LATAM Airlines Group, Latin America’s largest airline, has filed for US bankruptcy protection on Tuesday, making it the largest carrier to take the step amid the coronavirus crisis. The filing will allow the LATAM Group, which includes affiliates in Chile, Peru, Colombia, Ecuador and the United States, to continue operations while it works with creditors and reorganizes.
LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the filing.
In a statement in its regulatory filing, the group said bankruptcy protection “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, while enabling the group to transform its business to this new reality.”
LATAM had laid off 1,800 employees out of over 40,000 in the lead-up to its bankruptcy filing. The group has set up a website www.LATAMreorganizacion.com where employees, suppliers and customers can find additional information about what this announcement means for them.
“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,” LATAM’s CEO Roberto Alvo said in a statement.
LATAM follows rival Avianca Holdings of Colombia in seeking US bankruptcy protection. However unlike Avianca, Chile’s LATAM posted profits for four consecutive years totaling more than $700 million. The group carried 74 million passengers in 2019, 5.4 million more than the year prior, and had launched 26 new routes.
LATAM said it had secured funding from major shareholders, including the Cueto family which controls the airline through various companies, the Amaro family and Qatar Airways, to provide up to $900 million to support operations through its bankruptcy reorganization. Delta Air Lines also owns a 20 percent stake in the group.
Carriers in Latin America have sought government bailouts, but unlike rivals in the US and Europe, have so far not secured any assistance. In Brazil, LATAM has been negotiating a bailout of up to 2 billion reais ($367.45 million) which could provide a lifeline to LATAM’s largest subsidiary. However that funding has yet to materialize. Chile has so far declined to help LATAM.
LATAM’s move is the latest in a spate of Chapter 11 filings, including Friday’s announcement that rental car giant Hertz is seeking bankruptcy protection.