Latam Joins Avianca in Chapter 11 Bankruptcy

Chile-based Latam Airlines – second only to bankrupt Avianca in Colombian air transport dominance — announced May 26 that it filed for Chapter 11 bankruptcy in U.S. federal court.

The Covid-19 crisis – banning most air traffic — forced Latam to absorb impossible losses, the company noted.

For example: Colombia has banned all regular passenger air transport for more than two months, with international flights continuing to be banned through at least August 31 and national flights banned through at least June 30.

“We want our stakeholders to know that we will continue to operate as travel restrictions and demand permit, paying our employees, meeting benefit obligations, and paying critical suppliers as well as respecting ‘Latam Pass’ miles and flight reservations as we work through the Chapter 11 reorganization process,” according to the company.

“In addition, all tickets, vouchers, or any form of credit will continue to be respected. We will also maintain partnerships with existing agencies, abide by corporate loyalty programs and sell tickets through our service platform, and you will be able to continue to interact with our customer service operators as you did prior to this announcement.

“The U.S. Chapter 11 financial reorganization process provides a clear and guided opportunity to work with our creditors and other stakeholders to reduce our debt, address commercial challenges that we, like others in our industry, are facing as a group. Latam will emerge from this process a more efficient, resilient, and ultimately strengthened airline group that is better placed to serve Latin America,” the company added.

The bankruptcy applies to Latam Group and its affiliates in Chile, Peru, Colombia, Ecuador and the United States, according to the company. “Entities incorporated in Brazil, Argentina, and Paraguay are not [in bankruptcy], due to the nature of their debt structure and current financial status,” according to Latam.

“Whether included in the filing or not, all of our affiliates are able to operate as travel restrictions and customer demand permit. Our cargo operations have been operating above capacity through these challenging times, and that will not change as a result of our reorganization.

“Through the Chapter 11 protection process, we will pay vendors for all goods and services ordered or delivered after the filing date in the ordinary course and according to our existing terms.

“A key part of the reorganization of the business is the right sizing and shape of the fleet to reflect the current and anticipated market conditions. To support these objectives and protect the value of our group, we have made the difficult but necessary decision to terminate certain leases that no longer serve the best interest of our business from an operational or financial standpoint,” the company added.