One of the lessors repossessing aircraft from defaulting Mexican carrier Interjet tells Airfinance Journal the tale from behind the scenes.

So far lessors have repossessed 25 Airbus A320- and A320neo-family aircraft from Interjet since 24 March.

Seemingly happy to let some of these go, Interjet had described its existing lease terms as "abusive", without explaining why.

“Airlines like to use that term when their contractual lease rate is higher than the market at a particular point in time," says one of Interjet’s Airbus lessors. "Leasing is a supply and demand business, so market lease rates move up and down over time. Airlines never complain when the contractual lease rate they have in place is below the market, however.” ,

The lessor adds that many of those ‘abusive’ deals were sale and leaseback transactions. "If so, the sale price would have corresponded to the lease rate, so it’s a very unfair statement from the airline.”

In recent years Interjet has performed sale and leaseback transactions with Aviation Capital Group (ACG), Aircastle and Wings Capital.

AFJ's anonymous lessor source says that Interjet is “on average about one to two months” behind with its rental payments this year.

Some in the leasing community have said that Interjet was unwilling to engage in meaningful discussions about its default situation, saying they were surprised by the airline’s spiky reaction, but our interviewee hasn’t experienced that: “For us, the dialogue has been consensual and in the spirit of trying to find a solution for both parties. We may continue our relationship with them if they are able to obtain the right level of support from their shareholders and/or the Mexican government.”

However, the lessor adds that it will use "all the rights available to us, including legal remedies, if and when appropriate”.

Before the repossessions began, Aircastle had 11 aircraft on lease to Interjet, ACG had 10, Aercap had eight, GECAS had, Wings had four, and ICBC Leasing and Macquarie Airfinance had three aircraft each with the Mexico City-headquartered carrier.

The source rules out the lessors pursuing some form of joint action against Interjet. “We each have different circumstances so we are not pulling together. I believe that some will keep their assets with them if the airline is able to clean up their financial situation. Historically, the airline has had a high standard of maintenance and care for their aircraft and that is an important decision criterion for a lessor.”

The interview says that Interjet “did receive some funds from the shareholder about a month ago, and they told us they received some more funds about two weeks ago, but they seemingly held onto them if they were received”.

This was partially corroborated by another lessor with exposure to Interjet, who earlier this week told Airfinance Journal: “Basically, it’s a default situation. Interjet has not been very transparent. They’ve always been quite wishy-washy, saying we’re going to pay on this date or that date but when the date comes there’s still no payment so we’ve lost our patience with them.”

Airfinance Journal research shows that of more than 60 airlines surveyed, Interjet performed among the worst in terms of its pre-coronavirus liquidity profile.

Interjet stopped releasing financials after 31 March 2019 but before that its cash position decreased gradually over the years to just $21 million at 31 December 2018 from $200 million five years earlier.

Against this Interjet had $359 million of secured debt as of 31 December 2018.

In the past 24 hours, the carrier lost its 25^th Airbus unit after this was repossessed by ICBC Leasing. The Chinese lessor has now reclaimed all its aircraft from Interjet.

These 25 aircraft have been repossessed to date: two 2019-vintage A320neos from GECAS; three 2017-vintage A320neos and two 2010-built A320s from Aercap; four 2018-vintage A321neos from ACG; two 2000- and two 2008-vintage A320s from Aircastle; three 2017-vintage A321s and two 2012-vintage A320s from Wings Capital; three 2016-vintage A321s from ICBC Leasing; a 2008-built A320 from Magix Airlease (managed by Orix); and a 2006-vintage A320 from Zephyrus Aviation Capital.

Interjet would be neither Mexico’s first nor its largest airline bankruptcy. In August 2010 then-flag carrier Mexicana collapsed after 88 years. It and its subsidiaries had more than 130 aircraft in operation at the time. Mexicana was one of the oldest continuously single-branded airlines after KLM, Avianca and Qantas.

Back at Interjet, prior to the above repossessions the Mexico City-headquartered LCC had 89 aircraft in its fleet. They comprised 43 A320s, 24 Sukhoi SSJs, eight A320neos, eight A321neos and six A321s.

Airfinance Journal data shows that the carrier owns 30 of these aircraft, worth approximately $512 million under normal market conditions.

Interjet has outstanding direct orders with Airbus for 28 additional A320neos.

The carrier started operations in December 2005; it is Mexico's third-largest airline following Aeroméxico and Volaris.

Interjet is a family business run by president and CEO Miguel Alemán Magnani, son of Miguel Alemán Velasco, who is president of the group that owns the airline, Grupo Alemán.

Alemán Velasco is a son of former president and billionaire Miguel Alemán Valdés, who was in office from 1946 to 1952.