Another pair of airlines will halt operations, with the financial impact of COVID-19 the tipping point. LATAM Argentina and LEVEL Europe are both poised to shutter, though the larger parent operations of each will continue services.
LATAM Airlines Argentina ceases domestic operations
For LATAM Argentina the move ends flights between a dozen domestic destinations. Most international routes will continue, operated by other LATAM affiliates flagged in other South American countries.
“This is regrettable but inevitable news. Today, LATAM must focus on transforming the group to adapt to post-COVID-19 aviation,” said Roberto Alvo, CEO of LATAM Airlines Group. “Argentina has always been a fundamental country for the group and will remain so, with LATAM’s other affiliates continuing to connect passengers from Argentina with Latin America and the world.”
The Argentine operation was excluded from a recent Chapter 11 bankruptcy filing by the parent company.
In addition to current market conditions and COVID-19 LATAM cites “the difficulty of building structural agreements with local industry actors, which has made it impossible to foresee a viable and sustainable long-term project” in the decision to halt operations.
LEVEL Europe faces insolvency
For LEVEL Europe the situation is slightly different, though the net result is the same. Operations for a small portion of the broader network will be affected.
Just two years ago International Airline Group (IAG) formed LEVEL Europe with a handful of used A321 to operate short-haul flights from a Vienna hub. At the time the competition was formidable, but LEVEL Europe gave the Group an opportunity to potentially expand operations with a second AOC and set of labor contracts. Much like how Ryanair and easyJet use multiple contracts to effectively have their own airlines competing against each other to operate the services, IAG could have pitted LEVEL Europe against Vueling to expand its regional low cost carrier offerings. The plan was far from a sure thing, however.
And now, with demand depressed for the Summer, IAG is pulling the plug. Despite more than $11 billion in liquidity at the parent organization LEVEL Europe will file for insolvency on Friday. The long-haul LEVEL operations are not affected by this move.
More to come?
These are not the first airlines to cease operations as a result of COVID-19 nor are they likely to be the last. Earlier this week IATA issued a warning that with the limited summer season and significantly increasing debt loads the risk of future failures continues to grow.
Europe’s airlines in particular are susceptible to the seasonal variations in demand. And while many have become better at parking planes in the winter to ride out the cold, they usually use cash earned in the summer to finance that move. Without the summer windfall the winter will be much, much worse. Add to that increased debt payments required and the forecast is grim.
IATA Regional VP Europe Rafael Schvartzman highlighted those risks in a recent statement seeking financial and regulatory relief:
We know that European airlines are set to lose $23 billion this year. There will be no summer cushion. Continued relief measures will be essential to minimize job losses and maintain transport links. We would urge European regulators to prioritize an extension to the waiver granted for the slot use rules, and to consider other forms of financial aid that will not add to the growing debt burden weighing airlines down.