LTM Latam Airlines Group Sa

By Andrew Scurria 

Chile's Latam Airlines Group SA, the largest airline in Latin America, has filed for bankruptcy protection in the U.S. after travel restrictions all but emptied the skies in the region, sending air carriers scrambling for ways to cushion the coronavirus impact.

Latam and several affiliates sought chapter 11 protection on Monday to reduce the size of its fleet, cut down its more than $7 billion in debt and cope with the pandemic's severe impact on the aviation industry. The company, in which Delta Air Lines Inc. has a big stake, said it secured $900 million in bankruptcy financing from other shareholders, including Qatar Airways, to stay afloat during the restructuring process.

"As we have adapted to new realities in the past, we are confident that Latam will be able to succeed in the post-Covid-19 context and continue to serve Latin America, connecting the region with the world," said Ignacio Cueto, chairman of Latam's board of directors.

Latam is the largest of about one dozen airlines that have filed for bankruptcy protection or closed down since the coronavirus grounded much of the industry. The International Air Transport Association, a trade group, said Tuesday that while governments have so far provided $123 billion in support for carriers, Latin American airlines have received little aid.

Colombia's Avianca Holdings SA, the region's second-largest carrier, also filed for protection from creditors earlier this month in the U.S. Bankruptcy Court in New York. Like Avianca, Latam said it was in discussions with governments in several countries within its service area regarding potential rescue lending or other economic assistance. The airline offers domestic flights in Argentina, Brazil, Chile, Colombia, Ecuador and Peru and international services within Latin America and to other continents.

Airlines around the world are slashing costs, cutting back on routes and in some instances seeking concessions from creditors to try to endure the pandemic's devastating impact on passenger volumes. Travel restrictions, stay-at-home orders and fear of contagion have cut into revenues, sending carriers across the U.S., Europe and Latin America scrambling for state-led bailouts to avoid more austerity measures or financial trouble.

U.S. airlines are receiving $25 billion in government aid to cover payroll costs through the end of September under a $2.2 trillion stimulus package, and can also access another $25 billion in government loans.

Latam's bankruptcy comes after it sold a $1.9 billion stake in December to Delta under a commercial joint venture designed to combine the routes of the two airlines between North and South America, according to court papers. Delta Chief Executive Ed Bastian said recently the company "remains firmly committed to our partnership with Latam and believe that it will successfully emerge a stronger airline and Delta partner for the long term." Mr. Bastian has previously said Delta isn't in a position to provide more assistance to its international partners.

The financing package from shareholders would allow Latam to pay employees and vendors during the chapter 11 process, subject to court approval. Latam said it would welcome other shareholders to participate in supplying financing, "to the extent permitted by law."

The airline said last week it hopes to begin increasing its passenger operations shortly, potentially up to 18% of pre-pandemic capacity by July, according to a bankruptcy court filing by its finance chief, Ramiro Alfonsín Balza.

He said Latam had negotiated approximately $500 million worth of payment deferrals throughout the first three quarters of 2020 but still faced a mandatory $57 million payout to shareholders on Thursday and $130 million in debt service through the first week of June. The company filed for bankruptcy protection rather than deplete cash reserves for those payments.

Alison Sider contributed to this article

Write to Andrew Scurria at Andrew.Scurria@wsj.com

(END) Dow Jones Newswires

May 26, 2020 11:15 ET (15:15 GMT)

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