Mexicana ! MX ! MXA

The latest, and possibly last, attempt to revive Mexicana involves resuming limited service to the U.S. in mid-January and building a network of high-yield markets across Central and North America within five to six months.

This plan, developed by a group of investors working as PC Capital, has been approved by the airline’s pilot and flight attendant groups, and has the public backing of the Mexican Government and the carrier’s major creditors.

Ground workers are also expected to approve the reorganization plan, but are waiting for the formal approval from Mexicana’s main creditors, which could come in the first week of December.

While there is still the potential for this plan to fail, insiders suggest Mexicana could return to the skies mid-January with as few as six Airbus A320s offering services from Mexico City to Chicago, Los Angeles, Miami and New York.

The FAA safety downgrade does not affect the resumption of these flights as Mexicana already holds the rights to operate these services. However that same downgrade has stopped rival Aeromexico from assuming these routes during Mexicana’s grounding, a restriction that has boosted interest in PC Capital’s proposal.

The plan, at least tentatively, intends for the lease of up to 24 more Airbus A320-family aircraft by June, and some may even be aircraft that were leased before Mexicana’s bankruptcy. With this fleet of 30 or so A318s, A319s and A320s, the network could grow to include six key domestic markets—Cancun, Guadalajara, Monterrey, Oaxaca, Tampico and Veracruz—the addition of Las Vegas, San Antonio; Texas, San Francisco and Washington to the U.S. schedule, and nonstop services to Costa Rica, Cuba, El Salvador and Guatemala.

Nonstop flights will also resume between Mexico City and Colombia’s capital Bogota.

Frequencies on all these city-pairs will range from daily to four-a-day, a sharp contrast to the pre-bankruptcy schedule. In total, the revived Mexicana’s capacity will fall 60%.

To attain this, PC Capital had to convince employees that payroll needed to decline at similar levels. And for now it appears to have been successful with a package that pays furloughed staff 20% of their severance in cash, a further 20% after seven years with a 7% annual interest rate, and the remaining 60% in shares in the new Mexicana.

With this deal, the investors hope to reduce pilot numbers from about 780 to around 280 and flight attendants from 1,400 to about 380. Ground workers will not be as affected because PC Capital wants to maintain Mexicana’s MRO operation, so this division’s staff numbers may only fall from 3,200 to about 2,600.

Under Mexican law, a bankrupt company’s reorganization must also be approved by a majority of its creditors, and according to a source, PC Capital has gained the requisite agreements by paying all debts owed to its largest creditor and its fuel supplier, while another creditor, Banco Mercantil Del Norte, gets U.S.-held assets and shares if it approves the deal.

With these approvals, PC Capital will gain the more than 50% creditor acceptance required.

There are even bigger plans ahead, and while the revival of Mexicana is currently focused on returning to service, the new airline intends to keep all the gates at Mexico City’s Terminal 1 used by its now defunct predecessor. But this time it intends to battle new entrants such as VivaAerobus and Volaris, and increased capacity at Interjet, with a cost model akin to these low-cost carriers and not the legacy that ended service in August.

Mexicana de Aviacion could resume tickets sales on Jan. 24 and return to the skies the following month, according to a top Mexican official.

The announcement by Undersecretary of Transport Humberto Treviño to local media confirms a relaunch plan detailed last month by Aviation Week (Aviation Daily, Dec. 13). In that article, sources said flights could resume to the U.S. from Mexico City as early as mid-February with a fleet that could number up to 19 aircraft.

Few details are being disclosed, but Treviño is stressing that the Jan. 24 date marks only the start of ticket sales and not operations. He avoids any mention of fleet size or destinations, but confirms the appropriate creditors have approved the relaunch plan

Mexicana de Aviacion’s revival plan now expects to return the carrier to revenue service Feb. 14 with a fleet of six operational Airbus A320s and one spare.

