Leeham News and Analysis
There's more to real news than a news release.
There's more to real news than a news release.
Leeham News and Analysis
- Bjorn’s Corner: New engine development. Part 4. Propulsive efficiency April 19, 2024
- Boeing unlikely to meet FAA’s 90-day deadline for new safety program April 18, 2024
- Focus on quality not slowing innovation, says GKN April 18, 2024
- Boeing defends 787, 777 against whistleblower charges April 17, 2024
- Dissecting Boeing CEO’s statement next new airplane will cost $50bn April 15, 2024
HOTR: LATAM files bankruptcy, latest COVID airline casualty; 1,100 aircraft involved
By the Leeham News Staff
May 26, 2020, © Leeham News: LATAM, the largest airline company in South America, filed for Chapter 11 bankruptcy today in New York.
LATAM operates more than 300 aircraft. This filing means more than 1,100 worldwide were operated by airlines seeking bankruptcy or
administrative protections. The UK’s Flybe was already failing before COVID effectively shut down UK air travel.
Many others teeter on the edge, saved for the moment by government bailouts.
Below is LNA’s latest tally of aircraft.
I wonder how this will all “play out”….from leasing rates to manufacturing rates to airlines. In terms of investing, I’m investing in the companies which IMHO have strong balance sheets and which will eventually survive (such as Boeing and Airbus and probably Spirit Aerosystems – though not 100% on Spirit Aerosystems). On the carrier side, I see carriers such as Southwest, Ryanair, British Airways, Lufthansa surviving. I don’t know as much as the leasing companies.
Also, I can’t speak up for everyone however my family and I have decided we don’t plan on flying until there is either a vaccine and/or someway, somehow my family has antibodies towards COVID-19. Lets hope this virus has a low mutation rate – which ostensibly seems so far it has, which is good news.
Strange times indeed.
Believe, that no mayor Airlines will be going down, since all of them will be saved with your Tax $€£¥’s from your respective country. Of course the method will be LOANS with minimal guarantees, which an
the end may be condoned by the Public Authorities.
In regards to jumping on any aircraft, unless Private, I won’t like go to through the Airport/Airline hassle to get on any flight during this year, but will be attentive to the experiences of the traveling crowd, and a trustworthy vaccine made available.
Jocobin777, There may be a third option that may be safer and available sooner than a vaccine.
======================
https://www.medicalnewstoday.com/articles/using-convalescent-blood-to-treat-covid-19-is-it-possible#Worries-and-hopes-going-forward
=====================
@Richard Davenport: Thanks for the link – I have already read about convalescent plasma therapy. Its very interesting and potentially viable however I don’t see it replacing anti-viral therapy. 1)Not enough of plasma available. 2)Potentially cost-prohibitive.
While it may be an option, safer?
Vaccine process alone is more straight forward with far less contact and mechanism let alone moving it around and all the associated risks (blood pulled out requiring and IV, plasma process done, ship, insert (IV required) etc.
No reason to think we can’t do a safe vaccine. Billions have had it done for all sorts of disease.
So why don’t we have vaccines for HIV, Ebola, malaria etc? People seem to think vaccine development = and just as importantly, manufacture is predictably quick and easy. It isn’t!
Impact of Hollywood movies and simplistic business school mentality. In the 1995 outbreak movie, a cure is pulled from a specimen almost instantaneously, everyone gets injections the same day… The reality is that we are dealing with the virus family with the largest RNA genome and any therapy has no entry-to-market guarantee as f.e. launching a new business class seat product.
I’d still be cautious in investing in airlines. Margins traditionally are razor-thin and the capital requirements are enormous. Add to that the persistent mentality that managers have to prop up shareholder value no matter what (stock buyback programs, minimalist investment approach to both staffing and customer experience) and you’ve got the recipe for neither a sustainable, nor crisis-resilient business strategy … 🙁
We do have it for Ebola. One for sure, two I believe.
HIV and Malaria sand Bill Gates has been little effort as no profits in poorer countries.
You missed that SARs and MERs are Covd types and they were very close to human trials (died out and the funding quit)
State of the art keeps advancing, there are two trials with a Vaccine that have Human test subjects in the US, one in UK that has more.
One US trial has produces anti bodies. They are gearing up co production, estimate of a million doses by fall (that is enough to protect first responders)
There are probably a dozen efforts underway across the world.
No effort is being dismissed, early use might have limited long term and require a second one or a better ones comes along.
There is no question Malaria is one of the tough nuts, it has a different life cycle than other diseases.
HIV is also a tough one mostly in poor countries and the effort was drugs, once contained in wealthy countries it fell off the map.
No vaccine for malaria because it’s not a virus!
But your general point that vaccines are not always straightforward is valid.
No malaria vaccine, think again: https://www.radboudumc.nl/en/center-for-infectious-diseases/scientific-research/controlled-human-infection-models/our-models/malaria-model/malaria-vaccin
HIV is a retrovirus, and mutates rapidly, which makes vaccine creation harder and any vaccine would not necessarily long term effective as the virus in the wild mutates.
Malaria is not a virus, it is a parasitic infection, so you need to kill the parasite. the closes they have come to a “vaccine” is live parasite controlled infection to train the body to recognize and attack the parasite. very expensive, requires a lot of hands on supervision for each patient and not scalable in the types of countries where Malaria is prevalent. long term antimalarial prophylaxis has health risks associated.
there is an Ebola vaccine and has been since 2005, but it was not ever taken to human trials until 2014 because until then most ebola outbreaks had been short lived and not a threat to white people. when the major outbreak happened in 2014 and Europe and the US looked to be threatened, it finally got tested on humans and lo and behold, it worked. how many west africans could have been saved by widespread vaccination programs if they happened when the vaccine was first developed we will never know.
