Latam Brazil joins parent company’s bankruptcy protection program

Latam Brazil joins U.S. bankruptcy protection program
Photo: Thiago B Trevisan/Shutterstock

Latam, the biggest airline in Latin America, added its Brazilian subsidiary to its May Chapter 11 bankruptcy protection filing in the U.S. Initially, the process only included operations in Chile, Peru, Colombia, Ecuador, and the U.S. — with the Brazilian branch being left out while the company negotiates a BRL 2-billion loan with the National Development Bank.

In a statement, Latam Brasil claimed that its debts amount to roughly BRL 7 billion (USD 1.3 billion). The company called the move a ” natural step in light of the continuing Covid-19 pandemic,” saying it “offers the best option to access the proposed DIP financing that will provide the tools to adapt to this new reality.”

Before the pandemic, Latam employed 42,000 people and operated 1,400 daily flights in 26 countries, carrying around 74 million passengers every year. In April, operations were reduced by 95 percent — and the company slashed 1,400 jobs in Chile, Colombia, and Peru.

The airline sector has been one of the hardest hit by the pandemic with smaller companies almost sure to be phased out of an increasingly hostile market for small businesses.

The companies in the aforementioned sectors are unlikely to be able to endure the crisis without substantial government help — not only through direct financial assistance but also by changing antitrust regulations in the future to allow consolidations, according to a major shareholder at Brazil’s top domestic airline Gol, who spoke to The Brazilian Report.

Aeromexico and Colombia’s Avianca Holdings have also filed for Chapter 11 Bankruptcy Protection in the U.S. Meanwhile, Avianca Brasil, which had filed for court-supervised reorganization in 2018, went definitively bankrupt — and Azul Airlines announced the layoff of 1,000 staffers.

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