LATAM’s Passengers Fall 50% But There’s Hope For The Airline

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LATAM Airlines Group has seen a decrease of almost 50% in the number of passengers boarded during the first half of 2020 compared with 2019. Due to the coronavirus pandemic, Latin America’s largest airline group has seen its business shaken to its core. Nevertheless, there’s a lot of hope. Let’s investigate further.

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LATAM saw a 47.8% decrease in its passenger numbers during 2020’s first half. Photo: Getty Images

Cargo is the bright spot for LATAM

The South American carrier has transported 18,294,000 passengers during the first six months of 2020. While LATAM Airlines Group has already carried more people than almost every other Latin American airline did in 2019, it is still an abysmal fall for the carrier. On a year-to-year basis, LATAM has lost 47.8% of its passenger traffic.

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Since March, LATAM has seen how almost every country in South America closed its borders. Only Mexico remained fully open, while Brazil and Chile kept its airspaces flowing but with several restrictions. Only now, a few countries like Ecuador and Peru are opening up again.

To face this crisis, LATAM has turned to cargo operations. The carrier said,

“The company began to use passenger aircraft exclusively for cargo transportation on a regular basis. This occurs both in international and domestic routes using different aircraft, including B777, B787, B767, A320, and A321.”

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Additionally, it started operating some new cargo destinations like Mexico City and Los Angeles. LATAM also multiplied by five its cargo capacity between Santiago de Chile and Miami, going from six to 31 weekly frequencies. The Group said its connectivity from Miami to South America increased by 15% in the last few months.

Still, due to the current uncertainty in the world, and mainly in Latin America, LATAM filed for a Chapter 11 bankruptcy in the US. It was an excellent move to face the current crisis.

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LATAM Cargo is a bright spot for the South American carrier. Photo: Getty Images

LATAM’s well ahead in its Chapter 11 filing

While there’s still much to do, and we’re only at the beginning of LATAM’s Chapter 11 filing, the South American Group is in place for a successful recovery.

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In less than two months, LATAM Airlines Group has managed to obtain over two billion USD in investments. First, Qatar Airways and the Cueto and Amaro families agreed on committing $900 million. Then, Oaktree Capital Management L.P. and its affiliates promised a financing proposal of $1.3 billion.

Although it is not a competition, LATAM Airlines Group is ahead in its Chapter 11 filings compared to Avianca and Grupo Aeroméxico. Before the pandemic, Avianca already had a few financial problems, which makes its process more difficult. Meanwhile, LATAM was positioned as the best South American carrier and had just received an investment from Delta Air Lines.

Nevertheless, LATAM still has some things to figure out. Before coronavirus, the legacy carrier relied heavily on its long-haul flights and connectivity within South America. Both of these markets are in a full stop, and it will take longer for them to recover. So LATAM has to find a way to compete in domestic markets with low-cost carriers like Sky Airline in Chile and Viva Air in Peru and Colombia.

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Recently, LATAM Brazil joined the Chapter 11 process in the US. Photo: Getty Images.

LATAM rejects state aid

Thanks to the two billion USD bailout, LATAM is in a good position. While other carriers are continually looking for state aid, LATAM decided to withdraw from this instance. In a statement, LATAM said,

“Combined, Tranches A ($1.3 billion) and C ($900 million) meet LATAM’s financing requirements in the context of the COVID 19 crisis, and, as a result, it is hoped that financial support will not be required from governments.” 

What do you think of LATAM’s management of its current crisis? Let us know in the comments.

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