LATAM announces reorganization to ensure its sustainability

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LATAM Airlines and its subsidiaries in Chile, Peru, Colombia, Ecuador and the United States have filed for creditor protection as part of Chapter 11 financial reorganization process. The subsidiaries in Argentina, Brazil and Paraguay are not included in the file. Cueto Group and Qatar Airways will commit $ 900 million in additional funding, and flights will continue without change.

Barely announced its flight program for June and July which saw it reach 18% of usual capacity in two months, the leading group in Latin America unveiled this May 26, 2020 « a voluntary reorganization and restructuring in the United States, with the support of the Cueto and Amaro families and of Qatar Airways ”, two of its largest shareholders. Given the effects of the Covid-19 pandemic « on the global aeronautical industry », this reorganization process allows LATAM Airlines to « work » with the group’s creditors and other stakeholders to « reduce its debt, access new sources of funding and continue to operate ”while allowing the group to“ transform its activity into this new reality ”.




 

The process of the financial reorganization of chapter 11 is according to its press release « a proven legal framework, in which LATAM and the said subsidiaries will have the possibility to resize their operations in the new environment of demand and to reorganize their balance sheets, thus allowing them to emerge more agile, resilient and sustainable ”. In the meantime, it is preparing to welcome customers again once travel bans are lifted and demand increases, « ensuring the highest safety standards for passengers and crew for which LATAM is highly recognized ».


– All current and future tickets, travel vouchers, and frequent flyer miles and benefits, as well as flexibility policies, will be honored.
– Group employees will continue to be remunerated and to benefit from the social benefits provided for in their employment contract.
– Suppliers will be paid in a timely manner for goods and services delivered from May 26, 2020, and throughout this process.
– Travel agencies and other business partners will not be interrupted in their interactions with the LATAM group.

LATAM Airlines says it has entered the health crisis « as a healthy and profitable airline group, but exceptional circumstances have led to a collapse in global demand and not only have put aviation in a virtual stall, but they have also changed the industry for the foreseeable future, « said its CEO Roberto Alvo. « We have implemented a series of difficult measures to mitigate the impact of this unprecedented disruption in the industry, but in the end, this path represents the best option for laying the foundations for the future of our group. We are looking to a post-COVID-19 future and focusing on transforming our group to adapt to a new and evolving way of flying, the health and safety of our passengers and employees remain paramount.  »



The group has obtained financial support from its shareholders, including the Cueto and Amaro families « who have lasting ties to LATAM » and Qatar Airways, to provide up to $ 900 million in debtor-in-possession (DIP) financing. These partners « have in-depth knowledge of the industry, the group, and its operational challenges. Their support demonstrates a belief in LATAM and its subsidiaries, and in their long-term sustainability. ” Its largest shareholder, Delta Air Lines, is however not mentioned. To the extent permitted by law, the group, which has $ 1.3 billion in cash, « would welcome other interested shareholders to participate in this process to provide additional financing. » The group and its subsidiaries not affected by the use of Chapter 11 are also in discussions with their respective governments of Chile, Brazil, Colombia, and Peru to help « find additional funding, protect jobs in them wherever possible, and minimize disruption to its operations.  »

Le groupe se dit convaincu que ce processus réunira ces diverses parties prenantes pour construire un nouveau LATAM « mieux placé pour réussir pour les années à venir ». Face à la plus grande crise de l’histoire de l’aviation, le Conseil « a approuvé cette voie à suivre après avoir analysé toutes les alternatives disponibles pour assurer la pérennité du groupe. Comme nous nous sommes adaptés aux nouvelles réalités du passé, nous sommes convaincus que LATAM sera en mesure de réussir dans le contexte post-Covid-19 et de continuer à servir l’Amérique latine, reliant la région au monde », a déclaré Ignacio Cueto, président de Conseil d’administration de LATAM.




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