Mexico’s new state airline sued in $800m contract dispute

Mexico’s new state-owned airline was sued by the company that the government hired to manage plane leases and hire crews, claiming the carrier’s lack of cooperation has put the entire enterprise in jeopardy. SAT Aero Holdings Inc., which was formerly known as Petrus Aero Holdings, filed the lawsuit Wednesday in federal court in New York seeking damages in the full amount of its $838.5m contract, plus $2.4m in costs. President Andres Manuel Lopez Obrador, known as AMLO, launched the new Mexicana airline in December after buying the name from a carrier that stopped flying in 2010. The government has marketed Mexicana as a new budget airline set to compete with local carriers Volaris and Viva Aerobus. The airline recorded 160 flights in January, according to government statistics. AMLO said last year the government was looking to initially lease 10 Boeing 737 jets. But Mexicana now leases at least part of its aircraft from another regional airline, TAR Aerolineas. SAT was hired by the Mexican Ministry of Defense to provide services including procuring aircraft and insurance, recruiting and training pilots and crew and arranging for maintenance of the aircraft, according to the complaint. The company said it was understood that it would buy airplanes for Mexicana, and that the government would ultimately bear the cost. But SAT claims Mexicana broke their agreement by failing to pay more than $5.5m in deposits so that SAT could lease the first two of 10 aircraft. The company says it “pushed forward” and tried to “do everything possible to sustain the important long-term business relationship,” while continuing to negotiate leases.<br/>