Originally excluded from the Chilean group’s bankruptcy filing, LATAM Brasil was also added to the “Chapter 11” process in the US courts. The airline has guaranteed that there will be no impact on its passenger and cargo operations as well as on the LATAM Pass mileage program.

The option for the recovery plan was treated by the company as “natural” in view of the prolongation of the coronavirus pandemic and its effects on the air transport market. “We are making this decision at this point so that the company can have access to new sources of financing. We are confident that we are moving responsibly and appropriately, as we have the challenge of transforming the company so that it adapts to the new post-pandemic reality and ensures its long-term sustainability,” said Jerome Cadier, CEO of LATAM Brasil.

LATAM Airlines’ Brazilian arm, the largest in revenue and number of passengers transported in the group, was kept out of bankruptcy which included Chilean, Colombian, Peruvian, Ecuadorian and American affiliates. One of the reasons cited by its executives was that there was an expectation that the Brazilian government would grant a loan to the sector, however, these resources are still under discussion.

Cadier, however, considered that the process could facilitate the loan from the Brazilian development bank by “offering a safer option to the Bank, since the DIP (Debtor-in-possession) has priority over other company liabilities.

Passengers carried

Airline May/20 May/19 Var.
Azul 263.726 2.179.025 -87,9%
Gol 159.506 2.734.365 -94,2%
LATAM 129.885 2.841.082 -95,4%

Fleet reduction

LATAM once again emphasized that “Chapter 11”, provided for in American law, is a resource quite different from the Brazilian judicial recovery. According to the company, it is “a process known, predictable and used by notable companies in the global airline industry that have already gone through Chapter 11 in its history.

The choice of the US justice system involves a more transparent and clear environment so that companies can reorganize their structure and undertake a recovery plan without losing important assets such as leased planes. It is a situation quite opposite to the confusing Brazilian legislation in which the option for judicial recovery becomes a painful and long process and that often results in the bankruptcy of the company. The case of Avianca Brasil (OceanAir), which this week collapsed, illustrates this scenario.

Of the three major Brazilian airlines, LATAM is the one that lost the most passengers (AeroportoBSB)

Even so, the LATAM group’s journey will not be easier. The company has felt the effects of the crisis more and is already planning to return dozens of leased aircraft. It also received an injection of funds from partners such as Qatar and the $ 900 million Cueto and Amaro families to maintain its operations.

The airline, which leads the Brazilian market in number of passengers transported in 2020, was the one that lost the most passengers since the beginning of the COVID-19 crisis. In May, LATAM had a drop in passenger demand of 95.4% compared to the same month of 2019. Gol fell slightly less (94.2%) and Azul, 87.9%. Last month, its two competitors resumed several routes, which indicates that LATAM may see its numbers even weaker.