Editor’s Note August 29 – The weekend after I posted this, Mexicana officially declared themselves dead and they have canceled all flights.

Living in Mexico as I am right now, I’m particularly interested in how this Mexicana Airlines train wreck will play out. Ever since they declared bankruptcy it’s been a complete nightmare for customers who had bookings, some of whom I know personally. As this excellent Smarter Travel blog post says, Mexicana has basically been holding customers’ money hostage, refusing to cancel flights but also refusing to honor the flights or transfer the customers to another airline either. So all that cash is in limbo.

There are some odd twists to this story, one being that their budget arm Click is still flying, apparently because it’s financed as a separate company. An investor group just coughed up $50 million to supposedly give the company a lifeline for 100 days. Will it be enough?

In a country with only two major airlines and a few budget ones that just fly a few routes from oddball hubs (Toluca, Monterey, Tijuana), Mexicana’s implosion is messing up a lot of vacation and business plans.

When flights go back on sale they’ll probably be heavily discounted, but my advice would be to avoid this airline like it’s a drug smuggler with swine flu. There’s a very real chance you’ll never see your money again after you buy a ticket and you won’t fly either. Even with the cash, they’ve got to convince people to keep working for them and flying the planes despite a hazy future. Go to Vegas instead and at least you’ll get free drinks if you lose everything.

But hey, the Mexican buses still rock.