South American operator LATAM Airlines Group is filing for US Chapter 11 creditor protection in order to undertake a restructuring process.
The company says the voluntary filing with the Southern District of New York bankruptcy court, has the support of key shareholders Cueto Group and Qatar Airways, which will provide up to $900 million in debtor-in-possession financing.
Move will help LATAM “transform its business”
Cueto Group holds 21.46 per cent of the company, according to the filing. Qatar Airways has 10 per cent and Delta Air Lines has 20 per cent. Twenty-nine entities are included in the filing including affiliates in Chile, Peru, Colombia, Ecuador and the USA. Affiliates in Argentina, Brazil and Paraguay are excluded from the application. LATAM has stated that it is aiming to “transform its business” to maintain a “leading position” in Latin American air transport during recovery from the coronavirus crisis.
“No impact” on passenger and cargo operations
LATAM has stressed that there will be “no impact” on passenger and cargo operations. A statement by the group read: “This re-organisation process provides LATAM with an opportunity to work with the group’s creditors and other stakeholders to reduce its debt, access new sources of financing and continue operating.”
The move will enable LATAM and its affiliates to “re-size” their operations, to match new demand levels and re-organise its balance sheets to become “more agile, resilient and sustainable”.
“Best option to lay right foundation for the future”
LATAM chief executive Roberto Alvo stressed that the group had been “healthy and profitable before the collapse in demand of the global air transport sector caused by the coronavirus pandemic. He added: “This path represents the best option to lay the right foundation for the future of our airline group.”
LATAM states that shareholders’ financial support “demonstrates a belief” in the company and its affiliates. It adds “To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing.”
LATAM said it had around $1.3 billion in cash on hand at the time of filing. The carrier is also in talks with governments of its South American home states to source further funds, to protect jobs and minimise disruption.