Latin America’s largest air carrier, LATAM airlines filed for bankruptcy today. LATAM Airlines Group S.A. and its affiliates in Chile, Peru, Colombia, Ecuador, and the United States today initiated a voluntary reorganization and restructuring of their debt under Chapter 11 protection in the United States. Cueto and Amaro families and Qatar Airways, two of the largest shareholders of LATAM have supported this decision.
“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.
In April, the airlines’ system passenger traffic decreased by 96.6%, while capacity fell 94.3%. As a result, the Company’s load factor for the month fell 33.3 percentage points to 50.0%.
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. To the extent permitted by law, the group said that it 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.
The company will still operate passenger and cargo flights, subject to demand and travel restrictions in Latin America. LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing.
LATAM is advised in this process by Cleary Gottlieb Steen & Hamilton LLP and Claro & Cia. as legal advisors, FTI Consulting as financial advisor and PJT Partners as investment banker.