LATAM and Aeromexico file a case to extend the deadline for the Chapter 11 plan

Today, Aeromexico and LATAM asked the bankruptcy judge to extend the deadline to file their Chapter 11 exit plans. Latin American carriers must submit a restructuring plan as part of the bankruptcy protection process they they launched in May and June 2020. Let’s investigate further.

LATAM is looking to extend its deadline until September 2021. Photo: Vincenzo Pace | Simple theft

Not unexpected

LATAM Airlines Group is seeking to extend its deadline for submitting the restructuring plan until September 2021. Meanwhile, Aeromexico has filed the same request, seeking a new deadline on October 25.

These two petitions were expected, and Avianca could be seen doing the same in the coming days.

Many carriers have filed extensions to present their plans throughout airline history in Chapter 11 bankruptcy proceedings. Avianca did so in 2003; in the United States, Delta Air Lines and Northwest Airlines have done the same, as Aeromexico noted in its file.

Meanwhile, as reported by Reuters, LATAM said in a statement,

“The extension request is a common alternative being considered in the process and does not alter LATAM Group’s intention to exit Chapter 11 by the end of this year.”

Aeromexico Boeing 787 Dreamliner landing in New York JFK
Aeromexico needs more time to formulate a “confirmable Chapter 11 plan”. Photo: Getty Images

Why do they need the extension?

Going through Chapter 11 bankruptcy is not an easy process. Navigating it successfully in the midst of a global pandemic makes it even more difficult.

Grupo Aeromexico stated,

“Debtors are keenly aware of the costs and risks associated with operating Chapter 11, but given the complexity and importance of the issues they face, additional time is needed both to meet the demands of the schedule. equity conversion plan and to formulate a confirmable Chapter 11 plan. “

Both carriers will focus on streamlining their fleets, analyzing claims and resolving issues with creditors in the coming months, among other tasks.

So far, LATAM has rejected up to 53 planes and Aeromexico, 26. Both airlines have reduced the volume of their orders with Boeing and operate fewer flights today.

LATAM is currently operating at 36% of its pre-pandemic capacity. Colombia is the fastest recovering market for LATAM. In this country, the airline operates 94% nationally, but only 23% internationally.

Meanwhile, Grupo Aeromexico is 23.6% below its 2019 passenger count (in the country it is only 8.2% below).

LATAM Airlines Boeing 767-316 (ER) CC-CXF
LATAM withdrew $ 500 million of its remaining Chapter 11 funding. Photo: Vincenzo Pace | Simple theft

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LATAM withdraws more money

As part of the Chapter 11 bankruptcy process, LATAM received US $ 2.45 billion in debtor-in-charge financing. Until the end of the first quarter of 2021, the airline had only withdrawn half of that money.

But, today, LATAM filed a statement saying it will take $ 500 million from this remaining funding.

The money will help LATAM maintain its liquidity position throughout the pandemic crisis. Recently, LATAM CEO Enrique Cueto said the airline has the largest amount of cash available among its Latin American peers.

He added that LATAM is in a good financial situation and will emerge from the crisis strengthened, with an unbeatable cost structure.

For June, LATAM plans to operate 691 daily domestic and international flights. It will connect 114 destinations in 14 countries. At the same time, the Cargo division has scheduled more than 1,000 cargo cargo flights for June, 20% more than in June 2019. All these projections are subject to the evolution of the pandemic and to travel restrictions in countries where LATAM operates, the airline said.

Do you expect Avianca to follow in the footsteps of LATAM and Aeromexico? Let us know in the comments.

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