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May 27, 2020 By the A.M. Costa Rica staff and wire services Latam Airlines, South America's biggest carrier, is seeking U.S. bankruptcy protection as it grapples with a sharp downturn in air travel sparked by the coronavirus pandemic, informed Associated Press on Tuesday According to AP report, the Chilean-based airline said, travelers with existing tickets and vouchers can still use them. Chief Executive Roberto Alvo said Latam was profitable before the pandemic, which brought most of the world's flights to a halt. The airline is now facing a "collapse in global demand." "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," he said in a statement announcing the bankruptcy filing. Latam Airlines said that it and several of its affiliated companies launched the Chapter 11 reorganization effort in the United States in a bid to reduce its debt and find new financing sources. Air travel has plunged to a fraction of the levels it was just months ago as the virus spread from China to countries around the globe, prompting growing alarm in the aviation industry. The International Air Transport Association, last month, predicted that airlines' revenue from hauling passengers would drop $314 billion this year, meaning they could bring in less than half of what they made in 2019. Latam's move comes a little more than two weeks after another major Latin American airline, Avianca Holdings, filed for bankruptcy protection in New York. Australia's second-largest carrier, Virgin Australia, sought bankruptcy in its home market last month. Latam's bankruptcy filing includes parent company Latam Airlines Group S.A. and its affiliated airlines in Colombia, Peru and Ecuador, as well as its businesses in the United States. The company is not including its affiliates in Argentina, Brazil and Paraguay in the turnaround effort. It says it is talking with the Brazilian government about how to proceed with its operations there. Latam is South America's largest carrier by passenger traffic. It operated more than 1,300 flights a day and transported 74 million passengers last year. The airline had more than 340 planes in its fleet and nearly 42,000 employees on its payroll, according to its more recent annual report. It reported a profit of $190 million in 2019. It said the reorganization effort has the support of two prominent shareholders — the Cueto family in Chile and Brazil's Amaro family— as well as Qatar Airways, which owns 10% of the company. Those three shareholders have agreed to provide up to $900 million in financing as Latam makes its way through the bankruptcy process. It currently has $1.3 billion on hand, it said. Latam reached a deal to sell a 20% stake to Delta Air Lines for $1.9 billion last year. Its announcement Tuesday made no mention of the Atlanta-based airline. Delta CEO Ed Bastian expressed confidence in Latam's management in an emailed statement. "Airlines globally have been devastated by the covid-19 pandemic, for which no business plan could have been adequately prepared. We remain firmly committed to our partnership with LATAM and believe that it will successfully emerge a stronger airline and Delta partner for the long term," Bastian wrote. He did not say whether Delta might provide further financial support. The company declined to further comment.  On May 10, another airline, Avianca, the second-largest airline in Latin America, filed for bankruptcy protection in the United States on Sunday to reorganize its debt, "due to the unpredictable impact" of the coronavirus pandemic, reported Agence France-Presse. According to the AFP report, in a statement issued in Bogota, Avianca said that along with "some of its subsidiaries and affiliates" it had asked to "voluntarily file for Chapter 11 of the Bankruptcy Code" in a New York court. The process allows financially struggling companies to reorganize and restructure their debt. The airline's operations "have been dramatically affected by the covid-19 pandemic" as well as federal air travel restrictions. The company "continues to have high fixed costs," the statement said. Avianca temporarily suspended all passenger operations in late March, following Colombian President Ivan Duque's decision to close the country's airspace as the number of confirmed coronavirus cases rose. The decision, which grounded 142 aircrafts "has reduced consolidated income by more than 80 percent and has put significant pressure on liquidity," according to the statement. It added that 12,000 of the airline's more than 20,000 employees would take unpaid leave. The company asked the New York court for "authorization to fulfill work commitments" prior to the bankruptcy protection request and "maintain the compensation scheme applicable to its employees." The coronavirus pandemic has dealt a crushing blow to the global aviation industry, which has been directly affected by confinement measures and travel restrictions. According to the International Air Transport Association, IATA, Latin American airlines will lose $15 billion in revenue this year, the worst crisis in the industry's history. Avianca, which had already filed for Chapter 11 bankruptcy in the U.S. in 2003, recorded a net loss of $894 million in 2019, against a $1.1 million profit the previous year. Avianca Holdings, which carried 30.5 million passengers in 2019, is currently composed of the Colombian airlines Avianca and Tampa Cargo, the Ecuadorian airline Aerogal and the companies of the Taca International Airline Group, which has offices in Central America and Peru. ------------------------ Have you heard of an expat facing problems recovering paid flight tickets with Latam Airlines? We would like to know your thoughts on this story. Send your comments to news@amcostarica.com |
