BUSINESS SECTION

Mexican government will complete sale of AeroMexico and Mexicana by year end

August 18, 2005

The government plans to complete the sale of the nation's two biggest airlines by mid-November, said Andrés Conesa, chairman of both carriers on Wednesday.

Conesa said in a radio interview that 30 percent of the companies that formally expressed interest in Aeromexico and Mexicana are foreign. Under Mexican legislation, foreigners are limited to a 25 percent stake in airlines, so they must team up with Mexican partners, he said.

"We are very confident that we're going to end up with a good number of solid investor groups at the end of the process in November," Conesa told Mexico City-based Radio Formula.

Cintra SA, the government's holding company for the airlines, said on Aug. 9 that 11 companies expressed interest in Mexicana and 10 in Aeromexico. Conesa said he cannot reveal the names of the companies unless he gets permission from them.

Investors are interested in buying the two airlines even as the government awards permits for as many as five new airlines in an attempt to lower the country's airfares, because Aeromexico and Mexicana already operate out of Mexico City's airport.

"The Mexico City airport is saturated," said Conesa. "The new airlines aren't going to be able to fly from Mexico City, and therefore they'll only have part of the traffic flow to the central part of the country."

Click, the low-cost airline Conesa created out of Mexicana's regional carrier, already sought permits to fly from regional airports in Toluca and Puebla to prepare for competition from the new airlines, he said.

Conesa said he's in talks with the two airlines' union to grant as much as 10 percent of shares to workers. In the event investors bid for less than 100 percent of remaining shares for the two airlines, he said, the government will sell its shares in a public offering likely to take place during the first quarter of next year.

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