Mexicana's Ambitious Jet Order Amid Economic Shakeup

Mexicana, Mexico's state-run airline, has placed an order worth up to $1.6 billion for 20 Embraer jets. This move follows recent political changes and aims to boost the struggling airline's operations. Analysts have concerns about the long-term sustainability of this order as Mexicana faces financial and legal challenges.

(Recasts throughout) SAO PAULO/MEXICO CITY, June 3 (Reuters) -

Mexican state-run airline Mexicana placed an order for 20 Embraer jets with an estimated list price of at least $1.4 billion, a major step for the carrier as it has sputtered to get off the ground since launching last year. The announcement by Embraer of the order for 20 E2 jets on Monday comes after Mexico's landslide election of former Mexico City Mayor

Claudia Sheinbaum , a protege of outgoing President Andres Manuel Lopez Obrador.

"Mexican authorities wasted no time" in placing the order following the election results, analysts at Citi wrote in a note to clients. As president, Lopez Obrador

created Mexicana by reviving the brand of a bankrupt carrier and handing it over to the military, arguing it would offer cheaper fares to domestic travelers compared to airlines such as Aeromexico, Volaris and Viva Aerobus.

He has also increasingly militarized the aviation sector

, putting formerly civilian duties from airport administration

to the top post of the civil aviation body in the hands of current or retired military officials. However, since taking flight in December, Mexicana has struggled to gain traction, using just three Boeing planes from the military and two smaller, older Embraer jets rented from a regional carrier.

In the year through April, Mexicana has transported just under 76,000 passengers domestically, according to data from the aviation authority, compared to the millions moved by its competitors. The tie-up with Embraer will allow Mexicana to boost its flight frequencies. It also appears to confirm reports that the government's

much-touted talks with rival planemaker Boeing , presumably for larger planes, had failed.

Mexicana's firm order comprises 10 E190-E2 jets seating 108 passengers and 10 E195-E2 aircraft with 132 seats. Deliveries are expected to start in the second quarter of 2025. The Citi analysts did caution, however, that "the long-term staying power (and) reliability of this order is an open question."

Mexicana is expected to operate in the red until 2033, according to a finance ministry analysis from last year obtained by Reuters through a records request. It is

already facing legal trouble in the U.S. for alleged failure to make good on payments.

The Citi analysts put the price tag of Monday's order around $1.4 billion, but said Mexicana has likely received a discount given its size. J.P. Morgan, meanwhile, pegged the order at closer to $1.6 billion.

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