A few months back, I wrote about how multiple industry associations had warned about the impact of lockdowns on travel. Initially, their grim prediction told us that many airlines would probably just go under and would not be able to survive. Unfortunately, it now seems like that prediction is coming true about one more airline. LATAM airlines in the US is the latest to go under. LATAM announced that they’re filling for Chapter 11.
Chapter 11 Protection
#WeWillContinueToFly as we reorganize under U.S. Chapter 11 protection to navigate COVID-19 impacts, transforming our business to adapt to a new and evolving way of flying, and ensure long-term sustainability. Learn more: https://t.co/ZdWAGGhr9U pic.twitter.com/bjYigYxcf1
— LATAM USA (@LATAMAirlinesUS) May 26, 2020
You can refer to this article on Bloomberg which highlights some of the details of the filing.
The Chapter 11 petition allows Latam to keep operating while the Chilean carrier works out a plan to pay creditors and turn around the business. Latam, whose shareholders include Chile’s Cueto family and Delta Air Lines Inc., continues to operate on a reduced schedule, and it has commitments for a bankruptcy loan of up to $900 million.
The money is coming from shareholders including the Cuetos, the Amaro family and Qatar Airways, according to a company statement. Latam also has about $1.3 billion in cash on hand.
The Pundit’s Mantra
Just a couple of weeks back, we also saw Avianca go under. Once the WHO declared Covid-19 as a global pandemic, governments around the world enforced temporary shutdowns. Therefore, social distancing became the new normal and the movement of people almost came to a standstill.
Airlines saw a sudden drop in customer demand and have simply not been able to recover ever since. We’re now seeing a glimmer of hope as we see a few countries ease restrictions. Here’s hoping that the overall picture gets better over the summer as travel gradually picks up.
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