Panama Jack
16th Dec 2004, 06:28
Mexico to sell 2 airlines
by Steve Cannon in Mexico City
Updated 07:23 PM EST, Dec-14-2004
The Mexican government is expected Wednesday, Dec. 15, to approve a plan to merge, then sell the country's two largest airlines for up to $2 billion by mid-2005 following years of failed attempts to do just that.
President Vicente Fox's administration will also appoint a new slate of directors to carry out the plans for Aeromexico SA de CV and Mexicana de Aviacion SA de C, which now operate separately under a state holding company. It is also expected to approve a plan to merge and sell two smaller regional carriers, AeroCaribe and Aerolitoral, also under the holding company Cintra SA de CV.
The Mexican government has tried to sell the airlines almost since taking them over in 1995 as part of an industry bailout that followed the 1994 peso devaluation and an ensuing economic crisis. At first, financial problems in both companies prevented a sale, and then a worldwide slowdown in the aviation business after Sept. 11 made it unfeasible.
The government now hopes an expected recovery in airline travel and in the world economy will prompt investors to bet big on Mexican aviation. But success is by no means certain, as many of the logical buyers are part of a U.S. airline industry still undergoing painful restructuring.
To guide the sale, the government proposes that Andres Conesa, the head of public credit in Mexico's Finance Ministry, take over as Cintra chairman. The company's current chairman, Rogelio Gasca Neri, would be in charge of merging Mexicana and Aeromexico, which he ran in the 1980s. Mexicana CEO Emilio Romano would run the merged regional airline, to be called Aeronacional.
Mexico's Federal Competition Commission has said the regional carrier must nearly triple its market share to about 20% of flights before it will give final approval to the sale. Mexicana and Aeromexico control nearly two-thirds of Mexico's aviation market.
Cintra has said it expects to complete the sale in the first half of 2005.
The merged company would be Latin America's largest air carrier and could be worth $800 million to $2 billion, analysts say, depending on the sale terms. Government agencies hold a 60% equity stake in the Cintra holding company.
Government regulators have capped foreign ownership in the sale of the merged airline at 25% and it's unclear whether that might be lifted. Political opposition to a foreign takeover of the airlines has stiffened in recent years, as Mexicans watched the country's largest banks, Banamex and Bancomer, sold to Citigroup Inc. and Spain's Banco Bilbao Vizcaya Argentaria SA.
Foreign companies that have expressed interest in buying into Mexican aviation include Continental Airlines Inc., which has more flights into Mexico than any U.S. carrier, American Airlines Inc., Delta Air Lines Inc., and Spain's Iberia Lineas Aereas de Espana SA.
by Steve Cannon in Mexico City
Updated 07:23 PM EST, Dec-14-2004
The Mexican government is expected Wednesday, Dec. 15, to approve a plan to merge, then sell the country's two largest airlines for up to $2 billion by mid-2005 following years of failed attempts to do just that.
President Vicente Fox's administration will also appoint a new slate of directors to carry out the plans for Aeromexico SA de CV and Mexicana de Aviacion SA de C, which now operate separately under a state holding company. It is also expected to approve a plan to merge and sell two smaller regional carriers, AeroCaribe and Aerolitoral, also under the holding company Cintra SA de CV.
The Mexican government has tried to sell the airlines almost since taking them over in 1995 as part of an industry bailout that followed the 1994 peso devaluation and an ensuing economic crisis. At first, financial problems in both companies prevented a sale, and then a worldwide slowdown in the aviation business after Sept. 11 made it unfeasible.
The government now hopes an expected recovery in airline travel and in the world economy will prompt investors to bet big on Mexican aviation. But success is by no means certain, as many of the logical buyers are part of a U.S. airline industry still undergoing painful restructuring.
To guide the sale, the government proposes that Andres Conesa, the head of public credit in Mexico's Finance Ministry, take over as Cintra chairman. The company's current chairman, Rogelio Gasca Neri, would be in charge of merging Mexicana and Aeromexico, which he ran in the 1980s. Mexicana CEO Emilio Romano would run the merged regional airline, to be called Aeronacional.
Mexico's Federal Competition Commission has said the regional carrier must nearly triple its market share to about 20% of flights before it will give final approval to the sale. Mexicana and Aeromexico control nearly two-thirds of Mexico's aviation market.
Cintra has said it expects to complete the sale in the first half of 2005.
The merged company would be Latin America's largest air carrier and could be worth $800 million to $2 billion, analysts say, depending on the sale terms. Government agencies hold a 60% equity stake in the Cintra holding company.
Government regulators have capped foreign ownership in the sale of the merged airline at 25% and it's unclear whether that might be lifted. Political opposition to a foreign takeover of the airlines has stiffened in recent years, as Mexicans watched the country's largest banks, Banamex and Bancomer, sold to Citigroup Inc. and Spain's Banco Bilbao Vizcaya Argentaria SA.
Foreign companies that have expressed interest in buying into Mexican aviation include Continental Airlines Inc., which has more flights into Mexico than any U.S. carrier, American Airlines Inc., Delta Air Lines Inc., and Spain's Iberia Lineas Aereas de Espana SA.