Tenedora K would seek to pay is only legal when a company is declared bankrupt, whereas Mexicana is merely in a state of protection from creditors.

Lozano, noting the Labor Ministry’s goal of saving as many jobs as possible, said he had rejected Tenedora K’s proposal.

“Among other things, I haven’t seen them put the money on the table,” he said, referring to the hundreds of millions of dollars that will likely be required to keep Mexicana de Aviacion and subsidiaries MexicanaClick and MexicanaLink operating during the coming months.

“I haven’t seen where the money is, where the investors are, where the business plan is,” Lozano said. “They’re seeing who they can squeeze more and more and more and more to see if they can square up their accounts, and I don’t think that’s an adequate business model.”

A spokesman for Tenedora K declined to comment on ASSA’s and Lozano’s comments, or confirm or deny the plan to fire all the flight attendants.

Tenedora K hasn’t disclosed all of its investors, how much it paid for the stake in NGA, or how much money it’s willing to pump into the company.

Mexicana de Aviacion listed debts of more than $1 billion in its U.S. bankruptcy filing early this month and is reportedly burning through cash following a suspension of ticket sales. MexicanaClick and MexicanaLink continue selling tickets.

Communications and Transportation Minister Juan Molinar said earlier in the week that Tenedora K hadn’t submitted paperwork to federal aviation regulators to declare its 95% stake. The investor group has also avoided implying that a bailout of Mexicana is imminent, referring instead to “the possible rescue.”