LATAM Airlines Group and its affiliates in Chile, Peru, Colombia, Ecuador, and the United States have initiated a voluntary debt restructure.
The aviation player announced yesterday that it had filed for bankruptcy protection in the US with the support of the Cueto and Amaro families and Qatar Airways, two of the largest shareholders of LATAM.
The Chapter 11 financial reorganisation process will allow LATAM and certain affiliates to resize their operations to the new demand environment in light of the COVID-19 pandemic and reorganise their balance sheets.
LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing.
The group has secured the financial support of shareholders, including the Cueto and Amaro families, and Qatar Airways, to provide up to US$900 million ($1.4 billion) in debtor-in-possession financing.
As of the filing, LATAM had approximately US$1.3 billion ($2 billion) in cash on hand.
LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia, and Peru to assist in sourcing additional financing, protect jobs and minimise disruption to its operations.
All of the companies in the group will continue to operate subject to demand and travel restrictions and demand.
Furthermore, all current and future tickets, travel vouchers and frequent flyer miles and benefits, as well as flexibility policies, will be honoured.
LATAM’s employees will continue to be paid and receive benefits as provided in their employment agreements, and travel agencies and other commercial partners have been promised “no disruption” in their dealings with the group.
Chief executive Roberto Alvo said LATAM entered the COVID-19 pandemic as a “healthy and profitable airline group”.
“Yet, exceptional circumstances have led to a collapse in global demand, and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” he said.
“We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group.
“We are looking ahead to a post-COVID-19 future and are focused on transforming our group to adapt to a new and evolving way of flying, with the health and safety of our passengers and employees being paramount.”
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