MIAMI – LATAM (LA) has entered a voluntary restructuring of its debt under Chapter 11 protection. The Cueto and Amero families, alongside Qatar Airways (QR), are supporting LA, with a commitment of US$900m in additional funding.
The airline becomes the second from South America to file after Avianca did the same two weeks ago.
Chapter 11 allows LA to continue flying (while abiding by COVID-19 restrictions) and also reorganize the company to be agile enough to navigate the new world to which they will return.
“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.
Albo also said that while LA had implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, filing for Chapter 11 ultimately represented the best option to lay the right foundation for the future of the 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,” added the CEO.
LATAM will continue to operate as normal
LATAM said it is committed to continuing its business throughout the reorganization, focusing on employees, customers, suppliers, commercial partners, and local communities. Some of the measures include:
- LATAM Airlines and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions.
- All current and future tickets, travel vouchers, and frequent flyer miles and benefits, as well as flexibility policies, will be honored.
- The group’s employees will continue to be paid and receive benefits as provided in their employment agreements.
- Payments to suppliers will be delivered in a timely fashion for goods and services provided from May 26, 2020, forward, and throughout this process.
- Travel agencies and other commercial partners will experience no disruption in their interactions with the LATAM group.
“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 LA’s Board of Directors.
Cueto added, “As we have adapted to new realities in the past, we are confident that LA will be able to succeed in the post-COVID-19 context and continue to serve Latin America, connecting the region with the world,”
Announced partnership and resumption of operations
In addition to the filing by LA, Delta Airlines (DL) has canceled 4 Airbus A350-900 orders. However, the partnership between Delta and LATAM remains in place despite the deal initially stating it would be canceled in the event of bankruptcy.
Just three weeks ago, DL and LA and its affiliates signed a trans-American Joint Venture Agreement that marries the airlines’ complementary route networks throughout the Americas.
The agreement, pending regulatory approval, will offer a seamless travel experience and extensive connectivity throughout the region.
Additionally, last week, LA and its subsidiaries announced the resumption of their operations by 9% to 18% during June and July alongside further travel and sanitary policies.
Considering the uncertain climate due to the COVID-19 crisis and the above-mentioned measures, the carrier will offer flexibility in purchasing and scheduling trips, which will translate in 20% less expensive end-costs.
LATAM expected at the time of the operation resumption announcement to recover its domestic and international capacity from 5% to 9% in June and to 18% in July.