Mexico state-run carrier gains altitude with 20-jet Embraer order (updated)

Controladora Vuela Compania de Aviacion SAB de CV

03/06/2024 16:38

(Recasts throughout)
       SAO PAULO/MEXICO CITY, June 3 (Reuters) - 
    Mexican state-run airline Mexicana placed an order for 20
Embraer jets with an estimated list price of at least $1.4
billion, a major step for the carrier as it has sputtered to get
off the ground since launching last year.
  
        The announcement by Embraer of the order for 20 E2 jets
on Monday comes after Mexico's landslide election of former
Mexico City Mayor 
    Claudia Sheinbaum
    , a protege of outgoing President Andres Manuel Lopez
Obrador.
  
        "Mexican authorities wasted no time" in placing the
order following the election results, analysts at Citi wrote in
a note to clients.
  
        As president, Lopez Obrador 
    created Mexicana
     by reviving the brand of a bankrupt carrier and handing it
over to the military, arguing it would offer cheaper fares to
domestic travelers compared to airlines such as Aeromexico,
Volaris  VOLARA.MX  and Viva Aerobus.
  
        He has also increasingly 
    militarized the aviation sector
    , putting formerly civilian duties from 
    airport administration
     to the top post of the civil aviation body in the hands of
current or retired military officials.
  
        However, since taking flight in December, Mexicana has
struggled to gain traction, using just three Boeing  BA.N 
planes from the military and two smaller, older Embraer jets
rented from a regional carrier. 
  
        In the year through April, Mexicana has transported just
under 76,000 passengers domestically, according to data from the
aviation authority, compared to the millions moved by its
competitors. 
  
        The tie-up with Embraer will allow Mexicana to boost its
flight frequencies. It also appears to confirm reports that the
government's 
    much-touted talks with rival planemaker Boeing
    , presumably for larger planes, had failed. 
  
        Mexicana's firm order comprises 10 E190-E2 jets seating
108 passengers and 10 E195-E2 aircraft with 132 seats.
Deliveries are expected to start in the second quarter of 2025.
  
        The Citi analysts did caution, however, that "the
long-term staying power (and) reliability of this order is an
open question." 
  
        Mexicana is expected to operate in the red until 2033,
according to a finance ministry analysis from last year obtained
by Reuters through a records request.
  
        It is 
    already facing legal trouble
     in the U.S. for alleged failure to make good on payments. 
  
        The Citi analysts put the price tag of Monday's order
around $1.4 billion, but said Mexicana has likely received a
discount given its size. J.P. Morgan, meanwhile, pegged the
order at closer to $1.6 billion.
  

 (Reporting by Gabriel Araujo and Andre Romani in Sao Paulo and
Kylie Madry in Mexico City; Editing by Andrea Ricci)
 ((Andre.Romani@thomsonreuters.com; 11 991314109;11 56447500;))