LATAM Group, like every other airline in Latin America, is facing economic struggles and uncertainty due to the coronavirus pandemic. While the airline will operate a few more flights during the next few months, it is undoubtedly in a tight spot due to its branches in different South American countries. Let’s investigate further.
There’s still no final deal in Brazil
LATAM Brazil, GOL, and Azul are looking for a US$683 million bailout to weather the current crisis. Brazil is one of the few countries in the region to have done something to help the air industry. Nevertheless, financial aid is far from getting into the hands of the airlines.
Also, this bailout is less of what the airlines initially expected. At the beginning of the negotiations, the three domestic Brazilian airlines asked for a total of ten billion reais (approximately US$1.8 billion). What they got is two billion reais per airline.
According to local sources, 75% of these bailouts come in the form of a debenture. The extra 25% could be converted into company stakes.
“This instrument was designed to give a financial break to the airlines until the first quarter of 2021. It is good news for the airlines,” said O’Globo. In the meantime, the three airlines have joined forces to ask for help from the Government.
In June, LATAM plans to operate some flights from Brazil and Chile to Europe and Miami. The following month, it plans to add an extra 13 international routes.
Domestically, LATAM will fly 74 routes in Brazil and 12 in Chile. Nevertheless, these are just two countries. What happens in the other places it operates? Not good news.
LATAM Argentina is in deep trouble
Argentina is currently stopping all its domestic and international flights until 1 September. This government decision is terrible for airlines like LATAM, Aerolíneas Argentinas, Flybondi, Sky Airline, and others.
The International Air Transport Association (IATA) has repeatedly said that this decision could do more harm than good. Members of IATA have talked with the local authorities trying to convince them to open up the skies in July rather than September.
LATAM already published a statement saying that it does not expect to fly from and to Argentina until September.
The airline asked its passengers not to worry, as they could reschedule its flight for this year or the next. Still, LATAM Argentina could be in deep trouble. In March, Rosario Altgelt, LATAM Argentina’s CEO, said that the branch will have its fourth consecutive year with financial losses in 2020.
The LATAM branches in Peru and Ecuador are working to operate in June. Meanwhile, the Colombian branch expects fo fly in July, but it depends on the Government approval.
The airline didn’t pay in time some bonds – What does it mean?
On 15 May, LATAM Group was supposed to pay two coupons with bonds that expire between 2023 and 2027. These coupons have airplanes as guarantees, and now the airline has until mid-June to pay them.
The coupons are worth US$1.2 million and US$7 million, according to local newspaper La Tercera. On the other side, the bonds, which expire between 2023 and 2027, are worth US$175.6 million and US$845.2 million. LATAM put, as collateral, 17 airplanes composed of 11 A321, two A350-900, and four Dreamliners.
All of these reports have led to a possibility. According to Chilean newspaper El Mostrador, LATAM Group might be considering filing for a Chapter 11 bankruptcy in the US, like Avianca recently did. While this is news that would shock the region, it is not something set in stone. We contacted the airline for a statement. At the moment of publication, we had no answer. We’ll keep you updated if that changes.
What do you think of current LATAM challenges? Let us know in the comments.