Three stakeholders, including Qatar Airways, agreed on loaning $900 million to the South American carrier, LATAM. The loan is part of the first phase of the Chapter 11 restructuring. What does it mean for LATAM Airlines Group? Let’s investigate further.
LATAM is avoiding government financing
LATAM is currently in Chapter 11 in the US. The carrier filed for bankruptcy for each of its branches in South America, except Brazil, Argentina, and Paraguay. Additionally, LATAM ceased its operations in Argentina and suspended 23 routes from Chile.
In the last few weeks, a group of investors included Blackrock Inc, Macquarie, HSBC Bank, and the Chilean company Moneda Asset Management were also looking for a loan for the troubled airline. According to some reports, these investors searched for investment between $1 billion and 1.5 billion.
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At the same time, LATAM Airlines Group has worked to avoid a possible government loan. In Chile, the possibility of the Government bailing out the historical carrier was controversial. Why? Because current Chilean president Sebastián Piñera has had business in the past with the Cueto family, one of LATAM shareholders.
According to several newspapers, the relationship between Piñera and Cueto dates back the days when LATAM was still two airlines, LAN and TAM.
To avoid the Government, LATAM relies on its investors
In a statement, Roberto Alvo, CEO of LATAM Airlines Group, said,
“The companies that are part of LATAM didn’t accept the State support, unlike what happened in the rest of the world. Therefore, the commitment of the two main stakeholders is fundamental for the continuous operation (of the carrier) and to have access to future financing.”
Qatar Airways has a 20% investment in LATAM Airlines Group. But the Middle East carrier is not the only one that is behind the $900 million loan. The Cueto and Amaro families are also supporting this loan.
Qatar Airways is investing $600 million, and the two families will loan the extra $300 million, according to Crónica.
Why is Qatar Airways investing in foreign carriers?
Qatar Airways’ approach is different from other carriers around the world. For example, Delta Air Lines has denied any possible loan in troubled airlines such as Aeromexico (remember, Delta has a 49% stake in the Mexican carrier). The Qatari airline is, on the other hand, planning its investments in the long run.
In an interview with Sky News, Akbar Al Baker recently said about its international investments,
“We are there in the long run. It is a strategic investment, and we will continue to be an investor in IAG, as we’ve done to both LATAM and Cathay Pacific.”
Al Baker added later that Qatar Airways is prepared to inject more equity in partners such as IAG.
“If it is necessary, yes, we will inject equity into it because it is a long term investment for Qatar Airways,” he said.
LATAM Airlines Group is the leading carrier in Latin America. In 2019, it transported over 70 million passengers, while Avianca, the second most important airline, had over 30 million passengers. The importance of LATAM in the region cannot be understated, and Qatar Airways knows it.
What do you think of Qatar’s investment? Let us know in the comments.