Chile's Latam Airlines Files for U.S. Bankruptcy Protection
By Andrew Scurria
Chile's Latam Airlines Group SA, the largest airline in Latin
America, has filed for bankruptcy protection in the U.S. after
travel restrictions all but emptied the skies in the region,
sending air carriers scrambling for ways to cushion the coronavirus
Latam and several affiliates sought chapter 11 protection on
Monday to reduce the size of its fleet, cut down its more than $7
billion in debt and cope with the pandemic's severe impact on the
aviation industry. The company, in which Delta Air Lines Inc. has a
big stake, said it secured $900 million in bankruptcy financing
from other shareholders, including Qatar Airways, to stay afloat
during the restructuring process.
"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," said Ignacio Cueto, chairman of Latam's board of
Latam is the largest of about one dozen airlines that have filed
for bankruptcy protection or closed down since the coronavirus
grounded much of the industry. The International Air Transport
Association, a trade group, said Tuesday that while governments
have so far provided $123 billion in support for carriers, Latin
American airlines have received little aid.
Colombia's Avianca Holdings SA, the region's second-largest
carrier, also filed for protection from creditors earlier this
month in the U.S. Bankruptcy Court in New York. Like Avianca, Latam
said it was in discussions with governments in several countries
within its service area regarding potential rescue lending or other
economic assistance. The airline offers domestic flights in
Argentina, Brazil, Chile, Colombia, Ecuador and Peru and
international services within Latin America and to other
Airlines around the world are slashing costs, cutting back on
routes and in some instances seeking concessions from creditors to
try to endure the pandemic's devastating impact on passenger
volumes. Travel restrictions, stay-at-home orders and fear of
contagion have cut into revenues, sending carriers across the U.S.,
Europe and Latin America scrambling for state-led bailouts to avoid
more austerity measures or financial trouble.
U.S. airlines are receiving $25 billion in government aid to
cover payroll costs through the end of September under a $2.2
trillion stimulus package, and can also access another $25 billion
in government loans.
Latam's bankruptcy comes after it sold a $1.9 billion stake in
December to Delta under a commercial joint venture designed to
combine the routes of the two airlines between North and South
America, according to court papers. Delta Chief Executive Ed
Bastian said recently the company "remains firmly committed to our
partnership with Latam and believe that it will successfully emerge
a stronger airline and Delta partner for the long term." Mr.
Bastian has previously said Delta isn't in a position to provide
more assistance to its international partners.
The financing package from shareholders would allow Latam to pay
employees and vendors during the chapter 11 process, subject to
court approval. Latam said it would welcome other shareholders to
participate in supplying financing, "to the extent permitted by
The airline said last week it hopes to begin increasing its
passenger operations shortly, potentially up to 18% of pre-pandemic
capacity by July, according to a bankruptcy court filing by its
finance chief, Ramiro Alfonsín Balza.
He said Latam had negotiated approximately $500 million worth of
payment deferrals throughout the first three quarters of 2020 but
still faced a mandatory $57 million payout to shareholders on
Thursday and $130 million in debt service through the first week of
June. The company filed for bankruptcy protection rather than
deplete cash reserves for those payments.
Alison Sider contributed to this article
Write to Andrew Scurria at Andrew.Scurria@wsj.com
(END) Dow Jones Newswires
May 26, 2020 11:15 ET (15:15 GMT)
Copyright (c) 2020 Dow Jones & Company, Inc.