Latam Airlines Group has filed for Chapter 11 protection in U.S. bankruptcy court in order to maintain operations as it works to pay off creditors.
The group, which had to cut down operations to only about 5 percent of its usual capacity due to the Covid-19 crisis, will continue operating passenger and cargo flights based on demand and travel restrictions, pay employees and honor vouchers and frequent-flyer miles and benefits as it restructures. The group has about $1.3 billion of cash on hand and has the support of its largest shareholders, the Cueto and Amaro families along with Qatar Airways, to provide up to $900 million in financing.
"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," Latam CEO Roberto Alvo said in a statement. "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."
The filing includes Latam's entities in Chile, Colombia, Peru, Ecuador and the United States. It does not include affiliates in Argentina, Paraguay and Brazil, and its Brazilian affiliates are in discussions with the Brazilian government regarding financial support. All entities will continue service as demand and restrictions permit regardless of whether they are a part of the filing. Seeking bankruptcy protection also does not negate the group's planned joint venture agreement with Delta Air Lines, per the filing.
Latam is the second major Latin American carrier to file for bankruptcy protection this month. Colombian carrier Avianca also filed for protection in recent weeks.