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Aeromexico Flies into Bankruptcy Due to "Unprecedented" COVID-19 Challenges

By Lou Whiteman – Updated Jul 1, 2020 at 8:11AM

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The airline becomes the third Latin American carrier to seek Chapter 11 protection.

Mexican airline Grupo Aeromexico SAB de CV (GRPA.F) filed for Chapter 11 bankruptcy in the United States late Tuesday, becoming the third major Latin American airline to seek bankruptcy protection due to the COVID-19 pandemic.

Aeromexico in a statement said it intends to use the Chapter 11 process to reorganize its operations and strengthen its financial position. Flights will continue, including the airline's previously announced plan to double its domestic flight schedule in July.

A plane lands at night.

Image source: Getty Images.

"Our industry faces unprecedented challenges due to significant declines in demand for air transportation," Aeromexico CEO Andrés Conesa said in a statement. "We are committed to taking the necessary measures so that we can operate effectively in this new landscape and be well prepared for a successful future when the COVID-19 pandemic is behind us."

Airlines globally have been hit hard by the pandemic, which has cut travel demand significantly. The U.S. industry has so far avoided bankruptcies, in part thanks to $50 billion in government assistance coupled with private fundraising efforts, but elsewhere airlines have not been so lucky.

Aeromexico joins Chile's Latam Airlines Group and Colombia's Avianca Holdings in bankruptcy.

The filing is another blow to Delta Air Lines (DAL -1.71%) which in good times invested billions in foreign partners and is now seeing much of that equity wiped out. Delta owned a major stake in Latam and owns 49% of Aeromexico's equity.

Delta's equity investments are likely headed for zero, but the airline will hope to keep its alliances with the restructured partners. Aeromexico in its statement said it expects to continue to meet its current commercial agreements with partner airlines including sustaining its joint venture with Delta.

Lou Whiteman owns shares of Delta Air Lines. The Motley Fool recommends Delta Air Lines. The Motley Fool has a disclosure policy.

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