The encyclopedia · Finance & Accounting · Financial decision · 2020–2022
Latin America's largest airline lost 46 million passengers in one year
Revenue fell from $10.4B to $4.3B in one year. LATAM filed Chapter 11 in May 2020 with a $4.5B net loss. It emerged in 2022, restructured.
LATAM Airlines Group · 2020-05-26
What happened
LATAM Airlines Group, formed by the 2012 merger of Chile's LAN and Brazil's TAM, was Latin America's largest airline. In 2019 it carried 74.2 million passengers across 125 destinations in 26 countries, with a fleet of 342 aircraft and revenue of US$10.43 billion.
The pandemic eliminated that business almost overnight. In 2020, passengers fell to 28.3 million, revenue dropped to US$4.33 billion, and the group posted a net loss of US$4.55 billion. On 26 May 2020, LATAM filed for Chapter 11 bankruptcy protection in the United States. Its stock was delisted from the NYSE in June.
LATAM continued operating during the restructuring. It secured a US$2.45 billion financing deal approved by the US bankruptcy court in September 2020. The airline emerged from Chapter 11 in 2022, reporting a net profit of US$1.34 billion that year. Post-restructuring shareholders included Sixth Street Partners (20.1%), Delta Air Lines (10%) and Qatar Airways (10%).
Why it happened
- An airline's cost structure — aircraft leases, fuel hedges, labour contracts — is almost entirely fixed; when demand drops 60%, the losses are immediate and enormous
- LATAM carried the debt from the 2012 LAN-TAM merger into the crisis, leaving no balance-sheet room to absorb a revenue shock
- Latin American governments provided less direct airline aid than US or European governments, so LATAM had to rely on the US Chapter 11 process rather than a state bailout
- The Chapter 11 filing was a strategic choice, not a death: US bankruptcy law let LATAM keep flying while renegotiating leases and debt, which a local liquidation would not have allowed
The lesson
In a fixed-cost business, the right bankruptcy is a tool, not a failure — Chapter 11 let LATAM keep flying while it restructured, and it emerged profitable in two years.
Aftermath
LATAM's 2023 revenue reached US$11.79 billion, exceeding its pre-pandemic level. The restructuring diluted former controlling shareholders but preserved the airline as a going concern, with Delta and Qatar Airways taking strategic stakes.
Sources
- Wikipedia: LATAM Airlines Group
- AirInsight, 10 March 2021 — LATAM finishes 2020 with a $4.5bn net loss (Chapter 11 filed 26 May 2020; passengers fell from 74.18M in 2019 to 28.29M in 2020)
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