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LATAM Restructures to Better Handle COVID-19

On Tuesday, LATAM Airlines Group became the second Latin American airline to file for Chapter 11 bankruptcy, following Avianca, who filed earlier this month. The company’s restructuring will apply to its affiliates in Chile, Colombia, Peru, Ecuador, and the United States, while those in Brazil, Argentina, and Paraguay will not be affected.

Coronavirus Related Financial Struggles

While Avianca’s bankruptcy was a result of financial losses and management issues on top of the coronavirus, LATAM’s comes after four years of consecutive profits and expansion. The move by the airline provides an opportunity for it to reorganize and manage the challenges posed by COVID-19. The airline said in a statement,

“The U.S. Chapter 11 financial reorganization process provides a clear and guided opportunity to work with our creditors and other stakeholders to reduce our debt, address commercial challenges that we, like others in our industry, are facing as a group. It is very different from the concept of bankruptcy in other countries and is not a liquidation proceeding. We are looking ahead to a post-COVID 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.”

While U.S. and European airlines have received monetary aid from their governments, Chile has not offered LATAM a bailout. However, it has said LATAM is a “strategic company for Chile” and will “consider” options for helping the airline during the crisis. Meanwhile, Delta Airlines, which in 2019 invested $1.9 billion for a 20% stake in the company, said they are confident in LATAM’s survivability. CEO Ed Bastian said in a statement,

“We remain firmly committed to our partnership with LATAM and believe that it will successfully emerge a stronger airline and Delta partner for the long term.”

What Does This Mean for Passengers?

According to its website, LATAM has said its filing for bankruptcy will not affect reservations, employee wages, vouchers, or commercial and cargo operations. The airline explained,

“Importantly, we want our stakeholders to know that we will continue to operate as travel restrictions and demand permit, paying our employees, meeting benefit obligations, and paying critical suppliers as well as respecting LATAM Pass miles and flight reservations as we work through the Chapter 11 reorganization process.”

Click here for further information on how Chapter 11 works and how LATAM will be moving forward.

2 Comments
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Lyahes May 28, 2020

I have a serious issue with Expedia & LATAM. I purchased a roundtrip ticket on Expedia for a trip to NY from Lima Peru leaving June 15th for $715.99. LATAM cancelled my flight without notification and does not reply to any requests for refund. Expedia is trying to pass the problem for refund onto LATAM stating in an email from Expedia that Latam requires anemail regarding the refund issue, this has been going on for 2 months , so now I am without a ticket, without my $715.99 and in total lockdown in Peru since March 12th, and no refund for a ticket I purchased along with useless AIG Flight insurance with EXPEDIA. I hold Expedia totally responsible for my refund, as I have no doubt LATAM will not comply regardless how many emails they get, they won't refund any money to people who have had flights cancelled no matter how many emails they receive. I told EXPEDIA to refund me my money and you wait for Latam to refund to you. Their lousy reply was "We appologize for the Inconvenience this may have caused but LATAM requires we send them an email for the refund" I have received the same message from EXPEDIA 5 times in 2 months, what total BS...This type of back and forth is heartless on the part of both companies in light of the current global pandemic I have no intention of ever booking anything anymore either with EXPEDIA or LATAM. In closing, I had purchased flight insurance (AIG) on EXPEDIA when I booked the flight for an additional $41.00 but when I filed a claim the AIG stated I am not covered for the cancellation because of a Natural Disaster, yet when you purchase the policy it clearly states 100% refund upon a cancellation with no mention of the excuse they used to deny my claim. I will like to start a Class Action suit against both EXPEDIA & LATAM with other passengers that have the same issues regarding refunds. IN MY OPINION, NON OF THE AIRLINES DESERVE ANY BAILOUTS, IT'S CUSTOMERS LIKE ME AND MANY OTHER BUSINESS TRAVELERS THAT DESERVE THE BAILOUT. AIRLINES LIKE LATAM HAVE BEEN RIPPING OFF THEIR BUSINESS TRAVELERS FOR YEARS WITH OVERCHARGES FOR FLIGHTS & BAGGAGE FEES.

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Superjeff May 28, 2020

As a lawyer, but not a commercial bankruptcy lawyer, I'm wondering what has to be done in all of the countries where LATAM operates, under a U.S. bankruptcy. Here we have a foreign organization (or several associated foreign companies), which do business (but a relatively small percentage of their business) in the United States, but primarily operating throughout Latin America. They've excepted their Brasilian, Argentine, and Paraguayan affiliates from the Bankruptcy. Is anybody aware of a treaty between the U.S. and the Latin American companies where Latam has affiliates, whereby those countries will honor a U.S. bankruptcy, or does Latam have to file in other Rio de Janiero, at the least.