LATAM got its wings cut

LATAM got its wings cut

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%.

Sources: reuters.com, aljazeera.com, edition.cnn.com


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