Category Archives: LATAM Airlines (Peru)

LATAM Group receives offers for bankruptcy reorganization exit financing

LATAM Airlines Group S.A. and certain of its debtor affiliates in Brazil, Chile, Colombia, Ecuador, the United States and Peru (collectively, “LATAM”) released its five-year business plan along with advances regarding its exit financing process today. This milestone marks one of the final stages before the presentation of its plan of reorganization. LATAM forecasts recovering 2019 profitability by 2024, and a 78% operational result increase by 2026 when compared to pre-crisis.

As part of its exit financing process, LATAM has received several offers to date from its most significant claim holders and its majority shareholders, each of which provides more than US$ 5 billion of new funds, reaffirming the market’s confidence in LATAM.

LATAM Business Plan Highlights

The business plan includes a vision of the demand recovery, the fleet plan, and financial and operational projections through 2026, in addition to other information. In particular, the group forecasts a return to pre-pandemic capacity (measured in ASKs) by 2024 and a growth of 7% by 2026, compared to 2019, resulting from an estimated recovery of the domestic markets by 2022 and the international ones by 2024, in line with market consensus.

The recovery is supported by LATAM Airlines Brazil’s domestic market’s operational ramp-up to date, which reached a capacity (measured in ASKs) of 77% in August, compared to 2019, and is forecast to surpass 100% of 2019 levels in the beginning of 2022. The domestic markets of the affiliates in Colombia, Ecuador, Peru and  Chile have already reached 72% in August, while the international recovery of the group, both regional and long-haul continues to be affected by travel restrictions.

Total revenues are projected to increase 13% by 2026 with passenger revenues growing 8% and cargo revenues increasing  59% compared to 2019.

Cost reduction initiatives addressed during the Chapter 11 process, including leveraging LATAM’s digital transformation to improve efficiency, supplier renegotiations and fleet restructuring, amount to over US$900 million annually and have allowed LATAM to structurally change its cost base. Fleet costs alone note annual cash cost savings of over 40% compared to 2019. The group also expects improvements in its passenger CASK (cost per ASK) ex-fuel, which before the impact of inflation, is estimated to be 3.3 cents in 2024, with certain domestic operations even lower. Furthermore, LATAM has increased the variable portion of its cost structure from 65% in 2019 to 80% in 2021-2022, which will allow the group to better adapt to the nonlinear demand recovery path ahead.

LATAM projects an operating margin (EBIT) of 11.2% in 2026, the highest since 2010.

“Despite the dramatic crisis we have faced, we have taken full advantage of our restructuring, not only by becoming substantially more efficient, but also by cementing a better value proposition for customers, all of which has been reaffirmed by the significant interest we have received in providing exit financing” said LATAM Airlines Group SA, CEO Roberto Alvo. “We will emerge from this process as a highly competitive and sustainable group of airlines, with a very efficient cost structure, all the while maintaining the unparalleled network and connectivity that LATAM offers in all the markets it serves.”

Extension of Exclusivity Period Request

LATAM filed a motion seeking to extend the period of exclusivity to file a plan of reorganization through October 15, 2021, and to solicit acceptances of a plan through December 15, 2021.  The requested extensions will further LATAM’s development of a plan of reorganization that satisfies its exit capital and financing needs and assist in negotiations with the various stakeholders in its Chapter 11 proceedings.

Update on LATAM’s Chapter 11 Process

LATAM is currently negotiating with various stakeholders in order to agree on a plan of reorganization and exit financing to successfully emerge from Chapter 11 in compliance with all applicable laws.

Over the last few months, as part of the Chapter 11 process, LATAM has developed and made available certain material non-public information to stakeholders that are under non-disclosure agreements. Such information includes five-year projections and an initial estimate (high and low scenarios) of its total claims. This initial estimate amounts to approximately US$ 8 billion in the low scenario (US$14.2 billion including inter company claims) and US$ 9.9 billion in the high scenario (US$16 billion including inter company claims).

