UPDATE 2-Mexicana mulls creditor protection, 2 flights halted

Thu Jul 29, 2010 9:41pm EDT

* Company considers 2 other options for operation

* Canada cancels 2 flights on creditor request (Updates with flights canceled, adds comment from Mexicana)

By Cyntia Barrera Diaz and Veronica Gomez Sparrowe

MEXICO CITY, July 29 (Reuters) - Canadian authorities canceled two Mexico City-bound flights from airline Mexicana de Aviacion on Thursday amid mounting concerns over the financial health of the company.

The flights, set to depart from Montreal and Calgary, were canceled due to a request to Canadian authorities from an unnamed creditor seeking clarification on Mexicana's debt situation, the airline said in a release.

"The airline considers that the measures taken by the lessor are legally unjustified and a direct consequence of erroneous information," Mexicana said, adding it was working with Canadian authorities to resolve the problem and minimize disruption to passengers.

Representatives from pilot an flight attendants unions said earlier on Thursday that Mexicana, one of Mexico's two dominant airlines, was considering filing for creditor protection as one option to keep the company operating.

Lizette Clavel, head of the flight attendants union, told reporters that Mexicana, controlled by privately held Grupo Mexicana, was also considering cost cuts via salary reductions or selling the airline to the workers.

Pilots' union head Fernando Perfecto told Reuters that workers' representatives have been in touch with Mexicana's management for the past few days in an effort to find the best solution for both sides.

Mexicana, a member of the Oneworld alliance, was not available for further comment. Unions' representatives could not detail the current debt situation of the company.

Several major Mexican companies have faced tough debt problems since the global credit crisis and subsequent recession in Mexico.

Mexicana failed to place a $250 million bond earlier this year after a government bank refused to back it up. Volatility from Europe's debt troubles also throttled demand in Latin American corporate debt markets.

Mexico's air industry was battered by the country's deep economic recession in 2009 and the H1N1 flu outbreak that hit tourism hard.

Mexico's publicly traded airport operators OMA (OMAB.MX), GAP (GAPB.MX) and Asur (ASURB.MX) all depend on AeroMexico and Mexicana for a significant part of their revenue.

Mexicana said in May it hoped to return to profitability this year after two years of losses and forecast at the start of 2010 that it would carry 12 million passengers, up 8 percent from the previous year.

Local hotel company Grupo Posadas POSADASL.MX has a 30 percent stake in Mexicana. (Reporting by Cyntia Barrera Diaz and Veronica Sparrowe; Editing by Gary Hill)

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