Latin America's biggest airline LATAM announced on Thursday it has secured US$1.3 billion in financing from a US investment fund to help it survive the aviation industry crisis brought on by the coronavirus.
LATAM filed for bankruptcy in the United States in May, having been forced to scale back its operations by 95 percent due to the pandemic as travel ground to a halt worldwide.
Oaktree Capital Management pledged the US$1.3 billion after LATAM had secured $900 million in credit from Qatar Airways and the Cueto and Amaro families, who are already shareholders in the Chilean-Brazilian company.
It means that LATAM has managed to complete two sections, A and C, of the financing proposal it presented under Chapter 11 of the US bankruptcy process.
Chapter 11 proceedings allow a company that is no longer able to repay its debt to restructure under court supervision without pressure from creditors.
"Today the LATAM group took a big step towards guaranteeing its operational continuity by obtaining from Oaktree Capital Management and its affiliates the commitment for the entirety of the Section A financing," the group said in a statement.
This proposal must be reviewed and approved by the New York court in the coming days.
LATAM is hoping "it won't be necessary to call for financing from governments" for the proposal to be authorized.
The airline announced that its Brazilian subsidiary had joined the Chapter 11 proceedings due to the continuing crisis, which will help facilitate access to the financing proposal.
Before the pandemic, LATAM – a merger of Chile's LAN and Brazil's TAM – flew to 145 destinations in 26 countries, operating around 1,400 flights a day, transporting 74 million passengers a year.
Last month LATAM said it was indefinitely ceasing operations at its Argentine subsidiary due to the financial hardship provoked by the coronavirus pandemic.
The carrier said in a statement the move was "because with the current conditions of the local industry, aggravated by the Covid-19 pandemic, a sustainable projected is not considered viable."
The Argentine subsidiary has been in operation for 15 years but its 12 domestic routes have been shut down by the virus, while four international destinations are operated by other LATAM subsidiaries. Both passenger and cargo flights would be halted, the company said.