LATAM Airlines Group to Exit Chapter 11

[In The News]

DALLAS – Latin America’s largest airline, LATAM (LA) has high hopes of exiting Chapter 11 in the fourth quarter of 2022 after securing requisite financing and gaining approval from the US bankruptcy court and shareholders for its restructuring plan.

The group’s Chief Executive Officer, Roberto Alvo, said, “We have closed the second quarter with significant progress in our reorganization process under Chapter 11, and we hope to emerge from it during the last quarter of this year.”

The CEO warned that although the group had made advances in its operational recovery, it continued to remain “cautiously optimistic about the coming months, closely monitoring fuel prices and macro-economic variables, as the industry still finds itself in the midst of a very dynamic environment.”

LATAM Airlines Boeing 777-32W(ER) registered as PT-MUA in the special Star Wars-Galaxy’s Edge Livery. Photo: Alberto Cucini / Airways

Chapter 11 Exit

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A bankruptcy Judge approved the Chilean airline’s chapter 11 exit plan in the second quarter of the year—the plan provided the airline with US$5.5bn of new capital to inject into the firm and thereby pulled it closer to ending its two-year-long restructuring process.

Judge James Garrity of the US Bankruptcy Court for the Southern District of New York, explained that LA’s chapter 11 exit plan was designed from “good faith, arms-length negotiations” between LATAM and its stakeholders and provides the best-fit approach to quell the bankruptcy case.

The airline gained approval from the shareholders for the new capital structure and financing instruments during a presentation of the restructuring plan at a shareholders’ meeting. The presentation was a success, as 99.8% of the shares present or represented at the meeting (77.5% of the total shares with voting rights) ruled in favor of the plan.

Therefore, this allows LA to proceed to the final stages of regulatory requirements in the base nation Chile, to secure the implementation of the plan.

LATAM Airbus A320-214 registered as PR-MYQ. Photo: João Pedro Santoro/Airways

Previous Financing

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On July 8, 2022, LA submitted its request for financing instruments before the Chilean market regulator. At that time, LA reported a loss of US$523.3m in the second quarter.

However, the group highlighted that there has been a gradual recovery of its operations recording a consolidated capacity (measured in Available Seat Kilometers – ASK) of 72.6% compared to 2019. When comparing Q2 in 2022 to Q2 in 2021, the capacity more than doubled (135.2% growth).

LATAM stated that the surge in capacity is due to the recovery of domestic markets in Brazil, Colombia, and Ecuador, along with the recovery of its international operations, in the context of sharp fuel price hikes.

The airline filed for Chapter 11 in the United States on May 26, 2020, after facing economic turmoil due to the impact of COVID-19 on passenger throughput. Although the headquarters are located in Chile, LA is an American depository receipt and is traded on the New York Stock Exchange (NYSE) and the Santiago Stock Exchange.

Amid the chapter 11 announcement, LA’s stock ticker (LTMAQ) was unlisted from NYSE and eventually moved to unregulated OTC Markets Pink on June 12, 2020.

LATAM currently has a fleet size of 77 aircraft, a network of 148% of destinations, and 330 routes. The airline is optimistic with a better quarter approaching.

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Featured imagE: Latam PT-MBU Airbus A319 (Aviao Solidario livery). Photo: joão Pedro Santoro/Airways

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