Taesa, Mexico's third largest airline, made an operating profit of $31 million for last year after a four-year recovery from foreign debt. That could lead to new investors this year and a listing on the country's stock exchange within two or three years. But the key to further progress is the Mexican Government and its attitude to the airline's domestic deficit.
An improved Mexican economy has helped the private carrier's struggle to pay off heavy debts and to find new capital. President Capt Alberto Abed says last year's passenger numbers were up by 23%. Sales grew faster still to reach $250 million. Abed claims that Taesa has paid off its entire foreign debt of $80 million. Moreover, he foresees a way to retire the remaining $400 million domestic debt.
Much of its debt is owed to the government for back taxes, social security, and to the banking agency that took over defaulting loans from Mexican banks. According to Abed, $130 million is outstanding in interest and late charges. He believes the government should forgive that and concentrate on the $270 million principal. If government agencies agree, Abed estimates the airline could pay up to half its remaining debt from operating revenue, leaving the other half to be covered by fresh capital.
Abed reportedly has found investors willing to inject about $100 million as soon as final agreement is reached on Taesa's restructuring. The airline's shareholders, including Abed, are willing to dilute their interests to attract this new capital.
Taesa reached agreement during March with the Social Security Institute on remaining amounts due. Neither side has disclosed details, but the institute appears to have written off a large chunk of back interest. The willingness of other agencies to follow suit depends on how much the government is willing to forgive to have a viable third airline.
Taesa has remained quiet while others accused Cintra's two airlines, Aeromexico and Mexicana, of dominating local aviation. But with Taesa's imminent recovery, Abed has found his tongue. "Taesa wants the monopoly in our country removed, as do AeroCalifornia, Aviacsa, Aeromar, and others," he warns. "We will be permanently forced out of the market if there is no healthy way to operate. It is not good for the country without us."
Taesa began a supervised restructuring in 1995 after fare wars and a peso devaluation that nearly bankrupted Mexico's airlines. To hedge against the volatile peso, it cut domestic flights and increased charters and wet leasing to earn more foreign currency.
Source: Airline Business
