Latam becomes largest airline yet driven to bankruptcy

Emergency situation: The bankruptcy filing highlights the financial weakness of Latin America’s carriers in light of the coronavirus pandemic. — AFP

SAO PAOLO: Latam Airlines Group, the continent’s largest carrier, filed for US bankruptcy protection on Tuesday, becoming the world’s largest carrier so far to seek an emergency reorganisation due to the coronavirus pandemic.

The filing highlights the financial weakness of Latin America’s carriers, following a similar bankruptcy earlier this month by the region’s No. 2 airline, Avianca Holdings.

But unlike Avianca, which experienced management turmoil and losses, Chile’s Latam posted profits for the last four consecutive years totaling more than US$700mil.

Latam had also approved a dividend payment this year, in contrast to other carriers that have halted payouts.

One of the world’s largest airlines, Latam said it would continue to fly through its bankruptcy restructuring.

Latam shares closed down 36% after falling as much as 58% in Santiago.

Latin American governments, many under severe budget constraints themselves, have been reluctant to bail out their key airlines, in contrast to the United States and Europe.

Most recently, Germany bailed out Lufthansa for a 20% stake.

Chile’s economy minister Lucas Palacios, said on Tuesday he would not rule out a bailout, although he did not propose one.

“Lufthansa’s case is completely different, ” Palacios said.

“Latam is an international airline, its shares trade in the United States.”

In a separate statement, Chile’s finance ministry said Latam is a “strategic company for Chile” and that the government would “consider” how it could contribute to Latam’s restructuring.In Brazil, Latam has been negotiating a bailout of up to two billion reais (US$367.45mil) that has yet to materialise.

Latam’s Brazil unit is not part of the bankruptcy, and the company said it might file for bankruptcy there as well if the negotiations for aid fall through. — Reuters

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