LeoDF From Mexico, joined Aug 1999, 359 posts, RR: 5 Posted (9 years 1 month 1 week 6 hours ago) and read 6409 times:
According to Reforma newspaper Fox has decided to sell Mexicana and Aeromexico to American Airlines.
Canton, a priista senator, said that Congress has approved the sell of Mexicana and Aeromexico in the 2005 Income Law (Ley de Ingresos).
In the words of Canton: "After revising the public companies that the government is awaiting to sell, it took us to the conclusion that the Government of Vicente Fox has decided to deliver Mexicana and Aeromexico to the American company American Airlines."
The senator accused Fox of acting in a "cheating" way, as he continues to privatize state companies without informing the citizens and now with the legislative power. This comes after from an article on this Income Law that states that the government will recieve 2500 million pesos from incomes regarding the selling of its public companies.
EddieDude From Mexico, joined Nov 2003, 7437 posts, RR: 44 Reply 1, posted (9 years 1 month 1 week 6 hours ago) and read 6309 times:
Quite frankly I don't know what to make of the article. For starters, the less than U.S.$250 million price that the Congressmen contemplated while drafting the 2005 Ley de Ingresos seems very low to me.
On the other hand, the reference to AA is simply a newspaper's quote of the statements made by a Congressman and doesn't seem to be supported by any other type of evidence.
While I think that there is a strong possibility that the IPAB-owned airlines will be sold in 2005 (for a number of reasons: this administration's last chance, new leadership in the competition watchdog, supposedly profitable results of CINTRA in 2005, etc.), I don't think an agreement has been reached just yet. And we must not forget that foreign investment is limited to 25% of the voting capital stock of Mexican carriers, so whichever foreign carrier participates in the acquisition will definitely not be the controlling shareholder.
One last thing: AA may not be under court protection, but it is not doing well financially, so I don't see AA venturing in an acquisition at this point. A European carrier might be in a better position to make an investment in AM and/or MX given the current state of the global airline industry.
I suggest to change the name of this thread, since the way it is written is very misleading.
LeoDF From Mexico, joined Aug 1999, 359 posts, RR: 5 Reply 2, posted (9 years 1 month 1 week 6 hours ago) and read 6238 times:
Sorry EddieDude but they way Reforma put it was also a bit misleading... Anyway, as I am talking right now with Ghost, he told me that those 250 million dollars could only represent the 25% of the total. On aviation companies there has to be a minimun 75% of Mexican capital.
Anyway this are very interesting revelations. True or not, there has to be someone behind all this, and this time I think is the senator.
EddieDude From Mexico, joined Nov 2003, 7437 posts, RR: 44 Reply 3, posted (9 years 1 month 1 week 6 hours ago) and read 6163 times:
Hi Alejandro. Actually, thanks a lot for posting the news. I had not read the paper today, so seeing your post made me rush to it. I am in complete agreement with you that the fact that a Senator is mentioning this is a sign that something is going on at CINTRA.
I still don't know about the price. $250 million Pesos for 25% of CINTRA sounds more accurate, but now I don't know if it is a bit optimistic. And the reason is the long-term debt, the lease payments and the generally deteriorated situation of CINTRA's finances (including the retired employees liabilities). Under other circumstances, the flag carriers of Mexico would definitely command a very high price due to their position in the market, their routemaps and the goodwill of the brands. I wish we had an investment banker among us so that he could provide a rough estimation of the current market value of MX and AM.
XA744 From Mexico, joined Mar 2004, 734 posts, RR: 3 Reply 5, posted (9 years 1 month 1 week 5 hours ago) and read 6075 times:
Howdy folks ?,...
Will be meeting next week with some of my friends at the top of AM´s management over a few tequilas,... just hope they get drunk enough and disclose some valuable info that I could later share with you.
I do agree with you EddieDude when you say that American is not in the position to make any substantial investment anywhere at this time. I tend to believe, I do not know why, that most of CINTRA´s assets will be bought using pesetas...
I do not know, just taking a wild guess here.
No matter how you fly...just never get your wings clipped !
