LATAM’s Airbus A350s have perhaps some of the most interesting fleet histories. As it turned out, LATAM didn’t need its full Airbus A350 capacity, so it ended up leasing some of it to Qatar Airways and then selling four to Delta Air Lines. Qatar Airways’ leases ended and Delta canceled its purchase contract for the jets. Now, the saga continues as LATAM’s creditors have raised concerns over Delta and Qatar’s actions regarding the Airbus A350s.
LATAM Airbus A350 with Qatar Airways
Qatar Airways and LATAM have a long history around the Airbus A350s, so it makes sense to start there. In 2017, LATAM and Qatar Airways entered into agreements with Qatar Airways for the lease of two Airbus A350-900s. In 2019, Qatar Airways subleased three more Airbus A350s.
The rationale at the time was that Qatar Airways, which owns an approximate 10% stake in LATAM, needed additional widebody capacity to support the airline’s expansion plans, as delays in widebody aircraft deliveries have turned the airline’s growth trajectory upside down. LATAM also had spare capacity amid some changing economic factors in Latin America during the period.
The airline was also trying to figure out what it really wanted to do with its order for the Airbus A350. The carrier had modified the order by converting it to the Airbus A350-1000, then back to the A350-900s, before filing for bankruptcy and switching to a full-Boeing widebody fleet.
However, in 2020 the crisis hit and airlines around the world faced the most extreme drop in travel demand in recent memory. In March 2020, Qatar Airways and LATAM began exploring options for Airbus A350s leased from the Middle East carrier. The two parties have agreed on the early return of the leased jets, and Qatar Airways will pay an unblocked sum to LATAM.
The Airbus A350s of Delta and LATAM
Regarding the partnership with Delta, the Airbus A350s started up in September 2019. The two carriers announced their intention to form a global partnership covering travel between the Americas. This would include extended codeshare, and Delta would invest $ 1.9 billion for a 20% stake in LATAM.
Also part of the partnership, Delta announced that it will purchase four Airbus A350s from LATAM and take on LATAM’s commitment to purchase 10 additional Airbus A350-900s. This would essentially increase Delta’s A350 fleet by 14 aircraft ultimately.
When the crisis hit, Delta reviewed the LATAM deal and worked with the airline to end the purchase of four Airbus A350-900s, while retaining purchase commitments for 10 A350s. Delta is reportedly paying the airline $ 62 million for ending the agreement to purchase four A350s.
LATAM’s creditors have problems
LATAM Airlines’ official Unsecured Creditors Committee (the Committee) raised concerns about the agreements with Qatar and Delta A350 on June 16.
With regard to Delta, the Committee alleges that Delta wanted to withdraw from the aircraft agreement to avoid having to pay for planes whose value had fallen due to the crisis. The committee alleges that the plane has lost half of its value compared to the appraisal values before the pandemic.
With regard to Qatar Airways, the Committee alleges that LATAM authorized Qatar Airways, which it claims to be “extraordinarily solvent”, value “essentially as a favor”, to evade the obligation to pay the rent of the aircraft. .
Airlines fight back
LATAM hit back at the creditors, alleging that the committee seeks to “create a false story about LATAM and its interactions with its shareholders”. LATAM says the transactions provided the airline with additional liquidity and flexibility amid the industry’s worst crisis in recent memory. LATAM also states that it has conducted a full and thorough review.
LATAM completed both transactions before filing for bankruptcy. Even though the airline filed for bankruptcy shortly after the deals with the two airlines, it says the deals were “independent and good faith negotiations.”
Both Qatar Airways and Delta Air Lines reaffirmed that the transactions were flawless and had been concluded through appropriate negotiations. LATAM ultimately needed cash at the onset of the crisis. The agreements with Qatar and Delta have contributed to this factor rather than harming LATAM, as the Committee alleges.
LATAM has decided to no longer continue to operate the Airbus A350. Ironically enough, it looks like some of those Airbus A350s could end up with Delta Air Lines.
The hindsight is 20/20, as the saying goes. Thinking of the world in May 2020, it seemed crazy that Delta or Qatar Airways wanted more Airbus A350s with travel restrictions, parked planes and not-so-good finances. Now, with the world returning, it may seem like those decisions were short-sighted and perhaps Delta’s great play to grab wide-body jets on the cheap later on.
The world has changed dramatically over the past year. While the previously flown Airbus A350s LATAM can now head to a new home in the United States, that does not necessarily mean that there was an irregularity in the actions taken.
Ultimately, the courts will decide what should happen in this case. LATAM, Delta and Qatar Airways believe they have acted appropriately. The Committee expressed its concerns regarding these agreements.
Nevertheless, the LATAM Airbus A350 saga continues. Perhaps the only thing clear now for these planes is that the South American giant wants to consolidate its flights with widebody Boeing.
What do you think of the Committee’s concerns regarding the Airbus A350 LATAM transactions with Qatar Airways and Delta Air Lines, respectively? Let us know in the comments!