How LATAM Has Used The Pandemic To Refocus Its Strengths

LATAM Airlines Group is using the COVID-19 pandemic to refocus its strengths and push for a better future even as the company navigates through a Chapter 11 bankruptcy in the US. This is according to LATAM’s CEO Roberto Alvo.

LATAM Airlines Group is trying to emerge stronger from the COVID-19 pandemic. Photo: Getty Images.

Sad to say goodbye to Argentina

During an interview at CAPA’s monthly Live Event, Roberto Alvo and Peter Cerdá, regional vice-president at the Americas for the International Air Travel Association (IATA), discussed the many challenges ahead for the historical airline.

Roberto Alvo said it was a sad moment when LATAM decided to plug its operations from Argentina. After 15 years, it was hard to say goodbye. He said,

“Argentina is a great economy, a great market; it has huge potential as it is very underdeveloped. But we just couldn’t find a set of circumstances where we could believe that we could have a sustainable operation any longer. And we took that very hard decision.”

LATAM ceased operations in Argentina in June 2020 and officially closed down the branch last month.

Before the pandemic, LATAM Argentina operated 12 domestic destinations across Argentina. It also flew to several cities abroad, including Sao Paulo, Santiago de Chile, and Lima. In 2019, the airline carried 3.1 million passengers.

Despite winding down the domestic branch, LATAM will continue the international connectivity out of Ezeiza’s International Airport in Buenos Aires. Plus, leaving a struggling market like Argentina will allow LATAM to refocus on more promising grounds, like Colombia.

LATAM Argentina
LATAM ceased operations in Argentina last year. Photo: Getty Images.

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All onboard for Colombia

Leaving Argentina was tough, but it allowed us to focus and redeploy our priorities and opportunities, said Roberto Alvo. He added,

“Today, we’re looking into the Colombian market, which is the second largest in the region. It is a great opportunity, and we have been able to position ourselves as the second operator in Colombia in the last few years.”

The airline is behind Avianca in terms of market share. Nevertheless, Colombia is poised to have a very interesting year. Startups are coming like Ultra Air and Starblue; low-cost carriers like Viva Air and increasing their market shares and reaching for international connectivity; and Avianca and LATAM are in Chapter 11 reorganizations.

Roberto Alvo is confident that LATAM has a very solid cost position. He claims that the airline can be extremely competitive in costs, even against low-cost carriers.

“So yes, it is very sad we were not able to find a way to be sustainable in Argentina. But a problem has always been an opportunity, and now we can refocus our resources. We believe we have better chances of succeeding,” he said.

LATAM is pushing its cargo division with the conversion of up to eight Boeing 767 into freighters. Photo: LATAM Cargo.

Financial results for LATAM

On Tuesday, LATAM published its fourth-quarter financial results. The South American carrier had a net loss of US$4.54 billion in the year due to the impact of the COVID-19 crisis.

Passenger revenues decreased 70%, according to the airline. Meanwhile, cargo revenues surged 13.7% due to the increase in e-commerce in Latin America. Last week, LATAM Cargo announced the conversion of up to eight Boeing 767 into freighters.

The airline lost 61.9% of its traffic compared to the previous year. In 2020, LATAM carried 28.29 million passengers versus 74.18 million in 2019.

Finally, the company reported US$1.696 million in cash and cash equivalents at the end of the fourth quarter. Plus, LATAM also has US$1.3 billion in a fully committed and undrawn DIP Financing facility under the Chapter 11 bankruptcy process. Both of these numbers are record levels of liquidity to face the upcoming months, the airline said.

Do you expect LATAM to thrive in the next years? Let us know in the comments.