The debate over selling Aeromexico and Mexicana together or separately is reviving as the performance of Mexico's major carriers picks up.
Rogelio Gasca Neri, chairman of Cintra, the holding company for Aeromexico, Mexicana and their subsidiaries, is discussing with the new head of Mexico's federal competition commission, CFC, whether it will stand by its 2000 ruling that the two major airlines be sold separately. If the ruling stands, Cintra would be dissolved and ownership of Aeromexico and Mexicana split.
The CFC's order four years ago did not require immediate sale of the airlines because it recognised that a commercially viable sale at that time was impossible. Since then, Aeromexico and Mexicana have continued as separate brands under common ownership.
Before the CFC's ruling, Mexico's government had been at an impasse over the question of whether Cintra should be split or sold as one entity. The CFC argued that Cintra's two carriers had ignored orders to compete on domestic routes and had formed a monopoly that stifled competition.
The transport secretary argued that keeping Aeromexico and Mexicana together gave them more clout against foreign rivals. The issue took on political overtones because unions favoured, for their own financial security, keeping the airlines together.
This issue has resurfaced because, after years of losses, Mexico's two major airlines are enjoying a financial turnaround and market conditions for a sale are better than they have been in years. Mexico's government is also anxious to cash out its stake in Cintra, now estimated at 85%, so a sale would effectively reprivatise Aeromexico and Mexicana.
With a presidential election set for 2006, Cintra has decided the best time for a sale is in the first half of 2005.
According to local reports, President Vicente Fox would prefer to see the two airlines sold together. From the CFC's perspective, the key question will be how much domestic competition would suffer if they are.
Source: Airline Business
