Press release - October 26, 2004

Dow Jones Newswires

Mexico's Cintra To Restructure Units Ahead Of Sale

By Amy Guthrie , Dow Jones Newswires; (5255) 5080-3453; amy.guthrie@ dowjones.com

MEXICO CITY (Dow Jones)--Mexican airline holding company Cintra SA (CINTRA.MX) said Tuesday its board has authorized a restructuring plan that could bring it closer to a long-awaited auction of stakes in Mexico's main airlines.

Cintra plans to clump its two regional airlines - Aerolitoral and Aerocaribe - into one company and Mexico's main domestic and international airlines - Aeromexico and Mexicana - into another.

Cintra said in a press release that the reorganization plan has already been approved by Mexico's antitrust authority, the Federal Competition Commission.

The plan is for stakes in the two new airlines to eventually be sold to investors, inviting competition into a market that has operated under a near- monopoly since the government took over the financially troubled airlines in the mid-1990s.

Cintra said it plans to build up Aerolitoral and Aerocaribe prior to the sale, "giving them all the necessary elements so that their service offerings can increase in an effective, timely and significant manner, thereby converting them into a new competitor in the national aviation market."

Aeromexico and its subsidiary, Aerolitoral, dominate domestic air traffic with a 38% market share, while Mexicana and its Aerocaribe unit are a close second. In international traffic, though, Mexicana is the leader with 25% of the market versus Aeromexico's 16% share.

Local hotel associations and other tourist-driven business groups have long called for Aeromexico and Mexicana to be sold separately in the hopes that competition would bring down ticket prices, which are often three times more expensive than those for similar routes in other parts of North America .

Aeromexico belongs to the SkyTeam alliance with major carriers like Continental Airlines Inc. (CAL) and Delta Airlines Inc. (DAL), while Mexicana has a code sharing agreement with AMR Corp. 's (AMR) American Airlines.

Non-Mexican airlines are strongly discouraged from undercutting ticket prices offered by the country's airlines on international routes.

Also Tuesday, Cintra reported a rare financial gain. The company said it had a net profit of 1.47 billion pesos ($1=MXN11.5043) during the third quarter compared to a MXN72.5 million net loss the year before.

Cintra's class A shares were surging 24% to MXN3.35 on the Mexican Stock Exchange in light trade late Tuesday.