In accordance with the terms of these non-disclosure agreements and in furtherance of the process, LATAM has made certain disclosures today by the issuance of material facts in Chile and by the filing of Forms 6-K in the United States, which include LATAM’s financial projections, and other information regarding the Chapter 11 proceedings.

Also, in connection with these negotiations, LATAM provided an indicative proposed structure for its reorganization which sought approximately US $5 billion of equity financing and contemplated a consensual plan among stakeholders which required, among other things, the compromise by stakeholders of certain rights and compliance with both US Bankruptcy Code and Chilean law. In response to its request for proposals, LATAM has received certain non-binding exit capital/financing and restructuring proposals from its most significant claim holders and its majority shareholders. Each  proposal contemplates raising in excess of US$ 5 billion through the issuance of new debt and equity in LATAM Airlines Group S.A., which would be backstopped by the parties making the proposal. In addition, in each proposal, the proponents contemplate that if such proposal is approved and implemented, it would result in the substantial dilution of existing shares of LATAM Airlines Group S.A.

 

LATAM will continue to engage regarding the proposals with the proponents and other stakeholders, some of whom have agreed to remain under confidentiality agreements. LATAM is focused on ensuring that any exit strategy allows it to emerge with a robust capital structure, adequate liquidity, and the ability to successfully execute its business plan. Any plan will be implemented in compliance with the relevant requirements of the US Bankruptcy Code and Chilean law.

 

LATAM will keep its shareholders and the market informed regarding the progress in the Chapter 11 proceedings. Additionally, it contemplates summoning its shareholders to an extraordinary shareholders meeting when appropriate, subject to the progress of the negotiations with the various stakeholders which are currently ongoing.

LATAM projects an operation of 46% in July, the highest since the beginning of the pandemic

LATAM Group has issued this statement:

LATAM’s passenger operation for July 2021 is estimated to reach 46% (measured in available seat kilometers – ASK) compared to the same month in 2019, in a pre-pandemic context. This figure represents the largest operation projected since the beginning of the health crisis caused by SARS-CoV-2 and a significant increase from June’s operation of 36.9%. The challenge going forward, however, is the reactivation of markets like Chile and Ecuador, which register the lowest operational recovery of all of the countries in which the group operates. LATAM estimates approximately 880 domestic and international flights daily during July, connecting 116 destinations in 16 countries. Meanwhile, the Cargo division has scheduled 1,030 cargo freighter flights during the period, 20% more than in the same month of 2019. All of these projections are subject to the evolution of the pandemic, as well as travel restrictions in the countries where LATAM operates. During June 2021, passenger traffic (measured in revenue passenger-kilometers – RPK) was 32.1% compared to the same period of 2019, based on an operation measured in ASK (available seat-kilometers) of 36.9% compared to June 2019. Therefore, the load factor decreased 10.8 percentage points, reaching 72.2%. With regard to the cargo operations, the load factor was 62.8%, which corresponds to an increase of 7.7 percentage points compared to June 2019.

LATAM Group Operational Estimate – July 2021 (measured in ASK)

Brazil ● 48% projected operation (versus July 2019) ○ 75% domestic and 20% international ● Total July destinations: 44 domestic (equivalent to 418 daily flights on average) and 13 international. ○ Updates: ■ Domestic: 10 new routes: Río/Santos Dumont-Recife, Río/Santos Dumont-Maceió, Río/Santos Dumont-Natal, São Paulo/Congonhas-Fortaleza, São Paulo/Congonhas-Maceió, São Paulo/Congonhas-Natal, São Paulo/Congonhas-Recife, Fortaleza-Belém, Fortaleza-Manaus, Fortaleza-Teresina. ■ International: Restart routes São Paulo/Guarulhos-Paris and São Paulo/Guarulhos-Bogotá.

