Latin America's largest airline has officially filed for bankruptcy

May 26 2020, 9:56 pm

LATAM Airlines Group S.A., the holding company of the largest airline in Latin America, LATAM Airlines, and its subsidiaries in Peru, Chile, Colombia, Ecuador and the United States, has officially filed for bankruptcy as a result of the substantial impacts of the COVID-19 pandemic on its business.

The company disclosed the update in a press release issued on Tuesday, stating that it is voluntarily restructuring and reorganizing its debt under Chapter 11 protection in the United States.

The organization cites the losses incurred by the coronavirus pandemic by the international aviation industry as the reason for the reorganization.

Chapter 11 protections allow for LATAM and its affiliates to rescale their services to adjust to new demand and restructure their balance sheets to enable the company to “emerge more agile, resilient, and sustainable.”

A balance sheet is a summary of the financial balances of a person or organization.

According to Roberto Alvo, the CEO of LATAM, the airline entered the coronavirus pandemic as a “healthy and profitable” organization. However, due to later “exceptional circumstances” that caused aviation to come to a halt, the industry as a whole will be changed for the “foreseeable future.”


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Alvo continues that the company has had to implement a number of difficult decisions to alleviate the effects of “this unprecedented industry disruption,” but that this arrangement sets the organization up in the best possible way to move forward.

LATAM Airlines Group has obtained financial support from its largest shareholders, the Cueto and Amaro families and Qatar Airways, to supply upwards of USD $900 million in debtor-in-possession (DIP) financing.

The company explains in the release that these partners possess extensive knowledge pertaining to the industry as well as LATAM itself and the current challenges that it is facing, praising them for showing belief in the organization and its subsidiaries and its sustainability as a business.

The release continues that LATAM is also open to welcoming other shareholders who may have an interest in contributing to this initiative to supply additional funds, to the extent that the law permits it.

“As of the filing, the group had approximately USD $1.3 billion in cash on hand,” it states.

The company and its associates are also communicating with the governments of Brazil, Colombia, Chile, and Peru, respectively, to request additional financial assistance, ensure job security wherever possible, and limit interference in operations.

“Faced with the biggest crisis in the history of aviation, the Board has approved this path forward, having analyzed all the available alternatives to ensure the sustainability of the group,” said Ignacio Cueto, chairman of LATAM’s Board of Directors, in the release.

Cueto continues that the family is confident LATAM will succeed in a post-coronavirus setting and continue to provide service throughout Latin America by connecting the region with the rest of the world.

By filing for Chapter 11 bankruptcy, LATAM Airlines Group S.A. commits to maintaining the continuity of the business in the following ways:

  • Continue to facilitate passenger and cargo flights, in congruence with demand and travel limitations.
  • Present and already-purchased tickets, as well as travel vouchers, frequent flyer miles and other compensations, will be fulfilled, as will flexible booking and cancellation policies.
  • The group’s workers will continue to receive payment and benefits as outlined in their respective employment agreements.
  • Suppliers will receive payment “in a timely fashion” for products and services transported from May 26, 2020, onward throughout these procedures.
  • Travel agencies and other commercial partners will not experience any disruptions in their exchanges with the group.

Another one of Latin America’s largest airlines, Avianca Airlines, filed for bankruptcy earlier this month, also citing losses incurred by the “unforeseeable impact” of the coronavirus pandemic as the reason behind the decision.

Emily RumballEmily Rumball

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