Pzurita1 From Greenland, joined Sep 2002, 1385 posts, RR: 15 Reply 10, posted (9 years 1 month 1 week 4 hours ago) and read 5894 times:
I think it has been an unfortunate mistake of the newspaper and writer. What this Senator declared is that the Ley de Ingresos 2005 recognizes an income of up to 2,500 millon pesos by means of the sale of currently government owned firms.
However, this Senator, deliberately said that after this sale is MX and AM (which is very likely) but added that "he believes it is sold to AA".
El Norte and Reforma were mistaken to reproduce this words based on nothing but mere speculation and "grilla" of this Senator....
The only fact from this is: Ley de Ingresos consideres an income of 2,500 millones de pesos from an Asset sale of a government owned firm.
If it is MX and AM then 2,500 million pesos (USD 200M) is an extremely cheap package for 30% of MX and AM stocks (the highest a foreing can invest in an airline). It would be sad to see MX and AM sold for that little value. Expected price of a joint AM and MX (100% equity) is between 2 and 2,5 billion USD.
EddieDude From Mexico, joined Nov 2003, 7437 posts, RR: 44 Reply 11, posted (9 years 1 month 1 week 4 hours ago) and read 5828 times:
Pedro, I think the valuation estimation you provide is highly optimistic and, in my non-expert opinion, fails to consider all the liabilities that would be easily discovered during a tax, legal and financial due diligence process. Besides, if you look at the market value of airlines like the U.S. legacy carriers, LA, Brazil's Gol and AM-Transportes Aereos Meridionais (Brazil)">JJ, WN and B6, there is no way you can say that CINTRA is worth that much money.
I honestly do not believe that 100% of a combined AM and MX could be sold in 2005 for more than 1 billion dollars... especially when you consider that the feeder airlines (AeroLitoral and Aerocaribe) will be divested as part of the privatization process.
Somebody in a.net must work for some investment bank and be able to tell us something.
And sorry for being picky, but 25% is the limit of direct foreign investment in the voting capital stock of Mexican carriers under the Ley de Inversión Extranjera in effect. Authorization from the Commission may be obtained in order for the foreign shareholder(s) to purchase series "N" or non-voting stock of the company, but the 25% limit on voting stock would not be altered.
Cx340 From Mexico, joined Sep 2000, 609 posts, RR: 3 Reply 14, posted (9 years 1 month 1 week 3 hours ago) and read 5661 times:
Just a couple of thoughts:
1.- Like Pedro said, apparently (and I've not been able to confirm this myself) all the 2005 Income Law for the Mexican Federation says is that the government is supposed to receive $2,500 million pesos for the sale and transfer of currently owned entities, but not which entities, or does it? I think the senator rushed to conclusions. The fact is all we know so far is that the sale of CINTRA is authorized, but we are far from it at this point, or at least so it seems. Plus, as mentioned before, there are many legal, tax, financial, operational and technical issues that will definitely cause problems, not to mention the thousands of people being affected in one way or another by this deal, some of which may be powerful enough to delay it if not stop it.
2.- US airlines just do not have the $$$ to purchase an airline conglomerate right now, but assuming they did, why would they want to put millions of dollars into an investment which they can't control (and therefore can't assure its profitability) and which has a history of bad profitability when they have much more immediate and important issues to deal with right now? I just don't see it happening until Congress amends the Foreign Investment Law and allows majority ownership of and controlling voting rights in airlines to foreign investors. And even then, you still have a troubled company (CINTRA) that is in all honesty not necessarily attractive to every foreign airline in the world.
AAplatnumflier From , joined Dec 1969, posts, RR: Reply 15, posted (9 years 1 month 1 week 2 hours ago) and read 5611 times:
AA does have the money to buy the airlines, it is just if they have the money to maintain them. AA has what, $1billion-$2billion in spending money? AA is actually doing better than almost all of the non LCC. Also I believe they are at even or just above even this year. In my opinion AA knows how to fly.
Cx340 From Mexico, joined Sep 2000, 609 posts, RR: 3 Reply 16, posted (9 years 1 month 1 week 2 hours ago) and read 5558 times:
AA may have the money, I dont' doubt that, but I just don't think they are about to go on a shopping spree and get themselves a couple of foreign airlines that have been (unfortunately) historically in trouble but more importantly that AA can't control.