Chile ● 35% projected operation (versus July 2019) ○ 68% domestic and 21% international ● Total July destinations: 15 domestic (equivalent to 122 daily flights on average) and 14 international. ○ Updates: Restart route Santiago-New York (direct)

Colombia ● 76% projected operation (versus July 2019) ○ 98% domestic and 50% international ● Total July destinations: 15 domestic (equivalent to 136 daily flights on average) and 4 international. ○ Updates: ■ Domestic: New route Medellín-Cúcuta. ■ International: Restart route Bogotá-São Paulo/Guarulhos.

Ecuador ● 23% projected operation (versus July 2019) ○ 82% domestic and 7% international ● Total July destinations: 7 domestic (equivalent to 22 daily flights on average) and 2 international.

Peru ● 45% projected operation (versus July 2019) ○ 66% domestic and 38% international ● Total July destinations: 19 domestic (equivalent to 126 daily flights on average) and 17 international. ○ Updates: ■ Domestic: New route Arequipa-Cusco. ■ International: Restart Lima-Madrid and Lima-Orlando operations.

Cargo ● 75% projected operation (versus July 2019) ○ 63% domestic belly and 50% international belly* ○ 126% dedicated cargo * Belly: merchandise transported in the cargo hold (lower deck) of the aircraft

LATAM Group launches a pilot health passport from Lima and Santiago

The LATAM Group, through its subsidiaries in Chile and Peru, together with the International Air Transport Association (IATA) have come together to carry out the pilot of the IATA Travel Pass digital application, allowing passengers to organize and manage travel requirements complying with what is required by the authorities on international flights more efficiently and expeditiously.

IATA Travel Pass works based on the biometric information of the passenger’s passport, the results of laboratories in agreement and the joint information of the governments.

The pilot phase, which is voluntary for the passenger, is expected to take place between June 14 and July 2 on the following routes:

  • Lima-Miami
  • Lima-Santiago de Chile
  • Santiago de Chile-Lima
  • Santiago de Chile-Miami

LATAM Group adjusts operational projection to 25% in April

Delivered on December 23, 2019

LATAM estimates the passenger operation in April 2021 to reach 25% (measured in available seat kilometers – ASK) compared to the same month in 2019 and a pre-pandemic context. This operational projection is in line with the demand, which has been affected by new border closures and passenger travel restrictions due to the current impact of COVID-19 in the region.

The group plans to operate approximately 400 daily domestic and international flights this month, connecting 114 destinations in 15 countries. Meanwhile, in the Cargo Division, there are more than 1,150 cargo freighter flights scheduled.

All projections are subject to the evolution of the pandemic, as well as travel restrictions in the countries where LATAM operates.

During March 2021, passenger traffic (measured in revenue passenger-kilometers – RPK) was 22.6% in relation to the same period in 2019, based on an operation of 31.5% (measured in available seat-kilometers – ASK) compared to March 2019. As a result, the load factor decreased 23.3% percentage points to 59.5%.

With regard to the cargo operation, the load factor in March reached 67.2%, 9.1 percentage points higher than the same month of 2019.

LATAM Group Operational Estimate – April 2021 (measured in ASK):

Brazil ● 27% projected operation (versus April 2019) ○ 38% domestic and 16% international ● Total April routes: 72 domestic (equivalent to 190 daily flights) and 9 international.

Chile ● 18% projected operation (versus April 2019) ○ 50% domestic and 5% international ● Total April routes: 17 domestic (equivalent to 66 daily flights) and 11 international.

Colombia ● 64% projected operation (versus April 2019) ○ 107% domestic and 26% international ● Total April routes: 23 domestic (equivalent to 99 daily flights) and 2 international.

Ecuador ● 20% projected operation (versus April 2019) ○ 54% domestic and 11% international ● Total April routes: 6 domestic (equivalent to 14 daily flights) and 3 international.

Peru ● 31% projected operation (versus April 2019)○ 48% domestic and 25% international ● Total April routes: 18 domestic (equivalent to 67 daily flights) and 15 international.

