LATAM Airlines Brazil announced today that it began reorganization as part of Chapter 11 protection in the United States. Now every branch of LATAM Airlines Group, but the ones in Argentina and Paraguay, are under Chapter 11. What does this mean for the future of the company? Let’s investigate further.
It is the natural step for LATAM Brazil
In a statement seen by Simple Flying, the company said that the voluntary reorganization process would allow LATAM Brazil to restructure its debt and effectively manage its aircraft fleet. The company said,
“(It) is a natural step in light of the continuing COVID-19 pandemic and offers the best option to access the proposed DIP financing that will provide the tools to adapt to this new reality.”
The Brazilian branch will continue to operate its flights normally. Since the Chapter 11 filing, all the other branches have continued to operate regular flights. However, there have been some changes. For instance, LATAM ceased operations of its subsidiary in Argentina and suspended 23 routes from Chile.
Nevertheless, LATAM Brazil promised to fulfill its commitments to customers and obligations to employees. The carrier said: “obligations to employees, including pay and benefits, will be respected.”
LATAM secured 1.3 billion USD
Additionally to the Chapter 11 filing for LATAM Brazil, the company made another announcement today.
LATAM presented the second tranche of its debtor-in-possession financing proposal, which amounts to $1.3 billion. The court will review and approve this proposal in the coming days.
Oaktree Capital Management L.P. and its affiliates promised the $1.3 billion, said LATAM. Additionally, this investment will complement the $900 million that was committed by shareholders Qatar Airways and the Cueto and Amaro families.
With over $2 billion in investments, LATAM Airlines hopes to have enough financial support to exit the current coronavirus crisis successfully. It said,
“Combined, Tranches A and C meet LATAM’s financing requirements in the context of the COVID-19 crisis and, as a result, it is hoped that financial support will not be required from governments.”
Nevertheless, LATAM Brazil is still in negotiations with Brazil’s National Bank for support.
What will happen with LATAM Paraguay?
Paraguay, as most of the countries in South America, is currently closed. According to the International Air Transport Association, it has not announced when it will lift its airspace restrictions.
LATAM Paraguay has not made any announcements regarding the future of the branch. Besides LATAM Argentina, it is the only domestic branch that is not part of the Chapter 11 bankruptcy. Its future may be at stake. Currently, LATAM Paraguay doesn’t have a fleet of its own and only has a few international routes operated by the branches in Chile and Brazil.
On its website, LATAM Paraguay only says that they will come back again, soon. “We will meet again very soon. We are still working on flying as soon as we get the local authorities’ permission to do so.” Additionally, the domestic carrier is giving flexibility options to its travelers.
We contacted LATAM Airlines Group for a statement regarding its Paraguay branch future. We’ve not received a response yet. We’ll update you if that changes.
What do you think of LATAM’s Brazil decision? Let us know in the comments.