LATAM Sees Revenues Plummet After Passengers Drop 95%

During the third quarter of 2020, LATAM Airlines Group had total revenues of US$512.9 million. This amount was an 80.8% decrease in comparison with last year, due to the COVID-19 crisis, and a 95% plummet in capacity. But, what else do we know about LATAM’s financial results? How’s the Chapter 11 reorganization going at the moment?

A quick outlook at LATAM’s numbers

LATAM is the largest passenger airline in South America. In 2019, it transported over 70 million passengers, as it had a presence in every country on the continent. Nevertheless, the COVID-19 pandemic struck hard on LATAM’s finances, which had to file for a Chapter 11 bankruptcy in the US. Almost every branch of the company is in the reorganization. Only LATAM Paraguay is not, while LATAM Argentina ceased operations.

Now, a quarter after LATAM filed for its reorganization, and we’re seeing how’s the business going. Here are the highlights:

1. LATAM had total revenues of US$512.9 million, a decrease of 80.8% from the same period 2019.
2. The decrease was driven by a 94.8% decline in passenger revenues due to an 85.8% decrease in capacity. By September, the airline operated at 20% of its previous capacity.
3. LATAM relaunched operations in several South American countries like Colombia.
4. On the other hand, cargo revenues ramped up 12.8%, as freighter operations increased by 20%.
5. As a result, LATAM had a net loss of US$573.1 million in the third quarter.
6. During the quarter, the New York bankruptcy court approved LATAM’s modified DIP Financing for US$2.45 billion.

So, how’s the Chapter 11 reorganization going?

From Latin America big three (LATAM, Avianca, and Aeromexico), LATAM got the largest DIP Financing deal. Avianca’s DIP Financing is worth US$2 billion, while Aeromexico’s US$1 billion. It is understandable as LATAM has a bigger structure. For example, it ended the quarter with a fleet of 317 aircraft (302 commercial airplanes, 11 freighters, and four subleased). The airline is analyzing the future of its fleet, but we can expect further reductions.

Additionally, LATAM is reducing its expenses through several strategies. For example, it has furloughed people in the last few months. It also decreased by 56.1% of the wages and benefits it pays. LATAM achieved this through a voluntary salary reduction of between 20% and 25%, which resulted in savings of US$25 million.

Finally, on 8 October, LATAM made the first draw of its billionaire DIP Financing. It drew US$1.15 billion, which is almost half of its total funding.

The DIP Financing was divided into two Tranches. Tranche A was worth US$1.3 billion, led by Oaktree Capital Management, which would provide US$1.125 billion. Other companies, like Knighthead and Jefferies, would finance US$175 million.

Meanwhile, Tranche C is worth US$1.15 billion, including US$750 million provided by Qatar Airways, the Cueto Group, and the Eblen Group. Knighthead, Jefferies, and others would provide US$250 million, and the remaining US$150 million would come from minority shareholders.

The US$1.15 billion draw consisted of US$650 million from Tranche A and US$500 million from Tranche C.

What else has been going on with LATAM?

In the last few months, LATAM has launched several initiatives across the continent. The latest was the codeshare agreement it signed with Grupo Aeromexico. Previously, LATAM Brazil also signed a codeshare with Azul.

The Brazilian Government also approved Delta and LATAM’s Joint Venture. Finally, LATAM operated over a thousand passenger freighter flights, helping economies during the worst part of the COVID-19 pandemic. The airline claims it transported over 46,000 cargo tons on passenger aircraft flown as freighters during this quarter.

What do you think of LATAM’s financial results? Let us know in the comments.