South American Airlines can file for bankruptcy

Two major airlines of South America have already filed for bankruptcy protection and more airlines can follow if the situation remains the same. The pandemic has affected the airlines worldwide, but Latin America’s airlines are the worst affected, as they are not getting much support from the governments.

Avianca, Colombia-based airline filed for chapter 11 bankruptcy protection in early May whereas LATAM filed for bankruptcy protection on 26 May. They would continue the operations, parallel with the bankruptcy protection process. The crisis has affected their operations a lot, so the bankruptcy would allow them to prepare for the resuming of normal operations post corona crisis.

39 companies have filed a joint bankruptcy with the Southern District of New York’s bankruptcy court and Avianca Holdings is one of them. Other companies include Avianca Ecuador, Tampa Cargo, Avianca Costa Rica, and Taca International Airlines.

LATAM is one of the 29 entities named in the joint bankruptcy filing that include affiliates in Peru, Colombia, Ecuador, USA, and Chile, whereas the affiliates in Brazil, Argentina, and Paraguay are not included.

As compared to airlines of Europe, Asia, and North America, the South American airlines are facing more severe financial issues. Some countries of those regions have provided financial aids to their airlines including the USA, Canada, Netherlands, France, and Germany.

In South America, some airlines are facing a liquidity crisis, because the governments have not yet approved financial packages. Even though the governments are considering providing financial aid to careers, it may time before they approve the packages. Financial problems would delay the process of expanding the current network.

The authorities understand that the industry is in trouble and needs financial supports, but the region is poor, so the help may come very late if it comes at all. IATA is working with the governments and airlines to restart normal services and find ways to support the industry. But, the IATA’s vice president for the region, Peter Cerda said that if the current situation persists many careers would be unable to restart the operations.