Latam Airlines Group has filed for Chapter 11 protection in
US bankruptcy court in order to maintain operations as it works to pay off
The group, which had to cut down operations to only about 5
per cent of its usual capacity due to the Covid-19 crisis, will continue
operating passenger and cargo flights based on demand and travel restrictions,
pay employees and honour vouchers and frequent flyer miles and benefits as it
restructures. The group has about US$1.3 billion of cash on hand and has the
support of its largest shareholders, the Cueto and Amaro families along with
Qatar Airways, to provide up to $900 million in financing.
"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," Latam CEO
Roberto Alvo said in a statement. "We have implemented a series of
difficult measures to mitigate the impact of this unprecedented industry
disruption, but ultimately this path represents the best option to lay the
right foundation for the future of our airline group."
The filing includes Latam's entities in Chile, Colombia,
Peru, Ecuador and the US. It does not include affiliates in Argentina, Paraguay
and Brazil, and its Brazilian affiliates are in discussions with the Brazilian
government regarding financial support. All entities will continue service as
demand and restrictions permit regardless of whether they are a part of the
filing. Seeking bankruptcy protection also does not negate the group's planned
joint venture agreement with Delta Air Lines, per the filing.
Latam is the second major Latin American carrier to file for
bankruptcy protection this month. Colombian carrier Avianca also filed for
protection in recent weeks.