Cargo Division ● 78% projected operation (versus April 2019) ○ 61% domestic belly y 36% international belly* ○ 128% freighter

*Belly: goods transported in the cargo hold (lower deck) of the aircraft.

Top Copyright Photo: LATAM Airlines (Chile) Boeing 787-9 Dreamliner CC-BGP (msn 38469) LAX (Michael B. Ing). Image: 953352.

LATAM Airlines aircraft slide show:

LATAM Airlines Group files for Chapter 11 reorganization

LATAM Airlines Group S.A. has made this announcement:

LATAM Airlines Group S.A. and its affiliates in Chile, Peru, Colombia, Ecuador and the United States today (May 26) initiated a voluntary reorganization and restructuring of their debt under Chapter 11 protection in the United States with the support of the Cueto and Amaro families and Qatar Airways, two of the largest shareholders of LATAM.

In light of the effects of COVID-19 on the worldwide aviation industry, this reorganization process provides LATAM with an opportunity to work with the group’s creditors and other stakeholders to reduce its debt, access new sources of financing and continue operating, while enabling the group to transform its business to this new reality.

The Chapter 11 financial reorganization process is a proven legal framework under which LATAM and said affiliates will have the opportunity to resize their operations to the new demand environment and reorganize their balance sheets, enabling them to emerge more agile, resilient and sustainable. LATAM and its affiliates will continue flying as conditions permit throughout the process.

“LATAM entered the COVID-19 pandemic as a healthy and profitable airline group, yet exceptional circumstances have led to a collapse in global demand and has not only brought aviation to a virtual standstill, but it has also changed the industry for the foreseeable future,” said Roberto Alvo, Chief Executive Officer of LATAM. “We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option to lay the right foundation for the future of our airline group. 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 ourpassengers and employees being paramount.”

The group has secured the financial support of shareholders, including the Cueto and Amaro families, which have lasting ties to LATAM, and Qatar Airways, to provide up to $900 million in debtor-in-possession (DIP) financing. These partners have a profound understanding of the industry, the group and its operational challenges. Their support demonstrates a belief in LATAM and its affiliates and their long-term sustainability. To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing. In addition, as of the filing, the group had approximately USD $1.3 billion in cash on hand.

LATAM and its affiliates are also in discussions with their respective governments of Chile, Brazil, Colombia and Peru to assist in sourcing additional financing, protect jobs where possible and minimize disruption to its operations. LATAM and its affiliates would like to thank its shareholders, employees, creditors and the communities it serves for their support to help secure the group’s long-term future. The group is confident that this process will bring together these diverse stakeholders to build a new LATAM that is better placed to succeed for years to come.

“Faced with the biggest crisis in the history of aviation, the Board has approved this path forward having analyzed all the available alternatives to ensure the sustainability of the group. 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. 

The group is continuing to adapt and respond to the COVID-19 pandemic and is actively preparing to welcome customers back once travel prohibitions are lifted and demand increases, guaranteeing the highest safety standards for passengers and crew for which LATAM is highly recognized.

Continuing to serve Latin America

LATAM group is committed to preserving business continuity as it reorganizes – especially with respect to employees, customers, suppliers, commercial partners and local communities.

  • LATAM Airlines Group S.A. and its affiliates will continue to operate passenger and cargo flights, subject to demand and travel restrictions.
  • All current and future tickets, travel vouchers and frequent flyer miles and benefits, as well as flexibility policies, will be honored.
  • The group’s employees will continue to be paid and receive benefits as provided in their employment agreements.
  • Suppliers will be paid in a timely fashion for goods and services delivered from May 26, 2020 forward and throughout this process.
  • Travel agencies and other commercial partners will experience no disruption in their interactions with the LATAM group.

