With a fleet of 320 aircraft, LATAM is expected to experience an unprecedented shrinkage after filing for bankruptcy protection in the US this week. The Chilean group detailed in the documents sent to court that it is expected to return at least 19 planes in the coming days.
Six of these jets are the Airbus A350-900 and Boeing 787 models, state-of-the-art widebodies that stand out for their fuel economy. LATAM will stop using four 787-9 and two A350s, precisely the first two delivered to the Brazilian division – PR-XTA and PR-XTB registration. But the A321 is the model that will most be taken out of operation in this first wave, with 11 units about to be returned to the lessors. The list is completed by two A319s used by LATAM Brasil.
The number of aircraft returned, however, is expected to increase as leasing companies are LATAM’s main creditors and the reason the airline has applied for bankruptcy protection in the USA, where these companies are located. According to the recovery plan, around 97% of the jets are leased, 213 of which through financial leasing and 98 through operational leasing – only nine are owned.
The coronavirus crisis has been cruel to airlines that have many leased planes, whose payments continue to occur as long as these companies are unable to use these aircraft. LATAM Brasil, for example, is only operating at 5% of its pre-crisis capacity and has at least 13 planes banned from flying by its lessors while negotiating a new agreement.
Sublease
One of the reasons why LATAM Brasil was excluded from the judicial reorganization plan involves precisely the group’s strategy in relation to its fleet. It is the Chilean parent company that makes the leasing contracts and passes them on to the Brazilian subsidiary through sublease.
Currently, LATAM Brasil has 160 aircraft, including 129 jets of the A320 family, 13 Boeing 767, 10 Boeing 777 and eight A350s, but has just received four other models of this type that were leased to Qatar Airways.
The airline expects to go through this troubled period counting on the investment of almost $1 billion from its partners and also on assistance from the Brazilian government of around $380 million destined exclusively for LATAM Brasil.
