Interjet warns of ‘technical bankruptcy’ amid tax feud

Bloomberg

Mexican airline Interjet is in “technical bankruptcy” and at risk of collapse, according to its finance chief, following an order to start paying off nearly $30 million in back taxes.
Interjet beat back an attempt by authorities to seize control of its bank accounts in an effort to collect nearly 550 million pesos ($27 million) in unpaid taxes dating to 2013. But a judge this month ordered the closely held carrier to deposit 10 percent of its monthly revenue as a guarantee until the debt is paid.
The tax collector is putting Interjet “in a serious predicament of economic viability, preventing it from continuing its normal operations,” Chief Financial Officer Raul Lopez said in a court filing opposing the seizure attempt.
“The company’s results from 2013 to 2018 clearly show accumulated losses that can be interpreted as the airline’s technical bankruptcy.”
That’s a phrase that in Mexico is typically used to describe a situation where liabilities outweigh assets, but Interjet hasn’t filed for protection from creditors. Still, Lopez’s 77-page filing, which hasn’t been released publicly, describes how weak investor appetite and a fleet of balky Russian jetliners have pushed the airline into financial distress.
Interjet — owned by the family of former Mexican President Miguel Aleman Valdes and operating since 2005 in the space between low-cost and full-service carriers — also has been forced to ground planes as it grapples with labour strife.
In a statement, Interjet said it was clarifying the exact amount of the tax bill since some amounts may be erroneous. In a separate statement posted later on Twitter, the company categorically denied it’s in technical bankruptcy.
“This situation in no way affects passengers or the company’s operations,”’ Interjet said.
‘Losing Money’
The tax agency referred to a tweet earlier this month in which it said it was collecting a debt from an airline, without specifying the company name.
The carrier, formally known as ABC Aerolineas SA, posted 5.83 billion pesos in revenue for the first quarter, so it should take them only about three months to pay the taxes due. But Interjet logged an operating loss of 409 million pesos for the quarter.
“Their cash generation is negative and their operations are losing money,” said Bloomberg Intelligence analyst George Ferguson. “Taking away 10 percent of their revenues is definitely going to plunge them a bit deeper into negative cash flow and it will be more difficult for them to pay their debts.”
Interjet’s net debt is around 11.5 times earnings, Ferguson estimated.
At least some of Interjet’s tax problems can be traced to its fleet of 22 Sukhoi Superjets, according to court filings.