The right option to strengthen the group

The LATAM group has shared its journey with the people of Latin America, thriving in times of growth and pulling together to overcome times of adversity, and like many, LATAM and its affiliates began 2020 with hopes of progress that COVID-19 has brought to a virtual standstill. In 2019, the group launched 26 new routes and transported a record 74 million passengers, 5.4 million more than in 2018. The group’s plans for 2020 included further enhancing its passenger experience through cabin transformations and strengthening its strategic partnerships to further connect Latin America with the world. While the group will change through the Chapter 11 process, its culture, commitment to customers, shared history and Latin American identity will not.

After careful consideration, LATAM is confident that the Chapter 11 reorganization process is the best path forward to achieve the group’s objectives and meet its obligations while comprehensively managing its fleet and addressing its debts, most of which are held in the United States. Importantly, this process is markedly different from the concept of “quiebra“, “bancarrota“, or liquidation. LATAM intends to rely on specific relief that will allow it to pay its employees, meet benefit obligations, pay critical suppliers and conduct other day-to-day business operations as the group works with the court and creditors to resolve its case. With Chapter 11 protection, the group’s management team will remain in place and will continue to lead LATAM through the reorganization and transformation process.

These unique provisions of the Chapter 11 reorganization process will enable the group to minimize disruptions to the business and protect the interests of stakeholders while it restructures its balance sheet to emerge as a more agile, resilient and sustainable airline group.

While most of LATAM’s affiliates are included in the reorganization process, several entities are not, due to the nature of their debt structure and current financial status. A full list of filing entities is available at cases.primeclerk.com/LATAM. The list below summarizes the inclusion of these entities in the Chapter 11 financial reorganization and other proceedings.

Material filing entities:

  • Chile: LATAM Airlines Group S.A. and certain other entities incorporated in Chile are included in the Chapter 11 filing and will also file recognition proceedings in Chilean Courts in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
  • Colombia: LATAM Airlines Colombia and other entities incorporated in Colombia are included in the Chapter 11 filing and will also file recognition proceedings in the Superintendencia de Sociedades in order to ensure that the Chapter 11 process is given full credit and effect, providing even greater protection to LATAM’s businesses.
  • Peru: LATAM Airlines Perú and other entities incorporated in Peru are included in the Chapter 11 filing and are also filing a “Preventative Reorganization Process” with INDECOPI in order to ensure to these businesses are further protected from adverse actions of creditors.
  • Ecuador: LATAM Airlines Ecuador is included in the Chapter 11 filing.
  • United States: All of the group’s operating entities, other than special purpose vehicles, in the United States are included in the Chapter 11 filing.

Non-filing entities

  • Argentina, Brazil and Paraguay: LATAM’s affiliates in Argentina, Brazil and Paraguay are not included in the Chapter 11 filing. LATAM’s affiliates in Brazil are in discussions with the Brazilian government about the next steps and financial support for their Brazilian operations.

Importantly, whether included in the filing or not, all of the companies in the group will continue to operate as travel restrictions and demand permit.

Additional Information

LATAM Airlines Group and its affiliates understand that their employees around the world, their families, their suppliers and customers will have many questions. While LATAM may not have all the answers at this point, the group will be guided by transparency in all its interactions.

Previously the group made this announcement about the upcoming schedule:

LATAM Airlines Group and its affiliates, Latin America’s leading airline group with one of the largest route networks in the world, announced today it will gradually increase its international and domestic operations during June and July, offering passengers more flexible options, lower fares and increased sanitation measures.

In June the LATAM group expects to increase its total pre-crisis capacity from 5% to 9%, while preparing to reach 18% in July. The LATAM group understands that decision-making in these uncertain times is complex, reason why it is granting passengers greater flexibility to purchase and schedule trips with rates that on average can be up to 20% less expensive. Additional sanitation measures will also being implemented on all flights.

