Shares in Latin America's largest airline plunged 35 percent on the Santiago stock exchange on Tuesday after LATAM filed for bankruptcy in the US.
LATAM has suffered a drastic slump in business due to the coronavirus pandemic that last month saw it scale back operations by 95 percent.
Travel and tourism all over the world has been badly hit.
The news came after Chile’s government said it was considering a bailout to help LATAM, whose headquarters is in the capital Santiago.
“Given the impact that the COVID-19-generated crisis has had on the aviation industry, LATAM has been forced to make a series of extremely difficult decisions in the past few months,” the airline’s chief executive Roberto Alvo said in a video statement early on Tuesday.
“LATAM Airlines Group and its affiliates in Chile, Peru, Ecuador and Colombia entered into a voluntary reorganization under Chapter 11 protection in the United States,” he added.
Chapter 11 proceedings allow a company that is no longer able to repay its debt to restructure under court supervision without pressure from creditors.
“Here there is a country decision that we have to take,” said Chile’s Economy Minister Ignacio Briones, before adding that “the government will evaluate whether it is convenient and opportune to contribute to the LATAM reorganization process.”
Speaking to Radio Cooperativa, Briones said the government would decide whether and how to bail out LATAM.
“Any (state) help to a company is not help for the owners,” he said.
However, in a statement he said that LATAM “is a strategic company for Chile,” noting that it directly generates 10,000 jobs and indirectly helps employ 200,000 people through 2,000 suppliers.
He also pointed to the company’s importance to industrial imports, agricultural exports, tourism, mining and the connectivity of a country that stretches over 4,000-kilometers (2,500 miles) from north to south.
After it announced bankruptcy proceedings, the Chilean-Brazilian airline said there would be no immediate impact on passenger or cargo flights.
The news came just two weeks after Latin America’s second largest airline, Colombia’s Avianca, also filed for bankruptcy in the US to reorganize its debt “due to the unpredictable impact” of the pandemic.