Flying low: The government prepares to put Cintra on the auction block. (Spotlight).(Statistical Data Included)

Reports on Mexico's aviation industry are confusing. The process to sell Aerovias de Mexico (Aeromexico) and Mexicana de Aviacion (Mexicana)-- both controlled by holding company Cintra--has been rescheduled several times, although it is now expected to begin in July.

After Cintra was founded as a holding company to administer the nation's financially distressed airlines, the Federal Competition Commission (CFC) in October 1995 ordered its breakup on the grounds that it was a monopoly, with 80% of the domestic airline market falling under its control.

The federal government controls more than 65% of the holding company, mostly through the Bank Deposit Protection Institute (IPAB), which assumed its 50.5% stake from debt held by banks bailed out by the government after the December 1994 peso crisis.

Grupo Financiero BBVA-Bancomer has a 12% stake in Cintra, while Citigroup's Grupo Financiero Banamex owns 8%.

INDUSTRY MALAISE

The break up and privatization of the two airlines has been on the table for some time now, delayed partly because of the economic downturn and the events of Sept. 11, which threw the industry worldwide into a tailspin from which it has still not recovered.

Cintra registered losses of US$8 million in September alone, leading the federal government to provide rescue credits of up to US$100 million for airlines and fuel discounts as long as they were up to date with their tax and regulatory obligations.

Moreover, in the months prior to the attacks, four airlines--United, Delta, American and Continental--were considered major potential bidders for the two Mexican airlines. It now appears that none have the appetite or the cash to acquire either Aeromdxico or Mexicana.

And that's hardly surprising: Six months after the terrorist attacks, the U.S. aviation industry was still gasping, struggling to survive a period of catastrophic loss. According to the U.S. Air Transport Association (ATA) Office of Economics, prices plummeted 19.2% in October, 19.8% in November, and in December the average domestic fare was the lowest of any month since August 1992.

According to the Air Transportation Safety and System Stabilization Act, the decline will continue through 2002. It concludes that at best, the U.S. airline industry hopes to see profits again in late 2003, leaving Mexico's controversial privatization of its top two airline carriers on hold.

CLOSE TO HOME

And in Mexico, the aviation industry is …