Mexicana’s Tenedora K in arm wrestle with Labour Minister and flight attendants over cutbacks

As Mexicana’s self-appointed rescue group Tenedora K seeks to secure large flying staff reductions at the failed airline, flight attendants have pushed back. The employees have said they are not prepared to accept large salary reductions or a significant cutback in staff numbers by up to 75% in a revived airline.

The flight attendants have gained apparent support from Mexico’s Labour Minister, Javier Lozano, who believes the investors need to provide more information about their funding plans. The flight attendants – whose union, ASSA, is fully behind them – are, according to the Tenedora K investors, paid twice the level of their domestic counterparts. Salaries across the board at the two domestic regional subsidiaries, MexicanaClick and MexicanaLink, are however around local levels and there are no similar plans for them, as regional services continue more or less as normal.

Meanwhile, the new investors, whose full identities are still not being disclosed, have appointed an administrator to the airlines’ parent company Nuevo Grupo Aeronautico (NGA) – which owns all three airlines. The administrator, Alejandro Rodriguez Mirelles, has strong financial credentials and was a director at Mexico’s major bank BBVA Bancomer. Tenedora K said he "has a long career in the financial sector", and has served on numerous corporate boards.

A classic arm wrestle between investors and airline unions

Foreseeing reduced operations if Mexicana is revived, the Tenedora K consortium has reportedly proposed firing all 1,300 flight attendants who work for the international operation, then rehiring 25% of them at greatly reduced salaries.

This could be a negotiating position, but if it does reflect the likely downsizing of Mexicana, it is quite possible that the union will remain strongly opposed, on the basis that there would be little left of the airline.

Minister Lozano yesterday said this course was, in any event, unacceptable and the ASSA union decried it as illegal.

An expensive road ahead but no published roadmap

The Minister also criticised the consortium for not coming forward with any details of planned refinancing of Mexicana. But if investors are proposing to introduce several hundred million dollars into the carrier, they will first want to be sure they are in a position to make a viable and sustainable operation of it.

On the other hand, the Minister, under fire to reduce unemployment, sees his role as trying to save as many jobs as possible.

These two positions are conflicting but not necessarily irreconcilable. Any meeting point will depend largely on the nature of the outcome that the equity investors are seeking, and that in turn depends on who they are and whether they plan to be long-term investors.

They are keeping their options well and truly open by refusing to provide any details, making it seem very much like a speculative play. But, given some of the known figures involved and the national iconic importance attached to the airline, it is unlikely that this will come down to a mere equity play.

Passage of time makes recovery increasingly difficult

The issue still remains whether there will be any play at all. As time passes the prospects of recovering the operation diminish proportionately. Meanwhile, behind closed doors, the haggling with creditors will be ongoing, with the holding company now in bankruptcy protection in Mexico. ASSA and the flight attendants (the airline’s pilots appear to have been kept onside) are also solidifying their stance.

There are few precedents for a grounded airline recovering after such a lengthy suspension, with no renewed flying foreseen yet.

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