LATAM Airlines Group posted a $4.54 billion net loss in 2020 due to the impact of the COVID-19 pandemic. Last year, LATAM was one of the three Latin American airlines to file for  Chapter 11 bankruptcy in the US, to have “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 adapt its business to the new reality,” said the carrier in a statement. 

LATAM’s financial results in detail

LATAM’s operational statistics were particularly hard-hit by COVID-19. The company lost 61.9 percent of its passengers compared to 2019. Last year, LATAM carried 28.29 million travelers (versus 74.18 million in 2019). According to the airline’s financial results, capacity fell 62.6 percent, while demand declined 65.8 percent. The average load factor of LATAM’s flight in 2020 was 76.% percent.  Yields decreased 10.6 percent, going from 7.2 US cents in 2019 to 6.5 cents in 2020, while revenues per ASK reduced 18.1 percent, from six US cents to 4.9 cents. All of this led to a 58.4 decrease in LATAM’s revenue in 2020. Nevertheless, this percentage is a little bit deceptive. 

Passenger revenue fell by 69.9 percent, going from over nine billion in 2019 to just 2.7 billion in 2020. Meanwhile, Cargo’s revenue increased by 13.7%, showing LATAM a market niche that we will discuss further. 

Chapter 11 milestones

LATAM was the second Latin American airline to file for Chapter 11. It did this May 26, two weeks after Avianca. Due to the uncertainty of the COVID-19 pandemic, LATAM has ceased operations in Argentina, closing down the local branch and leaving a market in which it had approximately a 16% share. The domestic routes are now closed, but LATAM still operates international flights out of Buenos Aires’ Ezeiza International Airport. 

The company received a DIP Financing of US$2.45 billion, which was approved on September 19, 2020. LATAM made the first draw on October 8, for US$1.15 billion. Since then, the company hasn’t announced any other draw, unlike Aeromexico, which has already claimed all its DIP Financing (though it was smaller financing of US$1 billion). 

Currently, LATAM is working on its Reorganization Plan. The airline has until June 30 to present it, and the deadline for voting is on August 23. Nevertheless, the date for filing the Reorganization Plan may be further extended subject to the US Court’s approval, said LATAM. 

Cargo’s opportunity

Last week, LATAM Cargo announced the conversion of up to eight Boeing 767-300ERs into freighters. This conversion plan will be implemented in two stages and boost the cargo’s operator joint capacity by up to 80%.  LATAM will work with Boeing on the process. During the first phase, LATAM will convert four B767-300ERs and increase its cargo fleet to 15 aircraft (all of this type). The airline will receive the aircraft between 2021 and 2022. 

Meanwhile, the second phase is optional. If LATAM executes it, it will increase its cargo fleet to 19 767-300ER freighters and add airplanes between 2022 and 2023.  “Combining the passenger belly operations of LATAM Airlines Group with 15 to 19 Boeing 767-300ER freighters efficiently strengthens our customer value proposition. These conversions will enable the cargo affiliates to grow in key segments such as the Colombian flower market or imports to Brazil”, said Andrés Bianchi, LATAM Cargo’s CEO.

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