Airline Mexicana’s Planned Return Suffers Setback

March 2, 2011

 MEXICO CITY -(Dow Jones)- The planned return to the air of carrier Mexicana de Aviacion suffered another setback Tuesday when the private equity group that had secured agreements for a restructuring failed to come up with the capital to buy the shares from the current owners.

PC Capital said in a press release late Tuesday that the transfer of funds to buy Mexicana’s holding company Nuevo Grupo Aeronautico, or NGA, wasn’t made by the deadline set by current owner Tenedora K.

Tenedora K took over Mexicana last year after the airline filed for bankruptcy protection and was grounded, but failed to secure labor and other agreements that would have made the airline viable.

PC Capital came up with a business plan which government authorities approved, and secured agreements with pilots, flight attendants and ground staff that included significant layoffs.

PC Capital, which hasn’t publicly identified the would-be investors, said it would facilitate the transfer of the restructuring process to any other group of investors interested in capitalizing the airline.

The Labor Ministry and the Communications and Transport Ministry said in a joint statement that they “deplored” the fact PC capital failed to comply with its commitment to identify investors solvent enough to complete the process, and that talks with the firm’s representatives were terminated.

The ministries said the conciliator in the restructuring process will analyze other investment proposals.

-By Anthony Harrup, Dow Jones Newswires, (5255) 5890 5176, anthony.harrup@ dowjones.com