LeoDF
Topic Author
Posts: 349
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AA May Buy AMX And MXA!

Tue Nov 16, 2004 7:30 am

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.

More info at:

http://www.reforma.com/nacional/articulo/466838/




[Edited 2004-11-15 23:56:37]
Lloyd Aereo Boliviano
 
EddieDude
Posts: 6177
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RE: AA To Buy MXA And AMX!

Tue Nov 16, 2004 7:45 am

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.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
LeoDF
Topic Author
Posts: 349
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 7:59 am

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.

Regards

A. De Leo
"PiloT"
Lloyd Aereo Boliviano
 
EddieDude
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:20 am

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.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
srbmod
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:47 am

Can AMR even afford to buy into MX and AM?
 
XA744
Posts: 630
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:48 am


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.

Regards
No matter how you fly...just never get your wings clipped !
 
EddieDude
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:52 am

Be sure to ask them not just whether talks to sell CINTRA have begun (and with whom), but also whether AM and MX are planned to remain separate in terms of routes and identities.

Hopefully pesetas are not used since they are no longer legal tender anywhere in the world. Euros would be very welcome, though.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
aacun
Posts: 432
Joined: Wed Jan 21, 2004 2:47 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:54 am

I do also agree that AA may not be in a position to buy MX and AM by itself. But that doesnt mean that AA along with IB and other OneWorld members may not join in to put in a bid for them.......
 
avroarrow
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 8:59 am

I just hope that Aeromexico doesn't end up changing its livery if this happens. It is one of my favorites, nothing like a shiny new 737-700 in Aeromexico colours.  Smile/happy/getting dizzy

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Photo © Juan Carlos Guerra Aviation Photography of Mexico

Give me a mile of road and I can take you a mile. Give me a mile of runway and I can show you the world.
 
aacun
Posts: 432
Joined: Wed Jan 21, 2004 2:47 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 9:00 am

Avro:

I have to agree with you. Probably the best 737 livery around......
 
pzurita1
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 9:45 am

LeoDF,

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.

PZ
Next flight: IAH-DBX-MRU-ANT
 
EddieDude
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Joined: Fri Nov 14, 2003 10:19 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 10:10 am

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.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
pzurita1
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 10:49 am

EddieDude,
Indeed. I kept the value considered when they were to be sold back in 2000.
Thanks for your correction.
PZ
Next flight: IAH-DBX-MRU-ANT
 
chgoflyer
Posts: 312
Joined: Tue Nov 04, 2003 11:16 pm

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 11:02 am

Dont underestimate AMR and their relations with lenders. They can buy AM/MX if their board approves it. As for a European airline buying these two companies that might not be a good "click".
Will someone please wake me up in 4 years
 
cx340
Posts: 518
Joined: Sat Sep 02, 2000 2:59 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 11:21 am

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.

Cheers,
 
AAplatnumflier
Posts: 958
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 11:39 am

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
Posts: 518
Joined: Sat Sep 02, 2000 2:59 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 11:52 am

AAplatnumflier.

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.
 
pilotcoex
Posts: 102
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 12:53 pm

I just have two words for this (if it happens) F*****N Barbaric
 
sccutler
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 2:06 pm

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
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RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 2:38 pm

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
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Joined: Fri Jun 23, 2000 2:00 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 3:23 pm

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
Posts: 348
Joined: Sat Feb 07, 2004 2:22 pm

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 4:04 pm

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.
War is a very poor political tool
 
ua777222
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Joined: Mon Dec 22, 2003 11:23 am

RE: AA May Buy AMX And MXA!

Tue Nov 16, 2004 4:52 pm

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..

Take Care,

UA777222
"It wasn't raining when Noah built the ark."
 
ORD2PHL
Posts: 242
Joined: Sun Oct 19, 2003 9:15 am

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 2:05 am

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.
 
RogerThat
Posts: 505
Joined: Wed Dec 17, 2003 12:13 pm

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 2:27 am

AA Mergers in my lifetime:
1. TWA
2. Reno Air
3. Air Cal
4. Trans Caribbean

The Best: Trans Caribbean in 1971 which brought JFK - SJU, and several other Caribbean destinations.

The Worst: TWA as has been discussed many a time in this forum.

Now when your last successful merger was almost 35 years ago, sooner or later they figure out that M&A ain't the way to go.

Save the cash for a rainy day. And its been raining cats and dogs for 3 years.

 
RogerThat
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RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 2:36 am

Rare shots of Trans Caribbean.


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Thank you Mel Lawrence
 
anthsaun
Posts: 510
Joined: Thu Apr 22, 2004 3:32 pm

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 4:56 am

Things are getting out of control. It seams like the discussion is going nowhere because it is a weird idea that AA´s buys MX and AM. A statement by a congressman here in Mexico means mostly nothing but political warfare.

On the other hand. I´ve known that Mr. Carlitos Slim wants to put hands on MX because it has the business profile he loves: buy at a low price and get lots of profits from government concessions and privileges. Also he was waiting for CINTRA to make up its mind to sell both airlines as a single one.

Just one question... Could a foreign identity manage a Mexican owned business? Like AA managing AM & MX?
Over 80 years in business say a lot about success
 
LeoDF
Topic Author
Posts: 349
Joined: Mon Aug 02, 1999 11:44 am

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 5:03 am

Hey Anthsaun:

An interesting fact about what you say of Slim. Curiously Mexicana and Sanborn's have just made a deal in which you can buy your Mexicana tickets at any Sanborn's just 4 hours before the flight.

Does this mean anything? Maybe? Maybe these are the first steps of what you were talking about!

What do you think?

A. De Leo
"PiloT"
Lloyd Aereo Boliviano
 
EddieDude
Posts: 6177
Joined: Fri Nov 14, 2003 10:19 am

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 6:31 am

Not in this case; foreign entities cannot control Mexican carriers. The authorities not only enforce the 25% voting stock ownership limit, but also review very thoroughly the board composition as well as the by-laws and shareholders' agreements of companies with foreign investment limitations to make sure that Directors or contractual arrangements (i.e., supermajority vote requirements, services agreements, etc.) are not used to circumvent the 25% statutory provision.

As I mentioned in a separate thread, we can definitely not disregard Carso as a potential bidder for one or the two carriers. But claiming that it is a done deal simply because of a purely commercial agreement between Sanborns/Sears and MX is very far-fetched. I believe things should be judged by what they are... in this case it is a simple commercial alliance that will make money for Carso and that will provide MX with additional marketing and sales outlets. And sure, maybe this agreement will somehow allow Carso to take a look at MX's sales trends in order to evaluate the possibility of a future move. But right now it is just a commercial alliance. Just that. Whatever comes later is something else.
Next flights: MEX-LAX AM 738, LAX-PVG DL 77L, SHA-PEK CA 789, PEK-PVG CA A332, PVG-ORD MU 77W, ORD-MEX AM 738
 
FLY2LIM
Posts: 1095
Joined: Thu May 06, 2004 6:01 am

RE: AA May Buy AMX And MXA!

Wed Nov 17, 2004 6:46 am

I just have two words for this (if it happens) F*****N Barbaric

Let's get this right. That would be "F*****G Barbaric  Smile
Faucett. La primera linea aerea del Peru.

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