Mexico's government has asked a judge to replace the conciliator in Mexicana de Aviacion airline's bankruptcy proceedings, Gerardo Badin, citing delays in getting the carrier back on sound financial footing.

"Practically two years since bankruptcy proceedings began, the company has not managed to restructure (its debt) nor has a viable scheme emerged to protect the (airline's) assets," the Communications and Transportation Secretariat said in a statement.

In May, the Med Atlantica group acquired 95 percent of Mexicana, which suspended operations in August 2010 due to its financial woes and filed for bankruptcy shortly thereafter.

Med Atlantica is led by Spanish businessman Christian Cadenas, although 80 percent of the group's capital comes from Mexican investors.

The secretariat said that under Mexico's bankruptcy law the conciliator's primary role is to facilitate the signing of a creditors' agreement that guarantees the bankrupt company's future viability.

No such accord with Mexicana's creditors has yet been finalized even though on several occasions such a deal was supposedly imminent, the secretariat said.

It added that the lack of progress has caused harm to creditors, including the airline's workers, and that in turn has led to decline in the value of the company's assets.

Authorities, therefore, have asked the judge in Mexicana's bankruptcy case, Felipe Consuelo Soto, to order the IFECOM bankruptcy regulator to name a new conciliator for the airline.

The secretariat suggested Jose Luis Stein-Velasco, who has held various government posts and is director of a legal and financial consulting firm, as a potential replacement.

It added that the new conciliator must expedite the restructuring process to protect Mexicana's assets.

The secretariat said a change of conciliator would not affect the agreements reached thus far with creditors nor the recapitalization process.

The Mexicana group of airlines, which also includes sister budget carriers Click and Link, grounded its operations in August 2010 after nearly nine decades in business and filed for bankruptcy protection to restructure a debt load of more than $800 million.

In February, Mexicana's new owner deposited $300 million and showed proof of its ability to recapitalize the airline, which is to return to the skies this year with a staff of just 2,500 workers.

Severance packages still must be negotiated with the remaining 5,500 employees. EFE