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COVID-19 has decimated the airline industry and as more time passes, we will continue to see airlines struggle to stay above water.
Yesterday, LATAM Airlines announced they have now become the latest (and largest) airline casualty due to the coronavirus after the carrier filed bankruptcy.
Roberto Alvo, the CEO of LATAM 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.”
WHAT DOES BANKRUPTCY MEAN?
A bankruptcy is not the same as liquidation/going out of business. By declaring Chapter 11 bankruptcy, LATAM intends to stay in business but will be restructuring its debts with the hopes of emerging as a more financially healthy company.
A bankruptcy filing does not mean a company will be forced out of business. In fact, many companies have gone through the process and gone on to be profitable.
CONTINUING TO SERVE
The carrier is looking to speed through the process of restructuring and has secured the financial support of the largest shareholders, the Cueto and Amaro families, and Qatar Airways, who are providing up to $900 million in financing.
Surprisingly (or perhaps unsurprisingly given every airline is attempting to stay above water), Delta is not supplying any additional financing despite being another major stakeholder. In fact, a few months ago, Delta paid more for their share of LATAM (20%) than the entire airline is worth now. OUCH!
Per the LATAM group, the organization is committed to preserving business continuity as it reorganizes and said the following…
- LATAM Airlines Group S.A. and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions
- All current and future tickets, travel vouchers and frequent flyer miles and benefits, as well as flexibility policies, will be honored
- The group’s employees will continue to be paid and receive benefits as provided in their employment agreements
- Suppliers will be paid in a timely fashion for goods and services delivered from May 26, 2020 forward and throughout this process.
- Travel agencies and other commercial partners will experience no disruption in their interactions with the LATAM group.
FINAL STAMP
COVID-19 has decimated the airline industry and as more time passes, we will continue to see airlines struggle to stay above water.
Airlines are complex organizations and attempting to keep them afloat when no one is flying and country restrictions have been implemented is extremely difficult.
I trust this is not the last airline that will reorganize so let’s place this in the developing folder.
What do you think about this latest development?
1TattedPassport 