BY Richard Summerfield
Latam Airlines Group SA, Latin America’s largest air carrier, has filed for Chapter 11 bankruptcy protection in New York after the COVID-19 pandemic grounded flights across the region.
“Latam entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” said Roberto Alvo, chief executive of Latam.
He continued: “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”
The airline will continue to fly while it is in bankruptcy protection. Its affiliates in Argentina, Brazil and Paraguay were not included in the Chapter 11 filing, though affiliates in Chile, Peru, Colombia, Ecuador and the US were.
To help fund its continued operations throughout the bankruptcy period, the company has secured funding from a number of its major shareholders, including the Cueto and Amaro families and Qatar Airways. In total, the company has secured around $900m in debtor-in-possession (DIP) financing.
However, the company has given no indication whether its largest shareholder, Delta Air Lines, which holds 20 percent of the company, will help. The airline noted in its statement: “To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing.” The airline also noted that it had about $1.3bn in cash on hand.
Latam has struggled since the outbreak of the COVID-19 pandemic. In mid-March, it cut 90 percent of its flights and by April was down to just five routes. Earlier this month, Latam confirmed that it would lay off 3 percent of its workforce, some 1400 employees.
Of course, the company is not the only airline to suffer. Fellow South American airline Avianca has already filed for Chapter 11 bankruptcy, while Virgin Australia entered voluntary administration last month.
News: Latam Air Files Chapter 11 Bankruptcy, Stymied by Lockdowns