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LATAM Airlines Files Chapter 11 Bankruptcy Amid Coronavirus Woes

Zacks Equity Research

LATAM Airlines Group LTM filed for Chapter 11 bankruptcy protection in the United States as it grapples with a dramatic drop in air travel demand amid coronavirus concerns. Along with the Latin American carrier, its affiliates in Chile, Peru, Colombia, Ecuador and the United States are part of the bankruptcy filing, while those in Argentina, Brazil and Paraguay are not.

Despite the restructuring, LATAM Airlines and its affiliates will continue usual passenger and cargo operations. Per Roberto Alvo, CEO, the company “implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption.”

However, the company, carrying a Zacks Rank #3 (Hold), felt the bankruptcy protection route would be the best option for a turnaround. Under the Chapter 11 protection, the airline’s management team will remain intact. The provisions of bankruptcy protection will help in reducing disruptions to the carrier’s operations, while protecting the interests of shareholders as its balance sheet is restructured to fit the present demand scenario.
LATAM Airlines, which competes with the likes of Copa Holdings CPA in the Latin American aviation space, secured funding from its shareholders, including two of its largest — the Cueto and Amaro families, and Qatar Airways — to provide up to $900 million in debtor-in-possession financing. Major U.S. carrier Delta Air Lines DAL also has a 20% stake in LATAM Airlines. Notably, LATAM Airlines has approximately $1.3 billion in cash on hand. Both Copa Holdings and Delta Air Lines carry a Zacks Rank #3.

LATAM Airlines, which reduced capacity by 95% in April and May due to the drop in demand, so far has not received government support. Presently, the carrier and its affiliates are in talks with the governments of Chile, Brazil, Colombia and Peru for additional financial aid.

Apart from LATAM Airlines, Colombian airline Avianca Holdings AVH, carrying a Zacks Rank #2 (Buy), filed for bankruptcy protection earlier in the month due to demand slump and high debt burden. You can see the complete list of today’s Zacks #1 Rank (Strong Buy) stocks here.

Shares of LATAM Airlines have plunged more than 68% since the beginning of February due to coronavirus-led travel demand woes. The industry has declined 54.1% in the period.


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Delta Air Lines, Inc. (DAL) : Free Stock Analysis Report
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