The much-delayed return of Mexicana took its first solid step forward last week when the airline operated two maintenance certification flights. The revival continued this week with the completion Jan. 25 of a third maintenance flight and the recertification of Mexico City International Airport as the carrier’s hub airport, and will include the certification of Guadalajara Jan. 26 and the first recertification flight Jan. 28.

Ticket sales are scheduled to return Jan. 31, with first flights expected just two weeks later, according to a source with intimate knowledge of the plan. Destinations planned for the first day of operation are Chicago, Los Angeles, Miami and San Antonio in the U.S., Havana, Cuba, and Guatemala City, Guatemala.

An expansion plan still under discussion forecasts a fleet of 19 aircraft in time for the busy Spring Break season, which starts in April, and 42 Airbus narrowbodies for the summer schedule. Although the number of destinations is still being debated, the source says Mexicana is focused on building its presence in key city-pairs, with as many as four daily flights serving the higher-yield markets.

Certain destinations, including El Salvador, Toronto and Washington, should, however, return before the summer schedule.

The expansion will be halted at 42 aircraft, the source adds, although it may resume in 2012 once management can gauge market demand.

All the aircraft planned for Mexicana’s return will be leased, and agreements are still being negotiated. These include the seven aircraft planned for the Feb. 14 return (six operational and one spare), which could include aircraft owned by the carrier’s chief creditor, Banco Nacional de Comercio Exterior (also known as Bancomext), as well as lessors such as Aviation Capital Group and Orix.

Some of Bancomext’s nine A320s are already being used for the maintenance flights, but the bank must negotiate a sale and leaseback agreement with a lessor before it can place any aircraft with Mexicana, says the source. The airline, however, expects eventually to operate all nine A320s owned by Bancomext.

Mexicana’s return could, for now, dampen expansion plans at low-cost operators Interjet and Volaris, as Mexicana intends to keep all the slots it held at Mexico City before its bankruptcy.

This is compounded by the current bilateral air transport agreement between Mexico and the U.S., which restricts operations on any city-pair to two carriers from each country. And according to sources on both sides of the border, the Mexican government has made no indication that it wants to revise that accord.

Ownership of Mexicana de Aviacion has been transferred to a group of investors known as PC Capital under a restructuring plan that will provide more than $200 million to the bankrupt operator in the coming days.

The agreement shifts ownership from current owners Tenedora K to a group led by local investors Alejo Peralta Terán, Rubén Vila Garciasordo and Alejandro Ampudia Marco. These three and a group of foreign investors still finalizing their funding issues will assume control of the holding company Nuevo Grupo Aeronáutico, the airline says in a statement.

Shares have already been transferred to PC Capital, and the new funding is expected to be distributed before the end of the week. This process also initiates a restructuring plan that in essence lays off Mexicana’s entire payroll and re-employs a skeleton staff for the launch of revenue service March 4. About 35% of this staff, or 4,000 employees, will eventually be rehired.

Plans to resume revenue service by Feb. 28 have been deferred (Aviation Daily, Feb. 17), says a source close to the airline, although an “expeditionary” flight is still planned for that date. And while the flight is expected to operate between Mexico City and Cancun, regulatory requirements may shift the destination to San Antonio.

As previously reported by Aviation Week, Mexicana plans to return to revenue service with a fleet of seven Airbus narrowbodies, including one spare, serving about six mostly North American destinations. The airline then hopes to increase the fleet to 19 aircraft by the third week in April for the busy “Holy Week” holiday season, and some 40 or so aircraft by the start of the summer schedule.

Where this fleet will be sourced is still under discussion, although most of the lessors that provided Mexicana’s pre-bankruptcy fleet—with International Lease Finance Corp. the notable exception—prepared to provide some of the carrier’s fleet requirements. Aircraft once owned by Mexicana now in the possession of Bancomext, a major creditor, were expected to form part of the fleet, but recent political pressure on the bank appears to have halted that deal, according to one source.

This source also notes that the revitalization program can change “at any time.”