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Lack Of Cash Prompts Mexico’s Interjet To Stop Flying For 2 Days

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Interjet stopped flying for two days. Between 1 and 2 November, the Mexican airline halted all its flights, citing liquidity and aircraft issues. Does this announcement raise more red flags about the troubled Mexican low-cost carrier? Let’s investigate further.

Interjet getty
Interjet stopped flying for two days due to cash flow issues. Photo: Getty Images.

Why is it not flying?

On Sunday morning, Interjet published a statement on social media saying that it had canceled all its flights for that day. It added that it would notify every passenger that the flights scheduled for that day would happen on Tuesday, November 3rd.

The announcement sparked outrage on social media as many Interjet passengers have had similar issues in the recent past. Moreover, passengers claim that the airline vouchers are void as some are issued for routes Interjet is no longer operating. The others are worth only a fraction of today’s prices, so they still have to spend more to fly with the airline.

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Later, on Sunday evening, Interjet posted a new statement. It said that the airline would halt all its flights until Tuesday, November 3rd. Interjet claimed,

“The airlines have been the hardest hit by the negative effects of the COVID-19 pandemic. This situation is no different for Interjet, which has registered an effect in its operations and its cash flow.”

Many Mexican media outlets reported on a single fact: Interjet can’t pay for the fuel it needs to operate. These issues are as big as a red flag can get. For the first time, the airline has admitted to having cash flow problems. Previous to that, Interjet often said that every bad report out there was just fake news fueled by the competition.

#InterjetInforma

Que reanudará sus operaciones de manera regular el próximo 3 de noviembre 2020.

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Clic aquí para más información y protección de pasajeros con vuelo el 2 de noviembre 2020: https://t.co/xjbHzVUPYg pic.twitter.com/3kAmOLS6jh

— Interjet (@interjet) November 2, 2020

What can we expect going forward?

Aeropuertos y Servicios Auxiliares (ASA) is the Mexican State company that provides fuel to airlines. According to its third-quarter financial results, Interjet owes $55.7 million in fuel. Moreover, between the second and third quarters, Interjet only reduced its debt by one million dollars.

The debts with ASA has led to the State company to stop selling fuel to Interjet. If the airline wants gas, it has to pre-pay for it.

It seems that Interjet has fallen into a vicious cycle, which is very difficult to break. It doesn’t have passengers, so it can’t have a stable cash flow, so it doesn’t pay its bills and therefore can’t fly, so it has to issue vouchers and loses passengers, so it can’t have a solid cash flow, and so on.

Plus, the new management hasn’t approved the $150 million loan that Interjet announced in July. Nevertheless, if that money ever arrives with Interjet, how long will it last? In the airline industry, $150 million is pocket change.

Finally, Interjet is flying on half-empty planes. While its competitors like Viva Aerobus and Volaris are posting load factors above 80 and 70%, respectively, Interjet has an average 50% load factor. And remember: Interjet flies solely on Sukhoi Superjet 100 aircraft with 93 seats. Plus, Interjet lost its codeshare agreement it had signed with Aeromar earlier in the year.

Interjet
Interjet lost its Airbus fleet in 2020. The leasing companies repossessed the 66 aircraft. Photo: Daniel Martínez Garbuno/Simple Flying

Is the clock ticking on Interjet?

Seeing a healthy future for Interjet is very hard at the moment. The airline hasn’t paid the wages of its workforce for two months now. Because of this, the workers will undertake a silent manifestation tomorrow. Plus, Interjet’s union has filed for a strike later on in the month.

Interjet could become the latest victim of the COVID-19 crisis in the aviation industry. For any airline, it is complicated to survive when it can’t produce a stable schedule. Additionally, the big three airlines in Mexico, Volaris, Aeroméxico, and Viva Aerobus, have all seized the market Interjet has already left.

Interjet has an active fleet of five or six Sukhoi Superjet 100 planes that fly one or two times a day. Finally, if you check, Interjet’s website is down. The URL could be hinting at something. It is www.interjet.com/sorry.

What do you think of Interjet’s problems? Let us know in the comments.

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