South America's biggest airline seeks Chapter 11

Latam Airlines, South America’s biggest carrier, sought US bankruptcy protection yesterday as it grapples with a sharp downturn in air travel sparked by the coronavirus pandemic.

The Chapter 11 bankruptcy filing underscores the severity of the financial challenges facing the travel industry as a result of the lockdowns, quarantines and other measures taken by governments the world over to stem the spread of COVID-19.

Passenger and cargo flights will continue to operate during the reorganization, and employees will still be paid, the Santiago, Chile-based airline said. Travelers with existing tickets and vouchers can still use them.

Chief Executive Roberto Alvo said Latam was “healthy and profitable” before the pandemic brought most of the world’s flights to a halt.

“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,” he said in a statement announcing the bankruptcy filing.

Latam Airlines said that it and several of its affiliated companies launched the Chapter 11 reorganization effort in the United States in a bid to reduce its debt and find new financing sources.

Air travel has plunged to a fraction of the levels it was just months ago as the virus spread all around the world, prompting growing alarm in the aviation industry.

The International Air Transport Association last month predicted that airline revenue from hauling passengers would drop by US$314 billion this year, less than half of last year’s total.

Latam’s move comes little more than two weeks after another major Latin American airline, Avianca Holdings, filed for bankruptcy protection in New York. Australia’s second-largest carrier, Virgin Australia, sought bankruptcy in its home market last month.

Latam’s bankruptcy filing includes parent company Latam Airlines Group S.A. and its affiliated airlines in Colombia, Peru and Ecuador, as well as its businesses in the US.

The company is not including its affiliates in Argentina, Brazil and Paraguay in the turnaround effort. It says it is talking with the Brazilian government about how to proceed with its operations there.

Latam is South America’s largest carrier by passenger traffic. It operated more than 1,300 flights a day and transported 74 million passengers last year.

The airline had more than 340 planes in its fleet and nearly 42,000 employees on its payroll, according to its more recent annual report. It reported a profit of US$190 million in 2019.

AFP