South American Mega-Carrier LATAM Files Bankruptcy

South American mega-carrier LATAM, which recently left oneworld and entered a joint venture with Delta, has filed for Chapter 11 bankruptcy in the Southern District of New York. This follows a similar move by Avianca.

The bankruptcy filing includes LATAM Chile, Peru, Ecauador and Columbia but does not include Brazil, Argentina or Paraguay. Debtor-in-possession financing totaling $900 million is provided by existing owners the Amaro and Cueto families and by 10% owner Qatar Airways. The carrier is currently in talks with the governments of Argentina, Brazil, Chile and Peru about potential subsidies.


Copyright: artzzz / 123RF Stock Photo

There’s no mention of Delta’s role in the announcement. Delta isn’t in a position to provide debtor-in-possession financing or otherwise protect its position during the bankruptcy restructuring unless perhaps there’s a debt component to its assumption of 10 Airbus A350 delivery positions it took over in April. Update: Delta will pay $61 million to cancel its purchase of 4 A350s LATAM already has possession of, and LATAM will re-affirm its joint venture with the U.S. carrier.

The carrier, which is the largest in South America, will continue to fly through its Chapter 11 proceedings. I would expect it to restructure successfully and exit bankruptcy. I do not have concerns over the safety of LATAM Pass miles. They promise “you will see no changes to our frequent flyer program or change in your frequent flyer status during this time.”

About Gary Leff

Gary Leff is one of the foremost experts in the field of miles, points, and frequent business travel - a topic he has covered since 2002. Co-founder of frequent flyer community InsideFlyer.com, emcee of the Freddie Awards, and named one of the "World's Top Travel Experts" by Conde' Nast Traveler (2010-Present) Gary has been a guest on most major news media, profiled in several top print publications, and published broadly on the topic of consumer loyalty. More About Gary »

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Comments

  1. Great lies of our time:
    “The pound in your pocket has not been devalued”
    “The cheque’s in the mail”
    “you will see no changes to our frequent flyer program”

  2. Why are all these South American but not European airlines filing for chapter 11 in the US? Looks like AirBerlin was run by idiots by not filing for chapter 11 (or being registered in the US).

  3. LOL. . .look what greed gets you. . .a partner like DL that will let you fall apart(Virgin (both of them) / Alitalia / Latam). AA might come out the bigger winner in South America. With Qatar as a LATAM investor now, OneWorld will know every move; GOL can grow and likely become the number 2 airline in the region and AA will feed more of the new GOL hubs in Argentina and Columbia and . . .

    I think airlines will think twice when partnering with DL in the future.

  4. August 1967 flew standby Miami-Panama. They put me in first. Enjoyed the light show over Cuba and one of the best meals on LanChile. I’m optimistic that Latam will return as I’ve always had great polite service and never any problems with them. The people in Latin America are much more polite than they are in the US.

  5. I’ve been waiting for a refund for a ticket i purchased last Dec for a flight in early October.
    I purposely purchased a refundable ticket in case I needed to change it.
    Five weeks ago, I used the Latam website to cancel and have funds go back on credit card I used.
    After two weeks, I was sent a voucher good for a year. The fare is around $500.
    The email said I could request a refund to a bank account. Please supply routing/acct number.
    This was three weeks ago, so with this news, is there any chance I would get my money back?
    Can I chargeback to the credit card?

  6. Wait — I thought AA was run by idiots when they allowed DL to massively overpay for its stake in Latam a few months ago in exchange for code-sharing? Now AA has a cost-free codeshare with GOL and DL has lost its $2 billion investment. How the worm turns . . .

  7. @chopsticks
    You know as everyone else does, this is not over
    Gol can just as likely go belly up and leave it to th AA board and Parker to throw a wrench into agreements.

  8. @ Rog os correct. Coming out of bankruptcy lean and agile will cause much damage to Gol and Azul, which don’t have for now the luxury of doing so. LATAM is stretching it’s hand to the Brazilian government, but shouldn’t get anything from there, since it’s not a Brazilian company. It would be unfair to the other incumbents if the worst run airline got a lifeline from the Brazilian government.

  9. @Rog — You completely miss the point. While the future of all South American carriers may be unknown, AA didn’t spend any money securing the GOL codeshare partnership. If for any reason GOL goes out of business, AA just finds another partner or does more flying on its own metal. In contrast, DL has almost instantly lost $2 billion by overpaying for a stake in an already troubled airline. Seems like a big difference to me. No?

  10. @chopsticks No. It’s not always about money. Plus, AA will be hard pressed to find another partner if Gol goes bankrupt. It’s a stretch to see AA doing it’s own thing in Latin America without competition. Azul is a crap airline. Can’t see them lasting too long.

  11. I think Chopsticks is right on this one. $2 billion is $2 billion. Any light that Gary can shed on bankruptcy wiping out Delta’s equity?

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