Grupo Mexicana de Aviación declared the indefinite suspension of its operations
Grupo Mexicana de Aviación, which operates through its three subsidiaries, Compañía Mexicana de Aviación (Mexicana), Aerovías Caribe, S.A. de C.V. (Mexicana Click), and Mexicana Inter, S.A. de C.V. (Mexicana Link) declared the indefinite suspension of its operations since 28 August, 2010.
For fiscal 2009, Grupo Mexicana de Aviación contributed 12.63% of Grupo Aeroportuario del Pacífico S.A.B. de C.V.’s (PAC) total revenue. Grupo Mexicana contributed 12.5% and 10.3% of Aeroportuario del Centro Norte S.A.B. de C.V.’s (OMAB) and Grupo Aeroportuario del Sureste S.A.B. de C.V.’s (ASR) total revenue from January to July 2010, respectively. Thus, this seems to be depressing news for the the three Mexican airline operators.
Mexican airline operators have been facing tough times. Along with the economic recession in 2008, Mexican airlines sector was largely hit by the H1N1 virus, which broke out in Mexico in the first half of 2009.
During the economic downturn, the airline industry worldwide was badly hit due to accelerating fuel prices, close to $150 per barrel. Now that fuel prices have gone down to the mid-70s and markets are gradually picking up, Mexican airlines have encountered new problems with regard to suspension of flights.
This issue is expected to have a negative effect on the top-line results of Mexican airline operators as Grupo Mexicana is one of the major airlines.
However, the worldwide airline industry is expected to show positive results in the coming years. The International Air Transport Association (IATA) expects the airline industry to return profits of $2.5 billion in 2010. Thus, we maintain our Neutral recommendation on all the three Grupo Aeroportuario. ADS, PAC and ASR currently retain their short term “Hold” ratings (Zacks #3 Rank) while OMAB retains its “Sell” rating (Zacks #4 Rank).
GRUPO AEROP-ADR (ASR): Free Stock Analysis Report
GRUPO AEROP-ADS (OMAB): Free Stock Analysis Report
GRUPO AEROP-PAC (PAC): Free Stock Analysis Report
Zacks Investment Research
