Latam Airlines files for bankruptcy, Chile weighs help

Chile's Latam Airlines Group filed for US bankruptcy protection as it attempts to restructure its debt in response to a pandemic-driven collapse in demand.

Suggesting a possible bailout or investment, Chile's finance ministry said today that the carrier is a "strategic company" for the country, citing jobs, connectivity and small business ties. "As a result, the government will evaluate the worthiness and opportunity of contributing to the success of the Latam's reorganization process."

Latam, along with its affiliates in Peru, Colombia, Ecuador and the US, initiated a voluntary debt restructuring under the US bankruptcy code known as Chapter 11. Latam subsidiaries in Argentina, Brazil and Paraguay are not part of the restructuring.

"Latam entered the pandemic as a healthy and profitable group of airlines, but exceptional events have caused the collapse in global demand that not only froze air travel but changed the sector for the near future," Latam chief executive Roberto Alvo said.

Latam said it plans to continue operating during its debt restructuring and discussions with creditors, and will rely in the short term on $900mn in debtor-in-possession financing from its main shareholders, Chile's Cueto group and Qatar Airways. The company said it has $1.3bn in cash to fund operations.

Brazil's main domestic airlines, including Latam, are in ongoing talks with the government in Brasilia over a line of credit to help the industry through the crisis. Besides Chile, Latam said it was also in talks with Colombia and Peru regarding financial packages.

Earlier this month, Avianca -- Latam's main competitor in the region -- also filed for US bankruptcy protection, and is seeking to persuade the Colombian government to take a share in the business.