LATAM Airlines Group has filed for Chapter 11 Bankruptcy as it seeks to restructure in the face of mounting debts and a collapse in passenger demand for air travel.
In April, the Group suffered a fall of 96.6% in passenger traffic, and a 94.3% decrease in capacity.
In addition to the Chilean operations, the filing covers LATAM Airlines Colombia, LATAM Airlines Perú, LATAM Airlines Ecuador, and all of the Group’s operating entities in the US. LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing.
“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 Officer of LATAM. “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 group has secured the financial support of shareholders, including the Cueto and Amaro families, and Qatar Airways, to provide up to US$900 million in debtor in-possession (DIP) financing. These partners have a profound understanding of the industry, the group and its operational challenges. In addition, the group also has approximately $1.3 billion in cash on hand.
LATAM Airlines Group and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions, and state that suppliers will be paid in a timely fashion for goods and services delivered from 26 May, 2020 forward and throughout this process.
Whether included in the filing or not, all of the companies in the group will continue to operate as travel restrictions and demand permit.
Days earlier, the Group announced it was gradually increasing its international and domestic operations during June and July, offering passengers more flexible options, lower fares and increased sanitary measures, including the mandatory use of face masks for all passengers and cabin during all phases of flight.
It is unclear what effect if any, the filing will have on the recent (7 May) signing of a trans-American Joint Venture Agreement with Delta Airlines.
