LATAM initiates voluntary Chapter 11 reorganisation

Chile-based LATAM has filed for bankruptcy protection, enabling it to reorganise and restructure its debt under the American Chapter 11 financial reorganisation process. This includes its affiliates in Chile, Peru, Columbia, Ecuador and the United States. According to a press release dated May 26 by the airline, this is to ensure the carrier's "long-term sustainability."

LATAM follows the path of a similar bankruptcy move in Latin America by Avianca, where the region's number two airline filed for Chapter 11 bankruptcy in early May. LATAM is considered to be the region's largest airline and it continues to show the devastating effect COVID-19 is having on the aviation industry globally. Unlike Avianca however, LATAM came into the pandemic a healthy and profitable airline.

“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,” Roberto Alvo, CEO of LATAM.

The company states it has secured the financial support of shareholders, who will "provide up to $900 million in debtor-in-possession (DIP) financing." The group said it would also welcome other shareholders interested in providing additional financing. As of the filing, the group had approximately US$1.3billion of cash in hand.

A LATAM Boeing 787-900. Photo by Ernest Leung | AeroNewsX

Following the company's filing for bankruptcy, LATAM is looking to reduce its fleet, returning 19 aircraft to lessors. This compromises of six long haul jets, two A350-900s and four Boeing 787-9s.

“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. As we have adapted to new realities in the past, we are confident that LATAM will be able to succeed in the post-COVID-19 context and continue to serve Latin America, connecting the region with the world,” Ignacio Cueto, Chairman of LATAM's Board of Directors.

The group has provided an infographic for stakeholders detailing the restructuring process. The infographic states that "The Chapter 11 reorganisation process is the best path forward to achieve the group’s objectives and meet its obligations while comprehensively managing its fleet and addressing its debts, most of which are held in the United States."

LATAM Airlines Group provides one of the largest route networks in the world. They operate to around 146 destinations in 26 countries and employ approximately 41,000 people. The group uses a young and modern fleet with 335 operating aircraft as of September 2019. The group carried a record 74 million passengers in 2019.