Aeromexico CEO says airline needs to downsize as shares sink after bankruptcy filing

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MEXICO CITY (Reuters) - Mexican airline Aeromexico AEROMEX.MX will offer fewer flights and have fewer planes in the short term as it begins a Chapter 11 restructuring process, Chief Executive Andres Conesa said on Wednesday.

Its shares plunged as much as 65.7% to record lows after the airline said late on Tuesday it had begun Chapter 11 proceedings, although losses were later pared and the stock ended down 28.5%.

Aeromexico, 49%-owned by Delta Air Lines DAL.N, is the third airline to file for bankruptcy protection in Latin America, where carriers hit by the coronavirus have had less help from governments.

Speaking on Mexican radio, Conesa said Aeromexico had a viable business model but needed to adjust its size. The fact that 30% of its fleet is self-owned would help the carrier obtain liquidity, he added.

“We had a very healthy Aeromexico, but the impact of this crisis has been so significant that you need to transform,” Conesa told Radio Formula. “We have to prepare ourselves for the worst-case scenario, and that’s what we’re doing.”

The airline said in a statement late on Wednesday it had gained court approval to continue paying employees and suppliers, honor already purchased tickets and maintain agreements with travel agencies, corporations and partner airlines.

Its stock finished the day at 4.17 pesos. After the market close, Standard & Poor’s cut Aeromexico’s credit ratings to D from B- and forecast the airline would only be flying at half-capacity by the end of the year.

Unions representing the Mexican airline industry expressed support for Aeromexico’s Chapter 11 restructuring process.

Mexican rival Interjet has also been struggling under the burden of coronavirus-imposed travel and tourism restrictions. Latin America's two largest airlines, Chile's LATAM Airlines Group LTM.SN and Colombia's Avianca Holdings AVT_p.CN, filed for Chapter 11 restructuring in May.

Reporting by Noe Torres and Raul Cortes Fernandez; Additional reporting by Daina Beth Solomon; Writing by Anthony Esposito and Julia Love; Editing by Jonathan Oatis, Bill Berkrot and Edwina Gibbs