The CEOs of LATAM Airlines, Sky Airline, and JetSMART recently said that 2021 will be a recovery year for Chilean carriers. They expect that the South American country’s domestic market will be near 100% by the end of next year. So, how they plan to do it?
LATAM will thrive thanks to its Chapter 11
LATAM Airlines Group is the largest South American airline. With a fleet of over 300 airplanes, LATAM transported more than 70 million passengers in 2019. It was one of the role models of airline management before the COVID-19 pandemic, even though it had recently faced some pressure from low-cost operators entering the South American market.
That’s why it was a big surprise for everyone when LATAM filed for a Chapter 11 bankruptcy in the US. It recently received approval for its DIP Financing, worth US$2.45 billion.
Meanwhile, the South American carrier has been deeply affected by Government restrictions. It flies in many countries like Chile, Brazil, Colombia, Peru, and Argentina. In October, the airline operated at a 26.8% capacity due to severe restrictions in many countries. Of this total, more than half of the capacity came from one nation, Brazil.
Now, LATAM expects to end the year, operating at nearly 40% of its pre-COVID capacity. For 2021, the expectations are good. Roberto Alvo, LATAM’s CEO, said yesterday,
“We are going to exit strengthened from Chapter 11. We will have a competitive cost structure, similar to the ones held by Sky and JetSMART, which will allow us to seize more opportunities. LATAM expects to exit its Chapter 11 reorganization during the second half of 2021.”
LATAM still has a long way forward to achieve a full recovery. In the third quarter of 2020, its revenues plummeted 80.8% compared to last year.
JetSMART going into cargo
JetSMART is a low-cost operator that already flies in Argentina and Chile. It also plans to fly in Peru in the second quarter of 2021. According to the Chilean aviation authorities, JetSMART currently holds a 5% international market share and a 17% domestic market share.
Regarding capacity, JetSMART expects to close the year operating domestically at 65% of what it used to do last year. Internationally, it will fly at 20%, Estuardo Ortiz, JetSMART’s CEO, said. He added,
“I remain optimistic that the domestic market will largely recover across the region towards the end of 2021.”
Additionally, JetSMART plans to diversify its business. Next year, the airline will launch JetSMART Cargo. The new division will start operating in Chile and Argentina by March of 2021. Estuardo Ortiz said,
“We previewed the launch for later on in the year. However, since the cargo business has had an increase in airlines’ revenues due to the current pandemic, we will debut the project in the first quarter of 2021.”
What about Sky Airline?
Sky Airline is the second-largest carrier in Chile. It holds a 25% domestic market share in the country and a 10% international market share.
Currently, Sky Airline is operating at nearly 65% of its pre-COVID capacity. According to Sky’s CEO, José Ignacio Dougnac, the airline will close the year at near 80% capacity, the best among Chilean airlines.
He attributed the recovery due to its domestic market focus, according to Chilean newspaper La Tercera. Finally, Dougnac said that Sky Airline could achieve full recovery by early 2022.
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