Latam Charts Recovery as it Prepares to Exit Chapter 11

Latam’s Andreas Scheck talks:

• Corporate travel recovery expectations through 2022
• A new offering giving priority perks to corporate travelers
• The path to carbon neutrality

Latam Airlines Group on Friday announced that it has filed a reorganization plan to exit Chapter 11 bankruptcy protection via an $8.19 billion infusion to the airline group through new equity, convertible notes and debt load reduction. Over the course of that process, Latam has been cutting costs and adjusting its fleet, but it also has been building capacity back as travel demand recovers in Latin America. Prior to the reorganization plan announcement, VP of sales Andreas Scheck spoke to BTN executive editor Michael B. Baker about the status of business travel recovery in Latin America, a new offering for corporate travelers and progress on its planned partnership with Delta Air Lines.

BTN: Where is Latam in the recovery stage right now?

Andreas Scheck: We structure the recovery in three groups. One is the domestic markets we serve. The second is intra-South America trips, and the third is long-haul, South America to the States, Europe or Australia. For domestic, it is moving very well. We are above 80 percent compared with 2019, and in some countries, in Colombia and Ecuador, we are above 100 percent. In the regional, within South America, it has been a little more difficult, because there are a lot of government regulations. They go up and down, and there is a lot of change and uncertainty. There, we have maybe 20 percent [recovered]. If we go to long-haul, it is recovering steadily, at about 40-plus percent. Today, as an overall, we have about 60 percent of operation in [available seat kilometers]. By the end of the year, we’ll be at 70 percent, so it’s very good.

BTN: How is business travel recovering versus leisure in Latin America?

Scheck: When this crisis started, we were a little uncertain of what the future would look like, especially for business travel because of the virtual life we have now. As the pandemic evolved, we began to see a little more response from the corporate market than what we expected. The way they behave is different. The anticipated purchase changed a bit, and people are doing longer trips, because they don’t want to have to go back home and take all the tests. They want more flexibility, more servicing and digital experience. In the corporate market, maybe by the end of next year, 60 or 70 percent will have come back.

BTN: Have there been any initiatives geared toward corporate travel?

Scheck: We just launched our business corporate value proposition, called Latam Corporate Partner. It has a lot of perks in it. We understood during this process that we are part of the process for how our customers [conduct] business, so we need to have solid milestones like on-time performance. We’ve excelled the last three years as the best airline in the world about that one. On corporate value proposition, we just launched [earlier in November] a package that every time a customer buys with a corporate contract with us or through an agency, they get benefits regardless of their loyalty status. It’s preferred boarding, denied boarding protection, the option to have a carbon offset one-to-one, so if they pay a carbon offset, we match it to make it more powerful. It was very well received by customers, and it’s a way to improve business travel now.

BTN: What’s the status of your planned partnership with Delta?

Scheck: We are very excited about how things are moving, because we already finished all the approval processes for South America. We are a group of airlines, and as a group, we have to go through every government to make this happen. Now, we are just waiting for approval on the United States’ side, but we are pretty confident that’s going to happen soon. In the meantime, we do have some things we’re doing together with Delta, the codeshares. We’ll be able to connect from every corner of South America to every corner of the United States, even with the restricted codeshares we have now.

BTN: What has Latam been doing on the product side?

Scheck: We defined ourselves as a value carrier, and we have full-service cabins. We are not moving to the [ultra-low-cost carrier] model, but we do have ULCC products. We have one plane with four different products. One is the basic, which is just completely comparable with the ULCCs. The starting point is just to get on the plane with a handbag. Then, we go to the normal economy class, that has different bundles depending on how you want to travel. For the business traveler, they need this flexibility. For the leisure traveler, they need bags, so we’re thinking about how we can address that better with bundles. The next cabin is Premium Economy, which we have for domestic and regional markets. You have the middle seat empty, specialized catering, the curtain and more privacy and all the benefits of embarking and disembarking with priority. Then, we have the business cabins on the widebodies. All the planes have been retrofitted. In the last two years, we made a lot of focus on completely new cabins with new liveries, so we are making a strong investment there.

We are testing biometric boarding on some flights. We are one of the few companies in the world that doesn’t have check-in anymore. You buy your ticket, and even if it’s six months in advance, you already have your boarding pass. We’re doing a lot of things that technology will enable our customer to have a much more seamless experience.

BTN: With those fare product plans, what’s your distribution strategy?

Scheck: Distribution is a very important piece for us. We have a strong online direct presence in our home markets, and in other markets, we need and will need in the future the indirect channels. We are rethinking how we can get the best value for customers, and for that, we need to streamline the different channels and segments and see what’s the best solution to get to them. For that, we need to align agencies, [global distribution systems] and ourselves, but also we’re looking into new-gen aggregators, direct connects and [New Distribution Capability], which is a technological focus for the next year not only for sales but mostly for servicing. In that conversation, we are wide open. 

BTN: How is Latam addressing its sustainability goals?

Scheck: We want to be much more relevant to the communities where we operate. Flying is important [for] the countries. In Chile, for example, 2.2 percent of the gross product is enabled by flying and connecting the country. We thought about how we can offset or work in sustainability projects, and we decided not to just go with offsetting with the cheapest available [option] but to understand for each home country one iconic project that early makes a difference to the country, that will connect us with people and connect people with communities. It’s not only planting trees but protection, so we can recover the complete ecosystem. We launched a month ago the CO2 bio-project in Colombia. It’s more than 2 million acres owned by more than 200 different landowners, and it’s an incredible, beautiful project, how they protect everything. You can see trees, swamps, biodiversity. In the long term, we’re looking to be carbon zero in 2050, to have 50 percent of the domestic market offset by 2030 and to have no landfill [waste] by 2027 in all our operations. By 2023, we will have no one-use plastics in the cabins. We are having conversation with Airbus about improving the computers onboard to save fuel and CO2 emission during the flight. We’re also exploring the [sustainable aviation fuel] that is evolving. We believe it will take until 2035 for them to really make a big difference.