Aeromexico Gets Court OK For Slimmed-Down Boeing Deal

By Rick Archer
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Law360 (May 3, 2021, 7:34 PM EDT) -- A New York bankruptcy judge has given Mexican airline Grupo Aeromexico SAB de CV the go-ahead to amend a prebankruptcy deal to acquire two dozen planes from Boeing after cutting a deal to shave $800 million and unneeded aircraft from the contract.

At a virtual hearing Friday, U.S. Bankruptcy Judge Shelley Chapman gave Aeromexico permission to enter into an amended version of a Boeing contract that no longer met its post-COVID-19 needs, the airline said in a statement released Friday.

Aeromexico hit Chapter 11 in June, joining the growing list of airlines that flew into bankruptcy court after COVID-19 travel restrictions drastically reduced the demand for air travel.

The following month the airline got the bankruptcy court's permission to reject 19 aircraft leases as a way of cutting unneeded fleet in the depressed travel market.

Last month Aeromexico asked the court for permission to sign an amended version of an aircraft acquisition deal it had inked with Boeing in 2012, with related financing agreements entered into in 2017 and March 2020.

While the numbers and models of the aircraft the company had originally pledged to buy were redacted from the court filings, the company said they were more than its current business plan will require and that the lease terms were above current market rates.

Canceling the agreement entirely, though, would leave the company unable to replace older, less fuel-efficient planes and expose it to $1 billion in contract rejection claims from Boeing, it said.

Instead, the company will acquire 20 new Boeing 737 Max airplanes and four new Boeing 787-9s and assume amended leases on 16 additional aircraft, all on "very attractive terms compared to market levels."

The deal also includes reduced lease rates on four already-delivered 737 Maxs and adjustments to its engine maintenance agreements to reflect the company's downsized fleet, it said.

The company projected $800 million in savings from the modifications, broken down as $350 million shaved through restructured existing leases, over $300 million trimmed by way of amended sale leaseback transactions and about $150 million cut from maintenance costs.

The company also said it would have incurred another $2 billion in maintenance expenses had it been forced to take the unneeded aircraft.

"The company will continue to strengthen its financial position and liquidity, protect and preserve its operations and assets, and implement the necessary adjustments to face the impact from COVID-19," it said in the statement.

"Aeromexico is a valued Boeing customer and we are pleased to reach an agreement that will allow the airline to adjust its order book to meet its business needs during the travel recovery ahead," Boeing said in an email statement Monday. "We are honored that Aeromexico has reaffirmed its commitment to both the 737 MAX and 787 Dreamliner as the carrier builds its future fleet."

Aeromexico is represented by Marshall S. Huebner, Timothy Graulich, Joshua Sturm and Thomas S. Green of Davis Polk & Wardwell LLP.

The case is In re: Grupo Aeromexico SAB de CV, case number 1:20-bk-11563, in the U.S. Bankruptcy Court for the Southern District of New York.

--Additional reporting by Jeannie O'Sullivan and Dave Simpson. Editing by Andrew Cohen.

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Case Information

Case Title

Grupo Aeromexico, S.A.B. de C.V.

Case Number



New York Southern

Nature of Suit

Date Filed

June 30, 2020

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