Tuesday, 2 June 2020
CHILE: LATAM Files For U.S. Bankruptcy Protection Seeking Emergency Reorganization Due To The Pandemic.
LATAM Airlines Group has sought chapter 11 bankruptcy protection in the United States as the company seeks to reorganise in the wake of the Covid-19 outbreak.
Affiliates in Chile, Peru, Colombia and Ecuador are all involved in the move.
Colombian carrier Avianca took a similar step earlier this month.
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, says Roberto Alvo, chief executive of LATAM.
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.
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.”
LATAM laid off 1,800 employees out of over 40,000 in the lead-up to its bankruptcy filing.
The group said it had secured the financial support of shareholders, including the Cueto and Amaro families, and Qatar Airways, to provide up to $900 million in debtor-in-possession financing.
In addition, as of the filing for voluntary protection, the group had approximately US$$1.3 billion in cash on hand.
The chapter 11 financial reorganisation process is a legal framework under which LATAM, and its affiliates, will have the opportunity to resize operations to the new demand environment.
LATAM said it was also in discussions with the governments of Chile, Brazil, Colombia and Peru to assist in sourcing additional financing, protect jobs where possible and minimise disruption to its operations.
Faced with the biggest crisis in the history of aviation, the Board has approved this path forward having analysed all the available alternatives to ensure the sustainability of the group.
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 board of directors.
LATAM Airlines, the largest Latin American air transport group, had losses of $2.12 billion in the first quarter after an accounting adjustment of its assets amid the coronavirus pandemic, the company said in a statement late on Friday.
LATAM said its operational quarterly result was 17% higher year-on-year despite the fact that in March it reduced its offer of flights due to the first effects of the health crisis.
The firm mainly attributed the loss to a goodwill impairment loss of $1.73 billion as a result of the pandemic, the statement said.
The accounting loss is a natural consequence of the impact that COVID-19 has had over the entire industry, where inevitably the assets of airlines are devalued due to the impossibility of operating, CEO Roberto Alvo said in the statement.
Revenue from ordinary activities fell 6.8% to $2.266 billion between January and March.
LATAM filed for U.S. bankruptcy protection on Tuesday, becoming the world’s largest carrier so far to seek an emergency reorganization due to the pandemic.
LATAM Airlines Group S.A. is an airline holding company headquartered in Santiago, Chile. It is considered the largest airline in Latin America with subsidiaries in Argentina, Brazil, Colombia, Ecuador, Paraguay and Peru.
Although LATAM Airlines' headquarters are located in Chile, the carrier is an American depositary receipt and trades on both the Santiago Stock Exchange and New York Stock Exchange.
The company filed for Chapter 11 bankruptcy in the United States on May 26, 2020 due to economic problems attributed to the impact of the COVID-19 pandemic on aviation.
Chile's LAN Airlines and Brazil's TAM Airlines signed a non-binding agreement to merge on 13 August 2010, followed by a binding agreement on 19 January 2011 and papers to close the merger on 22 June 2012, with TAM Airlines’ shareholders agreeing to the takeover by LAN Airlines.
Enrique Cueto, former CEO of LAN, became the CEO of LATAM; Mauricio Rolim Amaro, formerly vice-chairman of TAM, became LATAM chairman.
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