Mexico’s newly reformed state-owned airline Mexicana is facing a hefty lawsuit for at least $841 million over alleged breaches of contract. On March 27, 2024, the US-based company SAT Aero Holdings filed a lawsuit in the New York federal court alleging various breaches of contract when relaunching the carrier and seeking at least $841 million in damages.
According to Reuters, SAT claims it was retained by the Mexican government in 2023 to provide crucial management consultancy services to get Mexicana off the ground. These alleged services included securing aircraft and the requisite insurance, recruiting and training qualified pilots, and sourcing cabin crew. However, the lawsuit details how an array of alleged actions by Mexicana executives stifled the partnership from the outset.
According to legal papers filed by SAT, Mexicana repeatedly undermined SAT’s efforts including Mexicana failing to pay a minimum of $5.5 million in deposits for leased aircraft secured by SAT.
This initial financial hurdle significantly hampered SAT’s ability to secure the necessary aircraft for the relaunch of the carrier and hindered the airline’s operational setup. Furthermore, the lawsuit alleges that Mexicana refused to sign crucial documents required for the airline’s operations. These documents were essential for securing landing slots and establishing flight schedules, which “potentially caused significant disruptions for Mexicana’s early operations.”
SAT also accuses Mexicana of actively poaching pilots and other crew members it specifically recruited to assist with the launch. This alleged poaching of personnel “could have significantly impacted Mexicana’s ability to function smoothly in its early stages, potentially causing delays and safety concerns,” according to the lawsuit.
SAT argues that these alleged breaches significantly hampered its ability to fulfill its contractual obligations and ultimately hindered Mexicana’s launch. Through the litigation process now underway, SAT is seeking $838.5 million in damages to compensate for the alleged lost revenue and wasted efforts incurred during their partnership.
In addition to the core contractual damages being claimed, SAT is also seeking additional compensation to the tune of $2.4 million in relation to “out-of-pocket” costs its claims to have accrued during the consultancy work carried out for Mexicana.
This latest lawsuit just adds to Mexicana’s ongoing struggle to establish itself in the Mexican aviation market. Having only launched flights in December 2023, the airline was intended to be a more affordable alternative to established larger carriers like Aeroméxico. However, the company initially faced difficulties acquiring aircraft and eventually launched services using an ex-Mexican Air Force Boeing 737. Mexico’s President López Obrador more recently announced plans for Mexicana to order 10 Embraer jets at a cost of $450 million.
Mexicana is yet to formally respond to the lawsuit. However, should the court’s decision go against it, the carrier could be put under huge financial strain just at a time when it can ill-afford it, and which could ultimately threaten its entire financial viability.