LATAM Group completes restructuring to emerge from Chapter 11

January 2023 | DEALFRONT | BANKRUPTCY & CORPORATE RESTRUCTURING

Financier Worldwide Magazine

January 2023 Issue

Emerging with what it describes as a “solid financial position”, Chile-based airline holding company LATAM Airlines Group has completed its financial restructuring process in the US and exited Chapter 11 bankruptcy proceedings.

LATAM was one of the three major carriers in the Latin American region to file for a bankruptcy process in the US to protect itself against the impact of the coronavirus (COVID-19) crisis on the aviation industry.

Avianca was the first to emerge in November 2021, while Grupo Aeromexico emerged in March 2022.

Having initially filed for Chapter 11 bankruptcy in May 2020 to reduce its debt, access new sources of financing and transform its business in response to the global pandemic, LATAM did not receive approval until June 2022.

Thus, by voluntarily commencing a financial restructuring process in the US, LATAM has emerged from bankruptcy with over $2.2bn of liquidity, approximately $3.6bn less debt on its balance sheet – equivalent to a 35 percent debt reduction from the pre-filing period – and the support of key incumbent and new shareholders.

“This marks an important milestone for LATAM and our stakeholders,” said Roberto Alvo, chief executive of LATAM Airlines Group. “We are pleased that we have completed a significant transformation and emerged from our financial restructuring process with a strengthened financial position and a renewed commitment to operational excellence.

“Our journey ahead will be full of opportunities, but will not be devoid of challenges, as we live in an uncertain world and we operate in a volatile industry,” he continued. “As a group with a dynamic team of 30,000 employees and an unrivaled connectivity network, we look forward to continuing to offer passengers the best alternative for travel to, from, and within South America and to contribute in the broader sense to the various countries in which we operate and their diverse interests.”

With affiliates operating in five domestic markets in the region: Brazil, Chile, Colombia, Ecuador and Peru, as well as international operations within Latin America and to Europe, the US, the Caribbean and Oceania, LATAM is the leading airline group in Latin America.

Moreover, as of October 2022, LATAM reached 144 destinations in 22 countries and expects to close the year with a global operation footprint of more than 85 percent compared to 2019. Between 2021 and 2022, the group added 10 new destinations in Brazil and plans to operate 36 new routes by 2023, including resuming the Sao Paulo–Johannesburg route.

In addition, LATAM and Delta Air Lines have recently implemented a joint venture agreement allowing passengers to access more than 300 destinations between the US and Canada and South America.

The joint venture agreement will enable the airlines to increase their level of cooperation in these markets, resulting in a greater number of routes, more and better connections and the strengthening of frequent flyer programme benefits.

“We emerge from Chapter 11 stronger, ready to compete, but most importantly, ready to be better,” concluded Mr Alvo. “To be better to our customers and to our people, as well as better to the environment and to the societies where we operate.”

Fraser Tennant