With the majority of its aircraft on the ground, Latam Airlines faces the worst crisis in its history, as do many of the world’s airlines. In order to stay afloat, the company linked to the Cueto family seeks to deploy a series of measures, such as negotiating with its unions a temporary decrease in a percentage of its workers’ wages.
Latam employs around 43,000 people, less than half work in Chile. In wages and salaries, the firm disbursed at the consolidated level US $ 1,478 million throughout 2019, that is, an average of US $ 124 million per month.
Brazil is its largest market, and contributed 38% of its income, which in 2019 reached US $ 10,430.9 million. Chile only represented 16% of that.
The International Air Transport Association (IATA) warned on Tuesday that most of the world’s airlines are facing a cash crisis, amid paralysis of travel due to the coronavirus, and that the Industry may need up to $ 200 billion in emergency aid.
The lack of cash is what currently complicates the situation tremendously for Latam. However, it has some reserves. As of December 31, the company’s liquid funds balance reached US $ 1,459 million, which are invested in short-term instruments. Additionally, it has a committed unused credit line of US $ 600 million. However, its debt level exceeds US $ 7.2 billion.
In the midst of this catastrophic scenario, the company’s management is trying to reduce its fixed costs, like wages. Given this, the company is doing a complete analysis of the situation, which includes determining the number of people who will have to stay in their homes and how much their work will be reduced due to the fact that most of the planes are parked. After that, the company will start the negotiation with the different unions.
IN addition, Latam, like many international Airlines is seeking state aid. “We are going to require the support of governments to get ahead of the greatest crisis in history,” said Roberto Alvo, current commercial vice president and next CEO of the firm to replace Enrique Cueto,on Monday.
The option of this airline would be the issuance of a subordinated bond that is acquired by the State of Chile.
The economy minister, Lucas Palacios, questioned the request. “I learned that Latam is asking for (financial) help from the State (…). It is very hasty to ask for something like this for a large company. It doesn’t seem convenient to me. We are for the people, “he said yesterday.
Despite this, the firm would continue in negotiations to try to close state support.