Latam Airlines — the holding company that controls Latam Brasil and is headquartered in Chile — presented in late November a plan to restructure its US$ 18 billion debt. The company filed for chapter 11 – or chapter 11 – in May of last year, in US courts.
Now, he is awaiting approval from creditors, but he is confident. “The plan was built together with more than 70% of creditors and more than 50% of shareholders, so this gives a guarantee that it will have support and will be approved, which we hope will happen in the next two months”, says Jerome Cadier, president of the airline in Brazil, told CNN. “Latam will come out stronger and more competitive from chapter 11”.
The process is very similar to the judicial recovery plan known in Brazil: when an indebted company enters chapter 11, it gains special conditions to negotiate its debts with creditors. It is an attempt to recover the company to prevent it from going bankrupt.
Cardier also spoke about the various public manifestations by Azul in a consolidation — which he does not see as likely — and warned of pressured costs in the sector.
“We always saw with difficulty any change in the composition of the group during chapter 11, which is already a complicated process, and in the middle of it put a consolidation, as I understand that is the intention of Azul”, he says. “Negotiating with regulatory bodies is practically unfeasible in the middle of this process. (Furthermore), in my view, Azul’s move is much more defensive than a credible short-term consolidation move.”
Cadier cites that the airline industry is experiencing a time of “very great” pressure on costs, which should influence the price of fares in the short term.
“Around 60% of an airline’s expenses are linked to the exchange rate, which started the pandemic at around R$4.20 and has already gone to R$5.60. The cost of fuel is 30%, 35% of the company’s cost, and has been rising in the last 20 months at a high of 90% in reais. In addition to the cost of inputs, including labor, which has been increasing a lot”, he says.
“So, there is inflationary pressure that, over the next few months, we should see a recovery in the fare, which, on domestic flights, is already at levels similar to what it was before the pandemic, but it will need to be recover in addition in reais”, he says.
Cadier also says that the company is still far from 100% capacity on international flights, which is closer to 35%, 40%, mainly due to the Ômicron variant, which has led many countries to increase border controls.
“We are going to add more capacity in the coming months, as we have seen some recovery, but recovering the levels of 2019, we can only imagine that it will happen at the end of 2023 or in 2024”, he says. “There’s still a slow international ahead of us.”
* Posted by Ligia Tuon
Reference: CNN Brasil
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