@jacobin
It seems strange for you to invest in airlines/makers when you say neither you nor your family will fly –
– assuming a vaccine will be made, and assuming a short time frame of 18 months to two or three years
this means that either you think others are more foolish than yourself and enough will fly enough to make you a profit or at least save you from a complete loss
or you think antibodies will spread via infections at a sufficient rate to get yourself and enough others into the air so that you will have not thrown away your money, and render therefore a vaccine redundant or at least a luxury
either way betting on something you do not believe in is probably a symptom of the poor thinking that got you into this quandary, in the first place, and will not get you out
That is why I let a professional do my investing.
@bilbo
Thanks for this note of sanity about vaccine development – it is extremely unlikely that one will be invented, and this virus and the next will/do mutate rapidly
All those on this site and elsewhere saying they will not do this, fly, or go out to restaurants or whatever ‘until there is a vaccine’ are refusing to face reality
You’ll notice even big pharma is backing away from the yes we can vaccine gold rush – Merck CEO
Time to accept – this bug ain’t that bad, so point is going Life on Mars on it there isn’t the time or the money, poverty and unemployment kills more than any bug ever has or ever will
Better manage the means and circumstances of bug production –
c.f. malaria – I understand a group of researchers in I think Italy say they can modify the genes of a female mosquito so that when carrying she’ll not be able to reproduce, which in some swiftish time will reduce the threat sufficiently
Which sounds like herd immunity only in reverse
We have a coronavirus vaccine already – but its for chickens. I prefer to consider the views of people who have worked with vaccines, they seem very optimistic as there are many different methods being worked on , and for a vaccine at ‘break neck speed’.
Then there is the ‘preventer pill’ approach which has to be taken regularly to be effective. Could be suitable for those who are regular travellers or just a holiday.
Gee, I wonder what that does to the Delta Airlines balance sheet. Did they not become one of the biggest holders of LATAM stock in recent years having a 20% investment???
@sam walker:
Worse, one of DL’s “enemies” QR’s Al Bakr just became a creditor for LATAM. Lets see how this turns out.
Qatar already owns 10% of LATAM, an investment made a while ago before Delta came to the scene. Qatar is also participating in the $900 million debtor in possession financing arranged as part of the Chapter 11 filing.
https://airwaysmag.com/airlines/delta-to-pay-latam-us62m-for-a350-cancelation/
DL/LATAM JV still in place. DL will not take 4x LATAM A359 while paying a cancellation penalty.
How does a South American Airline file for bankruptcy in the US?
Because it is also incorporated as a business in the US. Same as Avianca.
Because their shares trade in US markets just like Avianca.
Not because shares trade on US markets. Plenty of foreign companies including from China do so.
“LATAM Airlines Group and select of its entities in Chile, Colombia, Ecuador, Peru, and the United States have filed for Chapter 11 financial reorganisation in the United States Bankruptcy Court for the Southern District of New York citing the impact of the COVID-19 pandemic.
LATAM Airlines Group SA is incorporated in Chile where they have also filed bankruptcy
https://www.ch-aviation.com/portal/news/91170-latam-airlines-group-files-for-chapter-11
Most if not all airplane financings have “Choice of Law” and jurisdiction clauses in them.
This is true Scott but that’s mostly in the case the Lessor / Financier seeks recourse for default on a loan or lease. 99.9% of the time its either New York State or English law that applies. A bankruptcy filing by a Lessee / Debtor must take place at a registered place of business irrespective of what Law applies to a particular Loan / Lease. I’m sure there are some Leases designating English law that are affected here. LATAM filed Chapter 11 in the USA, Chile, Colombia, Peru and Ecuador only. They did not file in Brazil, Argentina nor Paraguay. Most of their fleet has LATAM (Chile) as Lessor / Debtor and they sublease aircraft to the appropriate regional entity accordingly.
Hi Bruce, quite often there are US subsidiaries for foreign corporations for tax and business reasons, so filings could go through them.
PS: I didn’t know you are where you are, now. Good to know.
Well that clears that all up. Now I am confused on a higher level.
Sheese, what a screwy world.
Delta is a vampire. Neither they nor virgin holdings have had any interest in virgin atlantic making a profit of its own nor building up any assets. This has bitten them in the bum now that they want UK government support, having not paid any taxes and appearing to have no means of paying back any loan.
I am not sure there is a big corporation that is not a Vampire.
Some are pretty good with Lipstick but if you get to the internals (two big ones for me) its a mucky cesspit.
My Credit Union just sent a notice you had to opt out of binding arbitration. So much for member owned.
And interesting on the future of Boeing. Would not even talk to prospective customers? Truly astonishing.
https://www.flightglobal.com/programmes/internal-tussle-as-boeing-weighs-future-of-747/138537.article
Just be up front honest? Nah, don’t talk to them, ghost em. Great integrity, but are we surprised? Sadly no.
There were news stories today about Boeing and Airbus working together to study the transmission of Covid 19 aboard commercial airliners. See the WSJ, etc.,…
And in the area of defense spending, those countries on the edge clearly cutting back.
https://www.defensenews.com/global/asia-pacific/2020/05/26/downward-trend-southeast-asian-countries-cut-defense-spending/?utm_source=clavis
Others will have to see, China of course is increasing.