LATAM got its wings cut

By: Miguel A. Rodriguez

09:45, 14 September 2020

Airline companies are in desperate need of some air under their wings.

LATAM Airlines, the largest air carrier in Latin America, filed for bankruptcy a couple of days ago. As it happened for most airlines since the pandemic took over the world, the travel restriction pushed the company over the brink.

Latam is the second Latin American company to file for bankruptcy after Colombian Avianca did it invoking financial problems related to the coronavirus. Unlike Avianca, which had internal and economic difficulties in the past, for the last four years, LATAM only posted gains, with a total that exceeds $700 million. Also, while other companies stopped the payment of dividends, the Chilean company went forward with it.

As bankruptcy pushed LATAM to restructure itself and lay 1,800 employees off,  the company continues to fly. The bankruptcy reorganization is something that the government will consider. As it has a unit in Brazil, LATAM is waiting for a bailout worth $367.45 million to come in force. Although the Brasilian unit isn't part of the bankruptcy process, it considers to file for it as well. Excluded from bankruptcy are also the units from Argentina and Paraguay. To cope with the bankruptcy reorganization, LATAM received $900 million from significant shareholders, some of which also control Qatar Airways.

The filing doesn't only affect the company itself, but other aviation  giants as well: Delta Airlines paid $1.9 billion last year for a 20% stake, becoming one of the largest shareholders.  

As of Tuesday, the company has a debt of $18 billion. 

During pre-market trading, the stock price dropped 41%. 


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This information/research prepared by Miguel A. Rodriguez does not take into account the specific investment objectives, financial situation, or particular needs of any particular person. The research analyst primarily responsible for the content of this research report, in part or in whole, certifies that the views about the companies and their securities expressed in this report accurately reflect his/her personal views and consequently any person acting on it does so entirely at their own risk.The research provided does not constitute the views of KW Investments Ltd nor is it an invitation to invest with KW Investments Ltd. The research analyst also certifies that no part of his/her compensation was, is, or will be, directly, or indirectly, related to specific recommendations or views expressed in this report.The research analyst in not employed by KW Investments Ltd. You are encouraged to seek advice from an independent financial adviser regarding the suitability of the investment, under a separate engagement, as you deem fit that conforms to your specific investment objectives, financial situation, or particular financial needs before making a commitment to invest. The laws of the Republic of Seychelles shall govern any claim relating to or arising from the contents of the information/ research provided.