Mexico launches military-run airline with $48 mln purchase of Mexicana brand

MEXICO CITY, Aug 10 (Reuters) – The Mexican government will launch a military-run airline later this year, officials said on Thursday, made possible by the 815 million-peso ($48 million) purchase of the brand of defunct airline Mexicana de Aviacion.

Mexicana, which entered bankruptcy proceedings in 2010, was previously a major national carrier, but encountered financial turbulence several years after being privatized.

Mexican President Andres Manuel Lopez Obrador has vowed to revive the airline to offer low-cost options to travelers, adding there is room in the domestic market for another airline.

Interior Minister Luisa Alcalde, speaking alongside the president and the defense minister at the regular morning press conference, said the airline would launch with the Mexicana name following an agreement with former employees to buy its brand for 815 million pesos.

The deal includes the purchase of three buildings and a flight simulator, Alcalde said, adding that next week the government would also begin to pay the more than 7,000 former employees who had not received salaries or benefits.

Lopez Obrador has increasingly turned traditionally civilian-led duties in the aviation sector over to the military. Earlier this week, administration of the Mexico City International Airport was handed to the navy.

Defense Minister Luis Cresencio Sandoval said the airline would start with 10 rented Boeing 737-800s, to be delivered in September and October.

The government will pitch in an initial 4 billion pesos for the airline, Sandoval added. Lopez Obrador said the funds would come from the public budget, but did not specify further.

Mexicana will also begin selling tickets next month to an expected 20 destinations out of the Felipe Angeles International Airport (AIFA), Sandoval added.

Opened last year, the military-run airport was built as an alternative to the Mexico City International Airport, the country’s busiest.

Even though Lopez Obrador has moved cargo flights and some commercial travel to the new airport, it has yet to gain traction with travelers.

($1 = 16.9509 Mexican pesos)

Reporting by Kylie Madry; Editing by Brendan O’Boyle and Jonathan Oatis

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