In the first quarter of 2020, LATAM Airlines Group posted a net loss of US$2,120.2 million. The airline group attributed this loss mainly to the effects of the coronavirus crisis. It also said that while passenger services are deeply affected, the cargo operations have ramped up. But despite this, LATAM is expecting to operate 18% of its capacity in July. Let’s investigate further.
Currently, LATAM Group expects to operate between 5% and 9% of its total pre-crisis capacity during June.
Latin America is, at the moment, the fourth epicenter of the coronavirus pandemic. This means that a lot of the governments in the region are keeping its airspaces closed to commercial operations.
Argentina and Colombia, two markets where LATAM flies and operates, banned any commercial flight until September. Brazil and Chile, the two main country hubs for the Group have restrictions for international passengers. Mexico is the only country in the region not to have any restrictions.
With this in mind, LATAM Airlines Group expects to reach an 18% capacity in July. Meanwhile, the cargo operations have ramped up in the last few months. During the first quarter, LATAM increased Its cargo capacity between South America and Europe by 40%. It also had 15% growth between South America and Miami and added Mexico City and Los Angeles as new destinations.
The coronavirus cut a possible growth
During the first quarter of this year, LATAM had total revenues of US$2,352.3 million. The amount was a 6.8% decrease on a year-on-year basis due to a reduction in operations after the pandemic arrived in Latin America. Before coronavirus, LATAM had high hopes for a good year.
New LATAM Airlines Group CEO, Roberto Alvo, said,
“The first quarter results reflect LATAM’s healthy performance prior to the onset of the COVID-19 crisis, as demonstrated by the operational results, lower costs, and solid liability management.”
And why does he say that? Well, the Group had a 17% increase in its operating income. The operating expenses declined by 7.6%, and the costs per available seat per kilometer (ASK) fell by 1.2%.
Until April, the Group had transported 17,829 million passengers, a 24.9% decrease in comparison with 2019. But, before the pandemic started in the region, in March, LATAM had a good run. It announced a new joint venture agreement with Delta and its exit from the Oneworld Alliance. Additionally, it signed a new codeshare agreement with Malaysia Airlines and launched its longest route from Santiago de Chile.
Chapter 11 does not mean liquidation
In its operating results, LATAM Airlines Group highlighted that its Chapter 11 protection in the United States does not involve liquidation.
The airline is convinced that Chapter 11 “is the best path forward to minimize disruptions to the business.” It added that the proceeding is different from the concept of liquidation and bankruptcy, as it is understood in Latin America.
Currently, the two leading airlines in Latin America, LATAM and Avianca, are under Chapter 11 filings. LATAM describes the proceeding as “a legal framework under which LATAM and its subsidiaries will continue operating.” The company will pay its employees, meet benefit obligations, and pay critical suppliers. In the meantime, LATAM will reorganize its balance sheet. Not all LATAM branches are included in the Chapter 11, as Brazil, Argentina, and Paraguay are out of the deal. (https://simpleflying.com/latam-18-percent-capacity-july/)
