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LATAM Shows Steady Recovery Despite Financing Struggles
LATAM Airlines reported on Monday its preliminary operating results for the month of August 2020, which demonstrate steady progress in the gradual recovery of the airline’s network in both the domestic and international markets. The group operated at 13.9% of its capacity – measured in ASK – compared to August 2019, an improvement of almost five points compared to the previous month, when it operated 9.2%, the highest month-on-month variation since the start of the pandemic. The carrier flew 5.7% of its 2019 schedule in April, 6.7% in May and 6.4% in June.
The domestic markets of the Spanish-speaking countries in which LATAM operated – Chile, Peru and Ecuador – as well as Brazil have managed to break the 10% recovery barrier, but the international segment is still behind by several points as a consequence of international travel restrictions put in place by most governments.
LATAM’s load factor was 65.8%, 18 points lower compared to August 2019 but still the best in five months after a historical low was reached in April, when the airline’s load factor was only 43.8%.
The airline reported that in Chile it has resumed flights to Copiapó, La Serena and Temuco in addition to increasing frequencies to Iquique, Calama, Antofagasta, Puerto Montt and Punta Arenas in August. Internationally, it resumed the route between Santiago and Madrid, Spain. Regarding cargo, LATAM Cargo achieved a load factor of 73.3%, 19 points more than in August 2019, after having maximized the use of its Boeing 767F fleet and using passenger aircraft to exclusively transport cargo on a total of 345 flights.
These numbers are important for one of Latin America’s key operators, as LATAM is still struggling to get the financial relief that it needs. The New York bankruptcy court recently rejected a $2.4 billion financing plan presented by LATAM Airlines on the grounds that the convertible loan included as part of the package would imply an “inappropriate” treatment of certain shareholders. The proposal consisted of a $1.3 billion loan from venture capital firm Oaktree Capital Management and a $900 million convertible loan from several key LATAM shareholders, including the Cueto family and Qatar Airways.
This move has infuriated minor shareholders that looked for alternatives and attempted a different rescue plan backed by investment bank Jefferies Group. Despite the setback, the court has set the grounds for the company to present a similar financing plan in the future, as long as it does not repeat the intention of converting part of the credit into capital.
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