Back to Avianca, Aeromexico and LATAM Chapter 11

Earlier this month, LATAM Airlines Group announced that the US bankruptcy court had approved the company’s Chapter 11 group reorganization plan. LATAM joined Aeromexico and Avianca in announcing their exit from bankruptcy proceedings. But how did they get there in the first place and how do they look so far? We’ll take a look.

Filing of Chapter 11

The COVID-19 pandemic has deeply affected the airline industry in Latin America. Unlike other parts of the world, governments in South America did not provide financial assistance to carriers, which ultimately led some to seek support elsewhere. Most airlines in the region survived, although a few disappeared (Interjet, TAME EP and the short-lived Itapemirim Transportes Aéreos).


In May and June 2020, three of the most iconic Latin American airlines, Avianca, LATAM and Aeromexico, filed for Chapter 11 bankruptcy in the United States.

The Chapter 11 filing has provided these airlines “a clear and guided opportunity“to work with their creditors and other stakeholders to reduce their indebtedness and address the business challenges facing the industry as a whole, without going into liquidation.

Avianca was released from Chapter 11 in December 2021. Photo: Getty Images.

Chapter 11 of Avianca

Colombian carrier Avianca was the first to file for Chapter 11 and the first to emerge. Moreover, for Avianca, this was its second Chapter 11 proceeding (the first was held between 2003 and 2004, in a post-9/11 world).

Between 2018 and 2019, Avianca had to do another financial reorganization, but this one was private, and the airline managed to avoid filing for bankruptcy in the United States. This private reorganization was successful; he brought in a new management team and a new plan, then simply known as Plan Avianca 2021, which included loans and strengthening the airline’s working capital position while executing a debt reprofiling .

On January 29, 2020, Anko van der Werff, then CEO of Avianca, proudly announced that the company’s financial situation had turned 180 degrees and that he was very optimistic about the future. About two months later, everything changed.

The Chapter 11 filing was a first step in protecting the airline from a pandemic that would have a prolonged impact, van der Werff said in 2020.

During the Chapter 11 process, the airline received more than US$2 billion in DIP financing, rejected lease agreements for several aircraft, and redesigned the entire Avianca concept. For example, the airline is in the process of densifying its fleet of small carriers and recently launched four international tariffs to personalize the journeys of its passengers. Avianca now looks more like a low-cost airline than a traditional carrier.

Avianca announced it was graduating from Chapter 11 on December 1, 2021. During its 18-month process, the carrier significantly reduced debt and more than US$1 billion in cash.

After its chapter 11, Avianca did not remain inactive. On the contrary, it has been at the forefront of the consolidation trend in Latin America.

Avianca recently announced that it will acquire Viva Colombia and Viva Peru, and the three will operate under the same holding company. A week later, Avianca shareholders announced the launch of Abra Group Limited with Brazilian GOL, which would create the largest airline group in the Latin American region.

Aeromexico exited Chapter 11 in March 2022. Photo: Getty Images.

Aeromexico Chapter 11

Mexican carrier Aeroméxico was the latest to file for Chapter 11 among the three Latin American airlines.

Aeromexico faced an uphill battle in the country, as it was unable to compete cost-wise with Volaris and Viva Aerobus, Mexico’s two ultra-low-cost carriers. Additionally, Aeromexico’s international market, which was traditionally its stronghold against ULCCs, simply disappeared overnight due to the COVID-19 pandemic.

The Mexican airline received more than US$1 billion in DIP financing from a creditor, Apollo Global Management, which later became the airline’s largest shareholder, with around 26%. At the same time, Delta Air Lines diluted from 49% to 20%.

During its Chapter 11 process, Aeromexico reorganized its fleet composition, retiring the former Embraer E175 and most of its Boeing 737-700s while renegotiating its order with Boeing for Boeing 737 MAX and 787 Dreamliners and signing new leases with companies like Dubai Aerospace Enterprise. Aeromexico’s fleet currently numbers 134 aircraft.

Throughout the bankruptcy process, Aeromexico filed a restructuring plan, in which the airline capitalized recognized unsecured loans (approximately $2.3 billion) and some loans under its DIP financing ( approximately US$750 million) obtained during the Chapter 11 process and has also capitalized new capital contributions of over US$700 million.

When its emergence was announced, Aeromexico was valued at approximately US$2.5 billion. The airline’s investors will raise more than US$1.5 billion in new equity.

Additionally, the airline is investing $5 billion in fleet and other key actions to improve the customer experience.

Over the past two years, Aeromexico has launched and announced around 20 routes, including several departing from the new Felipe Ángeles International Airport in Mexico City.

This month, LATAM received approval for its Chapter 11 reorganization plan. Photo: Getty Images.

LATAM Chapter 11

LATAM Airlines Group has spent more than two years in Chapter 11. Prior to the COVID-19 pandemic, LATAM was the strongest carrier in terms of financial results, compared to Avianca and Aeromexico.

Nevertheless, the crisis profoundly affected LATAM’s ability to operate, and this is something that continues to this day. LATAM has recovered approximately 76% of its pre-pandemic capacity in its markets (Brazil, Chile, Colombia, Ecuador and Peru). Also, during the pandemic, LATAM ceased operations in Argentina.

Like Aeromexico and Avianca, LATAM has extensively restructured its fleet, which included eyebrow-raising moves like the early lease rejection of its Airbus A350 fleet (some of which now fly with Delta).

The airline also announced the conversion of most of its Boeing 767 fleet to freighters and negotiated with Airbus and Boeing to receive 72 new aircraft in the coming years (mainly Airbus narrow-body airliners).

In the final stages of its Chapter 11 process, LATAM signed Debt Commitment Letters that will provide US$2.25 billion in new debt and a new US$500 million credit facility, plus 1 US$.17 billion in DIP funding.

In addition, once LATAM’s reorganization plan is effective, the airline will receive approximately US$8 billion through a combination of capital increase, convertible bond issuance and new debt.

This injection includes funding of US$5.4 billion backed by major shareholders such as Delta Air Lines and Qatar Airways and major creditors of LATAM.

Finally, earlier this week, the U.S. Department of Transportation (DOT) tentatively granted approval and antitrust immunity to the joint venture agreement between Delta Air Lines and LATAM Airlines Group.

Have you traveled with any of these three airlines as a result of their Chapter 11 proceedings? Let us know in the comments below.

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