LATAM Airlines Group plans to reject the leasing contracts of 19 more airplanes, further reducing its fleet. This latest movement is part of its financial reorganization under the Chapter 11 filing in the US. How will it affect LATAM’s fleet? Let’s find out.
Which airplanes are leaving LATAM?
In May, LATAM announced the rejection of 19 leasing contracts. It cut six long-haul widebody jets from its fleet, including two Airbus A350 and four Boeing 787-9 Dreamliners. The other 13 were various narrowbody Airbus models.
At that time, the airline left open the possibility of rejecting more aircraft in the future. In June, the court provided the opportunity of LATAM returning up to 111 leased aircraft. While it is uncertain that LATAM will reduce that much its fleet, it is interesting to see that it is continuing to have a smaller fleet in the future.
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In a docket seen by Simple Flying, LATAM is looking to reject 19 more aircraft leases. These airplanes are all narrowbody A320 family types. It will reject the contracts of 13 A320s and six A319s, according to the information. LATAM said,
“The Debtors have determined that each of the Leases does not currently provide value beneficial to the Debtors or their estates in light of the economic climate currently facing the airline industry.”
The carrier added that retaining these airplanes would be “particularly burdensome at the current time.”
How will it affect LATAM’s operations?
LATAM is a legacy airline. Over the last few years, it has struggled against low-cost carriers in the region. Instead, LATAM focused on the international and long-haul markets, where it could provide a unique style of service.
With the coronavirus pandemic, industry experts are saying that domestic travel will be the first to rebound from the crisis. So, why is LATAM rejecting the leasing contracts for narrowbody aircraft? On paper, it doesn’t make sense. But actually, it does, as Latin America is not following the same pattern as the rest of the world.
First of all, LATAM is rejecting the contracts of the older A320 family airplanes in its fleet. But second, and maybe most important, international travel will come back sooner than domestic and intra-regional travel in Latin America.
According to a study presented by ICF, Latin America’s international connectivity will recover its pre-COVID-19 traffic in 5.3 years. Meanwhile, domestic and intra-regional travel will take 6.2 years to recover.
Therefore, LATAM has been put on the spot. The data suggest that the Latin American international market, LATAM’s golden egg, will recover first. So, that means leaving its domestic connectivity open? Not exactly.
How will the LATAM fleet look like?
As of 30 June 2020, LATAM had a fleet of 318 aircraft. The operating fleet, though, was of 311 plans, as it had seven aircraft subleased.
According to its data, LATAM had:
- 46 A319-100
- 132 A320-200
- 13 A320neo
- 38 A321-200
- 10 A350-900
- 29 B767-300
- 10 B777-300 ER
- 10 B787-8
- 12 B787-9
- 11 B767-300F
After returning these 19 aircraft, the operating fleet will reduce to 292 airplanes. Both its A319-100 and A320-200 subfleets will still be significant. Additionally, LATAM has an order for new A320neo and A321neo.
As we advance, LATAM may reject more leasing contracts in the future. We could expect to see fewer narrowbody airplanes with the South American giant in the next few years. We can also expect LATAM to cancel more domestic routes. So, how is LATAM going to use its narrowbody fleet? Will it bet on intra-regional flights?
What do you think? Let us know in the comments.