Mexican airline Mexicana de Aviacion has filed for bankruptcy ending weeks of speculation over the future of the company.

The largest airline in the country failed to reach agreement with unions over cost cutting measures, having proposed to cut up to 40 per cent of pilots and crew.

However, Mexicana confirmed flights would continue to operate as normal while finances were restructured.

Speculation had been mounting over the past few days following a decision by Mexicana to cut flights between Mexico and the Unite States earlier this week.

Along with the global aviation industry, Mexicana has been hit by a downturn in demand for traffic. However, this was compounded by an outbreak of swine flu in Mexico last year, further depressing traffic to the country.

Bankruptcy

Mexicana confirmed it had filed for bankruptcy in a Mexico City court in order to “to restructure its costs and ensure the viability of the company”.

In the United States, the airline has filed for Chapter 15 bankruptcy protection in New York in order to fend off legal action from creditors.

However, court filings state aircraft leasing companies and owners are already taking steps to repossess planes.

Three of the airline’s 64 aircraft have already been seized.

The MexicanaClick low-cost arm and MexicanaLink regional units, which together operate 38 planes, are not part of the filings.

The bankruptcy is the largest in the industry since Japan Airlines  - like Mexicana, a member of the Oneworld global alliance- sought protection in January.

Mexicana confirmed it had lost $350 million since 2007 and listed debt of more than $1 billion in its bankruptcy petition.

The airline flies to more than 65 national and international destinations, including the US, Canada, Europe and Latin America.

In 2009, it transported 6.86 million passengers, while Click and Link carried 4.25 million.

Mexicana is offering the latest information to concerned passengers here.