“With these measures, the LATAM group is responding to the connectivity needs of the countries where it operates and adapting its offerings to the requirements of customers in this complex scenario,” said Michael Rutter, Senior Commercial Vice President of LATAM Airlines Group. “The group is increasing flights, destinations and frequencies, and taking concrete measures that respond to the new economic reality that clients and their families are facing. Those measures include more accessible and flexible flight options, new sanitation measures and customer assistance services for passengers during their trips.”

During June, LATAM Airlines Brazil will operate four international routes from São Paulo to Frankfurt, London, Madrid and Miami, while LATAM Airlines Group will operate from Santiago, Chile to Miami and São Paulo, a connection center through which customers can access these three destinations in Europe. By July, the LATAM group intends to increase international destinations to 13.

Domestically, LATAM Airlines Brazil will operate 74 routes, while LATAM Airlines Chile will reach 12 destinations that include La Serena, Copiapó, Temuco and Easter Island. Similarly, the affiliate in Ecuador is working to resume their domestic flights in June, with the Colombian and Peruvian affiliates expecting to reestablish their service in July, as permitted by local authorities.

MORE AFFORDABLE FARES

Given the new economic environment, the LATAM group further reduced costs and increased efficiency in order to offer tickets that on average can be up to 20% more affordable.

FLEXIBILITY TO TRAVEL

Given the uncertainty caused by the current health crisis, passengers will have more flexibility to buy tickets and schedule their trips, subject to applicable local regulations.

  • Until July 31, 2020, passengers can voluntarily reschedule their tickets on Latam.com before the departure of their flight. The first change will be without penalty or fare change (same destination, subject to cabin availability and validity of the ticket). The destination can change subject to a fare differential, if applicable.
  • If the passenger is not certain of the date of travel, they can leave their ticket open for 12 months, as long as they notify the airline through their website at least 7 days in advance. (My Trips section of LATAM.com)
  • In the event that a flight is canceled or rescheduled, passengers may reschedule their tickets without penalty or fare difference (subject to cabin availability, same destination and validity of the ticket). If they wish to change their destination, a rate difference will apply if one exists.

ASSISTANCE DURING YOUR TRIP

This new platform on the LATAM website contains detailed information on the chosen destination and provides travel solutions for passengers, who will also be able to connect with third-party providers on passenger responsibilities of securing entry, exit and any re-entry criteria for the destination they are visiting.

GLOBAL CATEGORY CLEANING STANDARDS

LATAM Airlines Group and its affiliates have adopted the best sanitation practices in the world, following the recommendations of the WHO and the industry.

The measures:

During check in:

  • Attention to the passenger

The cleaning and disinfection of the passenger service area increased, including counters and all self-service kiosks.

  • Self-service terminals

The LATAM group has self-service kiosks at all the airports where it operates, guaranteeing an autonomous service without face-to-face counters.

  • Use of mandatory masks

From the moment of arrival at check-in and while boarding, as well as during flight and disembarkation, the use of masks will be mandatory for all passengers. This measure extends to cabin crew in all phases of the flight.

On board:

  • Continuous sanitation
    • Proactive disinfection procedures in all aircraft after each arrival on all flights and of the entire cabin with quaternary ammonium spray and additional manual cleaning.
    • Alcohol gel available onboard all aircraft.
    • Cleaning of frequent passenger contact points (e.g., handles, toilets, armrests, belts, screens, light and call switches, seat pockets, windows and trays) during all phases of flight.
  • Air Filtration
    • All of the L group’s fleet has air recirculation systems that renews the air every 3 minutes with HEPA (High Efficiency Particulate Air) filters, removing 99.97% of the particles.
  • More space on board
    • Boarding will include social distancing requirements between passengers, avoiding crowds. Front restrooms will remain for the exclusive use of the crew, to minimize contact with passengers.
  • Blankets and Beds
    • All blankets, downs, and pillows are laundered after each flight. In the case of pillows, they can also be discarded depending on the material.

LATAM Airlines (Chile) aircraft photo gallery: