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Case - Latam Airlines and COVID-19: Seeking Bankruptcy Protection in the United States (Grade 8,5)
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Case Study 3: Seeking Bankruptcy Protection in the United States
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Case Study 3: Latam Airways 1Task 5.3: Case - Latam Airlines and COVID-19:
Seeking Bankruptcy Protection in the United States
Maastricht University
School of Business and Economics
, Case Study 3: Latam Airlines 2
Table of Content
1. Introduction ................................................................................................................................2
2. Chapter 11 vs Chapter 7 .............................................................................................................2
3. Why filing bankruptcy in the US? What about Chilean capital markets? ..................................4
4. Vulnerabilities of Latam in comparison to the industry .............................................................6
5. The long-term viability of Latam Airlines .................................................................................8
6. Is Latam’s DIP a good investment choice? ...............................................................................10
7. Chilean government public aids to Latam ...................................................................................12
8. Final Assessment/Conclusion ..................................................................................................15
9. Bibliography.............................................................................................................................15
10. Declaration of originality .....................................................................................................16
1. Introduction
Latam Airlines Group, with an enterprise value of $10 billion in 2019, was among the world's largest
airlines. It is known for its diverse international ownership structure and unique business strategy that
combines cargo and passenger travel. The company had bet on the growth potential of the aviation
industry in Latin America. However, the unforeseen shock of the Covid-19 pandemic had a catastrophic
impact on the aviation sector. Financially, 2020 was recorded as the worst year in aviation history. The
Pandemic led to a collapse in revenue streams due to lockdowns and grounded flights, exposing
weaknesses in Latam's financial structure. Latam had entered the Pandemic with a high level of leverage
compared to its peer companies, making it unable to meet its debt obligations to creditors. This report
aims to provide a comprehensive analysis and recommendations for Latam Airlines Group to navigate
the challenges posed by the COVID-19 pandemic and emerge as a resilient and sustainable player in
the aviation industry.
2. Chapter 11 vs Chapter 7
When COVID-19 hit the world, Latam Airways had already increased its leverage ratio and got caught
in an unfortunate, vulnerable state that forced the company to file for Bankruptcy. However, Bankruptcy
can consist of two very different processes: liquidating the company's assets or reorganizing the
2
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