Grupo Mexicana suspends its operations indefinitely

The country’s largest air carrier flew its last plane at midnight Friday, and after that all flights were cancelled indefinitely.

The shutdown of the company will also affect the operations of the low-cost airlines MexicanaClick and MexicanaLink.

In addition, more than 65 domestic and international destinations, including those to United States, Canada, Central America, South America, and Europe will be blocked.

A statement from the group reads, "Today's decision is a painful one for the 8,000-strong Grupo Mexicana family, but we will continue seeking out ways of securing the company's long-term financial viability, so our passengers can once again enjoy the quality services they are accustomed to.

"We hope to be back in the air soon and would like to thank everyone involved in this process for their support and understanding."

Weighed down by financial woes
The company first stopped selling new tickets and was forced to halt operations because it did not have enough money to keep flying.

High jet fuel prices and labor costs contributed to the financial troubles of Mexicana de Aviacion, while the heavy losses suffered due to the country’s recession and the outbreak of swine flu in 2009 further aggravated the situation.

"In the face of the serious deterioration of the company's finances and given the impossibility of reaching agreements to ensure the future viability of the company's operations, we have been forced to temporarily and indefinitely suspend operations," a recording played on the company's Mexico City contact number declared.

A 95 percent stake of the airline was bought by a group of Mexican investors called Tenedora K on the condition that it would lay off 1,366 of the airline's flight attendants and give them weaker severance payments. The plan, however, has been rejected by the government

Filed for bankruptcy protection
The company founded in 1921, filed for bankruptcy protection in Mexico and the United States on Aug. 2 in a bid to reorganize itself after two of its planes were detained in Canada for not realizing payments of lease.

Communications and Transportation Minister Juan Molinar Horcasitas stated that no financial aid will be given to the airline for restructuring. It will have to take assistance from its shareholders, new shareholders, unions, creditors, and other parties.

Before the bankruptcy filing, in a bid to keep the company afloat, the airline had tried to win union concessions for pay cuts of 41 percent for pilots and 39 percent for flight attendants, along with a 40 percent reduction in employees.

However, though the union workers agreed to flexible work time rules, they flatly declined the proposal of salary and job reductions.

A 95 percent stake of the airline was bought by a group of Mexican investors called Tenedora K on the condition that it would lay off 1,366 of the airline's flight attendants and give them weaker severance payments.

The plan, however, has been rejected by the government.

The air carrier's finances in bad shape
An examination of the books by the new owners revealed that the airline’s finances were in bad shape and even worse than expected.

The airline needs an infusion of at least $100 million to keep afloat.

Aviation consultant Jack Keady of Playa del Rey stated, "Over time, some well-positioned, low-cost Mexican carriers, such as Volaris, may add service where they will get the most money. Unless the company that bought Mexicana has deep, deep pockets, Mexicana will become a distant memory for us like TWA and Pan Am."