This week, Google filed a motion for relief to allow termination of its agreements with LATAM Airlines Group and discontinue the services it provides. According to the giant tech company, LATAM owes over US$8.2 million for unpaid services. Let’s investigate further.
LATAM doesn’t need Google
LATAM Airlines Group filed for a Chapter 11 bankruptcy on 26 May. A couple of months later, LATAM Brazil joined the reorganization process. Meanwhile, LATAM Argentina (which already ceased operations) and LATAM Paraguay are not included in the filing.
The largest South American carrier is trying to reduce costs, labor, and fleet. It is also looking for over US$2 billion in Debtor-In-Possession financing. In the meantime, LATAM has also stopped paying the services of some providers, like Google.
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According to Google’s filing, it provided an ads program. The services allowed LATAM “to reach potential customers as they search for designated words and phrases or browse websites.” Google also offered Cloud program services.
On 20 September, the Silicon Valley company filed proofs of claim for unpaid services by LATAM. This is how much they owed:
- Aerovias de Integracion Regional: US$27,378.52
- LATAM Airlines Ecuador: US$40,993.42
- Fidelidade Viagens e Turismo: US$70,925.23
- LATAM Airlines Peru: US$468,096.07
- TAM Linhas Aereas: US$1,536,665.27
- LATAM Airlines Group: US$6,105,378.12
Google added that if the Court doesn’t grant relief, it will cause “significant hardship” because the company would be required to continue to provide services to LATAM without payment. In contrast, LATAM “may continue to operate its business without the services provided by Google.”
LATAM spent almost half a million in May
For airlines and companies under Chapter 11, it is not uncommon to stop paying some suppliers. As they go through the reorganization process, these companies prioritize cash preservation.
LATAM, like Avianca and Aeromexico, has taken some measures like rejecting leasing contracts or furloughing staff. Nevertheless, it is fascinating to see how much airlines spend on other services.
Google included many bills in its filing for the New York Southern District Court. Some are small, a little over one dollar in services, but others are quite big. In May, LATAM Airlines Group spent US$454,600.63 in Google Cloud services, for instance. In July, it also spent US$532,500 on Retail ITA.
We contacted the LATAM Airlines Group regarding this topic. The airline said,
“We are in touch with the provider and following the procedures from the New York Court to resolve possible problems.”
Where does LATAM stand now in its Chapter 11 process?
The New York Court recently approved LATAM’s modified US$2.45 billion DIP Financing. For the South American carrier, the approval was a relief after it got surprisingly rejected the first time due to court doubts regarding the better treatment individual shareholders would receive.
LATAM also recently announced its intentions to reject the leasing contracts of 19 more airplanes. It has already returned 19 aircraft to the lessors. Now, the company plans to offload mainly Airbus A320 family planes.
Finally, the Administrative Council for Economic Defense in Brazil approved Delta and LATAM’s joint venture.
Does it surprise you how much LATAM owes Google? Let us know in the comments.