LATAM Airlines Group Sociedad Anonima — which includes certain subsidiaries and affiliates of its operations in Chile, Peru, Colombia, Ecuador, and the United States — filed voluntary petitions for reorganization and protection under Chapter 11 in the United States Bankruptcy Court earlier today, Tuesday, May 26, 2020 in an effort to both preserve its businesses for the future and ensure that it emerges from its court-supervised reorganization of its businesses as a highly competitive and successful carrier in South America and North America as it navigates its way through what could very well be a prolonged recovery for both the travel industry and the global economy overall.
LATAM Airlines Group Files for Chapter 11 Bankruptcy Protection
The group has secured the financial support of shareholders, including the Cueto and Amaro families, which have lasting ties to LATAM, and Qatar Airways, to provide up to $900 million in debtor-in-possession (DIP) financing. These partners have a profound understanding of the industry, the group and its operational challenges. Their support demonstrates a belief in LATAM and its affiliates and their long-term sustainability. To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing. In addition, as of the filing, the group had approximately USD$1.3 billion in cash on hand.
Additionally, LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia, and Peru “to assist in sourcing additional financing, protect jobs where possible and minimize disruption to its operations.”
Due to the impact of the current 2019 Novel Coronavirus pandemic on the global commercial aviation industry, this reorganization process provides LATAM with an opportunity to work with the of the group creditors and other stakeholders in order to reduce its debt, access new sources of financing, and continue operating — all while enabling the group to transform its business by resizing their operations to the new demand environment and reorganizing their balance sheets, which will enable them to emerge more agile, resilient, and sustainable.
The affiliates of LATAM Airlines Group Sociedad Anonima in Argentina, Brazil, and Paraguay are not included in the aforementioned filing; and the affiliates in Brazil are currently in discussions with the federal government of Brazil about the next steps and financial support for their Brazilian operations.
Despite the filing for voluntary petitions for reorganization under Chapter 11, operations will continue as normal during the process, as:
- LATAM Airlines Group Sociedad Anonima and its affiliates will continue to operate passenger and cargo flights as conditions permit throughout the process — subject to demand and travel restrictions.
- All current and future tickets, travel vouchers and frequent flier miles and benefits — as well as flexibility policies — will be honored.
- The employees of the group will continue to be paid and receive benefits as provided in their employment agreements.
- Suppliers will be paid in a timely fashion for goods and services delivered from Tuesday, 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.
Summary
LATAM Airlines Group is not the only airline based in South America which has filed voluntary petitions for reorganization and protection under Chapter 11 in the United States, as Avianca Holdings Sociedad Anonima also already did so on Sunday, May 10, 2020.
My only experiences as a passenger with LATAM was my first time aboard a Boeing 787-9 “Dreamliner” airplane traveling from Santiago to Easter Island — as well as the return flight. Yes, I still have the series of articles pertaining to my trip to Easter Island to finish as well.
What all of this means to you as a customer and as a member of the LATAM Pass frequent flier loyalty program: nothing, as the airline will operate business as usual — including its new partnership with Delta Air Lines — for now, anyway.
All photographs ©2019 by Brian Cohen.
