Latam Group to refocus towards Colombian market, following collapse of its Argentinian unit

Published: Sunday, March 14, 2021

Latam Airlines Group sees opportunities to refocus its attention and resources towards the Colombian market, following the collapse of its Argentinian unit last year.

Describing the closure of Latam Airlines Argentina in June 2020 as a “very hard decision”, Latam Airlines Group chief executive Roberto Alvo told a Capa Live event on March 10 that “a problem always brings an opportunity, and now we can refocus our resources where we believe we have a better chance of succeeding”.

That means the group – most of which is restructuring under US Chapter 11 protection – is “looking into the Colombian market, which is the second-largest market in the region”.

Having already positioned itself “as clearly the second operator in Colombia”, Latam Airlines still has a “great opportunity” in the country, Alvo stated.

Helpfully, the operator has “come to a very, very solid cost position” at its Bogota base, he said.

And expansion in Colombia – where flag carrier Avianca is also reorganizing under Chapter 11 protection – would complement the group’s Lima hub in neighboring Peru, Alvo noted.

“I think that the complement of our Lima hub with our operation in the northern part of the subcontinent is very clear,” he said, adding that “the geography Colombia has with respect to the rest of the network of Latam is just perfect”.

Indeed, Alvo believes that “the combination of [the hubs] we have today in Sao Paolo, Lima and Santiago, which allows us to connect South America with almost everywhere in the best of ways, is a huge benefit to any large deployment or operation that we could have in the northern part of the South American sub-continent”.

Latam Airlines Argentina’s flights to and from 12 domestic destinations ceased in June 2020.

While Argentina “has huge potential” and is “very underdeveloped” in airline connectivity terms,” we just couldn’t find the set of circumstances where we could believe that we could have a sustainable operation”, Alvo said.

His comments came the day after Latam Airlines Group announced a full-year net loss of US$4.55bn for 2020, on an operating loss of $1.67bn.

Revenue was $4.33bn, a decline of 58.4% year on year, on a 62% drop in passengers carried and a 13% fall in tons of cargo transported.

Operating expenses were 38% lower at $5.99bn.

Latam ended 2020 with $1.7bn in cash and $1.3bn in a fully committed and undrawn debtor-in-possession financing facility.

It had gained bankruptcy-court approval for its DIP financing proposal in September 2020, receiving shortly afterwards the first instalment from its loan of up to $2.45 billion.

With Latam Airlines Group’s reorganization under the Chapter 11 process still under way and expected to be finalized mid-year, Alvo said he has “no doubt that when the crisis passes, Latam will operate as a strengthened group”, despite expectations that the region will be relatively slow to emerge from the pandemic.