LATAM Airlines Group SA filed for U.S. bankruptcy protection on Tuesday, becoming the largest carrier to seek an emergency reorganization amid the coronavirus crisis.
Latin America's largest airline follows rival Avianca Holdings of Colombia in seeking U.S. bankruptcy protection.
But unlike Avianca, Chile's LATAM posted profits for four consecutive years totaling more than $700 million. It had recently approved a dividend payment.
LATAM laid off 1,800 employees out of over 40,000 in the lead-up to its bankruptcy filing.
"We have implemented a series of difficult measures to mitigate the impact of this unprecedented industry disruption, but ultimately this path represents the best option," CEO Roberto Alvo said in a statement regarding the filing.
LATAM is an instantly recognizable brand for South Americans, dominating international air travel in the region, as well as a leading domestic flight operator in Brazil, Colombia, Chile, Argentina, Peru and Ecuador.
Carriers in Latin America have sought bailouts to no avail so far, unlike rivals in the United States and Europe.]
LATAM will continue to fly while it is in bankruptcy protection. Its affiliates in Argentina, Brazil and Paraguay were not included in the Chapter 11 filing.
In Brazil, LATAM for weeks has been negotiating a bailout of up to 2 billion reais ($367.45 million) that has yet to materialize.
If negotiations are successful, it could provide a lifeline to LATAM's largest subsidiary.
Chile has so far declined to help LATAM.
LATAM said it had secured funding from major shareholders, including the Cueto family which controls the airline through various companies, the Amaro family and Qatar Airways, to provide up to $900 million to support operations through its bankruptcy reorganization.
Delta Air Lines Inc last year paid $1.9 billion for a 20% stake during better times for the industry.
"To the extent permitted by law, the group would welcome other shareholders interested in participating in this process to provide additional financing," the airline said, adding it had about $1.3 billion in cash on hand.
LATAM said that as of Tuesday it had $7.6 billion in debt, including $460 million in loans tied to its Brazilian subsidiary which is not part of the bankruptcy process.
The airline was downgraded by S&P and Fitch on Friday after the company confirmed it did not pay interest and principal on three tranches of 2015 $1 billion worth of debt tied to the financing of new aircraft purchases.