Sccutler From United States of America, joined Jan 2000, 5260 posts, RR: 27 Reply 18, posted (9 years 1 month 1 week ago) and read 5036 times:
The transaction discussed above is both politically and practically improbable.
Politically, because I cannot see the government of Mexico easing the foreign ownership requirements enough for a foreign purchaser to actually gain effective control of a Mexican flag carrier, for reasons of sovereignty and pride (both of which matter a great deal).
Practically, because AA could never hope to effectively manage and control the two airlines in Mexico with any measure of success; they could not even manage to buy, integrate and benefit from acquiring established airlines in California, even after two tries. AA needs its cash to preserve itself for a coming turnaround. It hopes.
...three miles from BRONS, clear for the ILS one five approach...
AAplatnumflier From , joined Dec 1969, posts, RR: Reply 19, posted (9 years 1 month 6 days 23 hours ago) and read 4894 times:
I could totally see it happening. The Mexican government doesnt want to hold control of the airlines nor does it want to pay to maintain in when the airlines are loosing money. Basically the government is loosing money and my guess is they dont want to. I believe that Vincente is a smart man and that he will make the right decision at the end of the day.
SR117 From Mexico, joined Jun 2000, 787 posts, RR: 2 Reply 20, posted (9 years 1 month 6 days 23 hours ago) and read 4755 times:
What that dumbass senator says is total nonsense and a sample of the worthless blabber that some polititians spew down here. That AA would consider bidding for a stake in CINTRA is perfectly plausible, but to start saying conjectures to the tune of : "evil mister fox is consorting to deliver our virginal airlines to the sin filled brothel of devilish aa", uggg. Things are quite unclear right now yet, so I think it's quite irresponsible for mister senator to be making those groundless claims.
Usatoeze From United States of America, joined Feb 2004, 358 posts, RR: 2 Reply 21, posted (9 years 1 month 6 days 22 hours ago) and read 4635 times:
US airlines just do not have the $$$ to purchase an airline conglomerate right now, but assuming they did, why would they want to put millions of dollars into an investment which they can't control (and therefore can't assure its profitability) and which has a history of bad profitability when they have much more immediate and important issues to deal with right now?
Well said and great point. They would have to be taking an incredibly potent drug of some sort to argue against that logic, but worse things have been tried in the past.
If true, this idea just seems awful. Mexican aviation needs divested, but it doesnt need to be put into the hands of either AA or a European carrier.
If something could happen ala Copa and CO....(A 50.01 deal) then that would be different.
UA777222 From United States of America, joined Dec 2003, 3348 posts, RR: 12 Reply 22, posted (9 years 1 month 6 days 21 hours ago) and read 4569 times:
AA can buy whatever whenever it wants. Again it all comes back to weather or not the airline is ready to make a gable of this nature and if it's ready to expand in this manner. I think this is just talk and that like everyother announcment here on a.net will turn out the complete opposite. For all we know MX and AM will be sold to WN who will then expand it's routes to Mexico and Centrl America operating the 767's and incoming 777's with a mixed C/s of all three airlines, but still with that dirt cheap price. WHO KNOWS???
Give it time but I think this seems a bit too "rushed" seeing how AA won't even take a/c which cost much less than this whole franchise until next year so to say that they will own the to largest Mexican carriers is outrageous. So don't get your pants in a knot too soon..
ORD2PHL From United States of America, joined Oct 2003, 311 posts, RR: 0 Reply 23, posted (9 years 1 month 6 days 12 hours ago) and read 3490 times:
Hold the phone, I understand that AA definitely has the cash on hand to make the purchase but would they be able to sustain the airline(s) going forward. They posted over a $200 million net loss last quarter, and are in the midst of renegotiating their senior credit facility with their banks of which they are going to collaterize that loan with potentially a portion of if not all of the remaining 60+ aircraft that have already not been utilized to secure further debt.
Given their financial condition, I just cannot see this happening.