Photo: Airbus.
On Friday, LATAM Airlines Group announced its unsecured creditors had voted overwhelmingly to approve the airline’s Plan of Reorganization. Following yesterday’s announcement, LATAM’s Chapter 11 moves forward; the company still needs to obtain positive votes from holders of the RCF claims, and they have until May 10 to submit them.
LATAM moves on
Yesterday, LATAM, along with its affiliates in Brazil, Chile, Colombia, Ecuador, Peru, and the United States, informed the results of the Plan of Reorganization Vote.
The Plan reached sufficient support of 82% in dollar amount and around 65% in number of voting creditors in the Plan’s impaired classes. By receiving this approval from the unsecured creditors, LATAM is moving forward towards exiting its financial reorganization. Of the three Latin American carriers that filed for a Chapter 11 bankruptcy process in the United States, only LATAM has not announced its exit. Avianca did it late last year and Aeromexico in March.
The negotiations continue
LATAM has been engaging in extensive negotiations and mediation processes over the last several months. At the same time, LATAM has been slowly recovering its pre-pandemic service levels. Right now, it is operating at around 70% of 2019 capacity levels, although some countries (like Colombia and Brazil have recovered faster).
Regarding the company’s Chapter 11, LATAM said,
“LATAM remains confident that the Plan represents an equitable outcome with consideration to all stakeholders. If confirmed, the Plan would infuse new funds into the Group through a mix of equity, convertible notes, and debt, and would strengthen its balance sheet, liquidity, and capital structure for go-forward operations.”
The Confirmation Hearing of LATAM’s Chapter 11 Plan of Reorganization is set to take place on May 17 and 18, 2022.
During the Hearing, the Court will evaluate the Plan, which is the last milestone of the bankruptcy process in the United States. At this time, LATAM continues to target completion of the process and emergence from Chapter 11 in the second half of 2022.
LATAM’s financial results
The South American carrier has yet to publish its 2022 first-quarter financial results.
Nonetheless, in 2021,
- For full-year 2021, LATAM had a US$4.64 billion net loss, a 2.2% increase compared to 2020’s net loss (US$4.54 billion). In 2019, the group had a net profit worth US$190,430.
- LATAM carried 40.1 million passengers in 2021, a 42% increase compared to 2020, but still 45.8% below 2019 levels, prior to the COVID-19 pandemic, when it reached 74.1 million travelers, its highest level ever.
- The airline had passenger revenue worth US$3.34 million, still 62.9% below 2019 levels.
- The airline carried 802,000 tons of cargo, still 11.3% below pre-pandemic traffic levels. Nonetheless, cargo revenue soared by 44.8% compared to 2019.
- Total operating expenses were US$6.2 billion.
- At the end of the quarter, LATAM reported US$1,047.2 million in cash and cash equivalents. In addition, LATAM has access to US$1.25 billion of committed liquidity in the DIP financing as part of its Chapter 11 proceedings.
- Finally, LATAM’s EBITDA margin was 0.9% (in 2020 was -6.4%).
