South American giant, LATAM Airlines, announced on Friday that layoffs were coming. The carrier, which is the largest in South America, expects to lay off 1,400 employees as the coronavirus pandemic continues to take its toll in Latin America.
Reuters reported that the layoffs are coming as the company seeks to downsize amid the current crisis. These 1,400 jobs represent about 3% of LATAM’s workforce. Already, the airline has slashed salaries in half for its 43,000-strong workforce. It is unclear which departments will see these layoffs.
Downsizing in the current crisis
Like most airlines, LATAM is focusing on downsizing to reduce its cash burn. The carrier has drastically cut its international flight schedules. LATAM Brazil’s President, Jerome Cadier, even believes that demand will take two to three years to recover. Meanwhile, LATAM Airlines Colombia’s CEO believes it will rise by 60-70% by the end of 2021. Both of these predictions were offered last month, and this will likely change.
The state of affairs at LATAM
This month has been incredibly busy for the Latin American airline. On May 1st, LATAM formally exited the oneworld alliance. This move will have positive repercussions on the airline’s finances. Being part of an alliance comes with dues and associated costs of maintaining reciprocal relationships with other airlines in the alliance. Outside of this alliance, LATAM now has the freedom to choose more effective partnerships.
One of those partnerships includes a new joint venture agreement with Delta Air Lines. In 2019, LATAM dropped its partnership with American Airlines after regulatory hurdles in getting a joint venture agreement. The new joint venture with Delta will give both airlines plenty of opportunities to grow in the South American market.
However, while LATAM hoped that this deal would support its operations and provide additional revenue opportunities, the coronavirus pandemic has muted those possibilities. Both LATAM and Delta are slashing international flight schedules. Delta does not expect to resume major South American services until later this summer.
Layoffs are coming to many airlines around the world. Air Canada expects layoffs of up to 20,000, Ryanair has told some office employees they will not return in June, and over 2,000 Icelandair employees were laid off at the start of this month. In more dire circumstances, Avianca, South America’s second-largest carrier, has also filed for bankruptcy with cuts coming.
While the 1,400 number is small in comparison, it nonetheless represents the loss of livelihoods for many people. It is unclear if, or when, these workers may be able to find jobs again at LATAM. However, for now, LATAM is simply focused on survival.
Looking forward, LATAM has fewer Airbus A350 commitments as part of its deal with Delta. This will avoid some overcapacity at the airline– a problem that many airlines are starting to face. The coronavirus pandemic is taking a heavy toll in Latin America. In an attempt to raise much-needed funds, the carrier is selling travel certificates that increase in value over time.
Simple Flying reached out to LATAM for a comment. However, LATAM was not immediately available. This article will be updated accordingly.