Latam Airlines seeks bankruptcy protection as travel slumps

Photo: The Canadian Press

Latam Airlines, South America’s biggest carrier, sought U.S. bankruptcy protection Tuesday as it grapples with a sharp downturn in air travel sparked by the coronavirus pandemic.

The Chapter 11 bankruptcy filing underscores the severity of the financial challenges facing the travel industry as a result of the lockdowns, quarantines and other measures taken by governments the world over to stem the spread of the virus that causes COVID-19.

Passenger and cargo flights will continue to operate during the reorganization, and employees will still be paid, the Santiago, Chile-based airline said. Travellers with existing tickets and vouchers can still use them.

Chief Executive Roberto Alvo said Latam was profitable before the pandemic brought most of the world's flights to a halt, but is now facing a “collapse in global demand.”

“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,” he said in a statement announcing the bankruptcy filing.

Latam Airlines said that it and several of its affiliated companies launched the Chapter 11 reorganization effort in the United States in a bid to reduce its debt and find new financing sources.

Air travel has plunged to a fraction of the levels it was just months ago as the virus spread from China to countries around the globe, prompting growing alarm in the aviation industry. The International Air Transport Association last month predicted that airlines' revenue from hauling passengers would drop $314 billion this year, meaning they could bring in less than half of what they did in 2019.

Latam's move comes little more than two weeks after another major Latin American airline, Avianca Holdings, filed for bankruptcy protection in New York. Australia's second-largest carrier, Virgin Australia, sought bankruptcy in its home market last month.

Latam's bankruptcy filing includes parent company Latam Airlines Group S.A. and its affiliated airlines in Colombia, Peru and Ecuador, as well as its businesses in the U.S.

The company is not including its affiliates in Argentina, Brazil and Paraguay in the turnaround effort. It says it is talking with the Brazilian government about how to proceed with its operations there.

Latam is South America's largest carrier by passenger traffic. It operated more than 1,300 flights a day and transported 74 million passengers last year.