The Atlanta Journal-Constitution
Latam Airlines seeks U.S. bankruptcy protection
Travelers of South American airline can use existing tickets.
BANGKOK — Latam Airlines, South America’s biggest carrier, sought U.S. bankruptcy protection Tuesday as it grapples with a sharp downturn in air travel sparked by the coronavirus pandemic. The Chapter 11 bankruptcy filing underscores the severity of financial challenges facing the travel industry as a result of lockdowns, quarantines and other measures by governments to stem the spread of COVID-19.
What happened
Passenger and cargo flights will continue to operate, and employees will be paid, the Chile-based airline said. Travelers with existing tickets and vouchers can still use them. Chief Executive Roberto Alvo said Latam was profitable before the pandemic brought most of the world’s flights to a halt, but is now facing a “collapse in global demand.”
“We are looking ahead to a postCOVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying,” he said in a statement announcing the bankruptcy filing.
Why it’s happening
Latam said it and several affiliated companies launched the Chapter 11 reorganization effort in the U.S. in a bid to reduce debt and find new financing. Air travel has plunged to a fraction of levels it was just months ago as the virus spread from China to other countries. The International Air Transport Association last month predicted that airlines’ revenue from passengers would drop $314 billion this year, meaning they could bring in less than half of what they did in 2019. Latam’s move comes little more than two weeks after another major Latin American airline, Avianca Holdings, filed for bankruptcy protection in New York. Australia’s second-largest carrier, Virgin Australia, sought bankruptcy in its home market last month.
What’s next
The International Air Transport Association has warned that other airlines could fail without government support. The trade group said the industry’s total debt could jump to $550 billion this year, a $120 billion increase since Jan. 1. “Government aid is helping to keep the industry afloat. The next challenge will be preventing airlines from sinking under the burden of debt that the aid is creating,” said the trade group’s CEO, Alexandre de Juniac.
Among U.S. carriers, American Airlines is widely seen as facing the greatest risk of bankruptcy, but Washington approved up to $50 billion in grants and credit for the industry, buying some time. On Monday, Germany agreed to provide $9.8 billion to help Lufthansa. Air France-KLM has received billions from the French and Dutch governments.