As Brazil's airlines look for government assistance to stay afloat, multi-national carrier LATAM might have just delayed the bailout process for itself and its rivals. This is due to its recent filing for bankruptcy in the United States. The largest airline in South America, LATAM's move could push back aid to at least July while its Brazilian rivals may be waiting until the end of June.

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Marty St. George will join the airline in a turbulent time. Photo: Getty Images

A multi-month delay

According to Reuters via two sources, LATAM's bankruptcy filing will further delay the financial assistance it would have received from the Brazilian government. Not only will it affect LATAM, but it will also have an impact on Brazil's other carriers, which are also struggling severely during this crisis.

Other Brazilian carriers seeking government assistance include budget-carrier Azul and full-service airline Gol Linhas Aereas Inteligentes.

“The bailout will happen; what could happen is that it may be staggered due to LATAM’s situation,” -Anonymous source via Reuters

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The 787s are a significant part of the airline's long-haul operations out of Chile. Photo: Getty Images.

Collateral complications

One of the main complications with LATAM’s declaration of bankruptcy is the ability to put forward collateral on any bailout loans.

One source told Reuters that the Brazilian government in the process of figuring out how best to provide a bailout loan to LATAM with its parent company in bankruptcy protection. Usually, Brazil's development bank (BNDES) asks for collateral from parent companies. However, under bankruptcy protection, this would not be possible. “What we would want is for that collateral to have priority over the rest of the company’s debts,” the source said to Reuters.

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LATAM's short-haul fleet is made up of A320 family aircraft. Photo: Getty Images

Support could have come earlier

At the beginning of May, we were anticipating that support was to come in the middle of the month. However, despite a financial aid package being offered by the Brazilian Government, the airlines involved had not agreed to the terms.

The three airlines (LATAM, Azul, GOL) held off on signing the agreement to receive aid because of dissatisfaction with the terms of the deal. It is thought that the Brazilian government was seeking part-ownership of the airlines in exchange for the stimulus package.

In an interview with NeoFeed, the CEO of Azul Linhas Aéreas Brasileiras, John Rodgerson said that state aid would “definitely help.” However, he went further to say that the government must be careful about how it presents the assistance, saying:

“The BNDES ‘measures are good, they will help, but we have to be very careful:’ at what price? ‘. The price of debt will impact the future of the growing industry. If you put financial conditions at a very high cost, it will hinder the growth of our industry going forward.”

Unfortunately, about 10 days after the news that airlines were holding out for better terms, we received word of LATAM's bankruptcy. As such, what could have been secured in days may take several months longer.

Do you think GOL and Azul regret not taking government aid sooner, before LATAM's bankruptcy filing? Let us know in the comments.