Mexico reopens airlines privatization process

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MEXICO CITY, May 22 (Reuters) - Amid what it hailed as signs of recovery in
the airline industry, Mexico said on Wednesday it would again seek the
controversial sale of the nation's two leading airlines, Aeromexico and
Mexicana.
"The economic recession and, above all, the effects of the terror attacks
against the United States impacted airline finances. But since last December
this situation is under control and is even beginning to show signs of
recovery," bank deposit guarantee agency IPAB said in a statement after
informing a Congressional committee of the plans.

IPAB said it was seeking a financial agent to handle the sale of Aeromexico
and Mexicana, the nation's No. 1 and No. 2 carriers, which share 80 percent
of the market.


The two airlines are to be sold as separate entities.

The government had hoped to bring in $1 billion for its stake in the two
airlines, but analysts have said that privatization will be difficult in the
wake of the Sept. 11 attacks in the United States, which devastated the
industry worldwide.

IPAB took over 51 percent of airlines holding company Cintra as part of the
government's $100 billion bailout of Mexico's crippled banks following the
botched peso devaluation of 1994-95.

Creditor banks formed Cintra in 1995 to nurse the airlines back to health
after the devaluation, when soaring interest rates left them on the verge of
collapse from debt payments.

The government also holds another 15 percent in Cintra via the state
development bank Nafin. The rest is split between banks and shares that
float on the Mexican bourse.

Mexico's anti-monopoly authorities recommended the sale of the airlines to
promote competition, but the privatization was delayed at the request of
lawmakers and unionized workers who fear for their jobs.

IPAB said on Wednesday that the selection of an agent should be completed by
June, with a financial review of the airlines to follow.

Cintra has been restructured to form two separate units under the umbrella
company and enable a separate sell-off of the two airlines, a step toward
privatization approved by lawmakers.

"In this way, Cintra will be preparing to sell the airlines at the first
opportunity, always taking into consideration market conditions," IPAB said.


©2002 Reuters Limited.

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