Mexicana Submits Takeover Bid for Aeromexico

Grupo Mexicana has submitted a takeover bid for Consorcio Aeromexico. At a press conference, the group’s stockholders, board members and CEO said that the bid is for at least 51 percent and possibly as much as 100 percent of the shares of Aeromexico.

At a purchase price of 2.19 pesos per share, which renders in 2.17 billion pesos (approximately $200 million) for the entire Aeromexico share package, Grupo Mexicana’s offer is 25 percent higher than the next highest offer made by other investor groups on the stock exchange.

According to Grupo Mexicana Chairman of the Board Gaston Azcarraga, the decision to place a bid for Aeromexico was in the best interests of Mexico’s commercial aviation industry.

“Merging these two companies into one single aeronautical group will boost their profitability, enabling them to offer reliable transportation alternatives at an attractive price and guaranteeing job stability for their employees in the long term,” said Azcarraga, adding that this is an opportunity to restructure the country’s aviation market. “What we are proposing is a restructuring of the market that will ensure the survival of these two flagship airlines,” he said. “We want to strengthen them and we know how to.”

Grupo Mexicana submitted data to support its premise that, under current conditions, the domestic market cannot support two flagship airlines. Faced with growing competition, the best option for the country and users is a strong aviation group, complemented by more competitive, better-structured low-cost airlines.

The number of airlines in the country has doubled since 2001 and the joint market share of Mexicana and Aeromexico has dropped 47 percentage points since 1990. Based on figures for the first half of 2007, Mexicana’s and Aeromexico’s share of the domestic market fell from 65 percent to 53 percent and is expected to drop below 50 percent by yearend.

Meanwhile, low-cost airlines could see their market share increase to as much as 36 percent once they receive delivery of 25 new aircraft for which orders have already been placed. In the specific case of Mexicana, cost restructuring initiatives have not managed to offset losses, which are on the increase.