One day after the airline filed for court-supervised reorganization, Santiago-based group reportedly sent letters to lessors eying up to 25 aircraft

01/31/2024

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Gol shares plunged again on Tuesday (30) trading session — Foto: Fabiano Rocha/Agência O Globo

Gol is studying measures against LATAM after the competitor attempted to take 20 to 25 of its 737 planes. Gol’s lawyers told the New York judge responsible for the case, in documents seen by Valor, that LATAM sent letters to the lessors on Friday (26) to try to take the aircrafts one day after Gol filed for bankruptcy protection.

Gol shares plunged again on Tuesday (30) trading session, marking a 26.97% drop. The company ended the day with a market capitalization of R$1.2 billion, a 55.4% loss when compared to Thursday (25), when it filed for court-supervised reorganization, according to Valor Data.

LATAM does not operate the 737 model and, according to Gol’s lawyers, the Santiago-based group is trying to illegally interfere in its rival’s restructuring. Andrew LeBlanc, a lawyer at the Milbank law firm, told Judge Martin Glenn that “several” articles in the legislation prevent the Chilean company from taking such approach.

Mr. LeBlanc told the judge that Gol is studying which measures to take against LATAM. The lawyer also argued that it is necessary to ensure that Gol will be able to negotiate with lessors without the “interference” of parties acting “inappropriately.”

The 737 model is crucial for Gol’s single fleet strategy. LATAM, in turn, has a fleet of 256 Airbus models, used on short-haul flights. The Boeing family (58 units in total) is used mainly in long-haul flights—through the 787, 777, and 767 models.

The lawyer said the letter starts by alluding to “recent events” in the industry, an obvious reference to Gol’s bankruptcy filing.

He notes that LATAM also underwent Chapter 11 in New York court in a two-year process, which means, according to him, that it knows the limits of the Bankruptcy Code.

The judge asked if it was confirmed that the letter was real and, according to the lawyer, it even had letterhead. The lawyer said he believes it is real and that the airline will investigate over the next few days whether it is having an effect.

The letter to lessors comes at a time when Gol struggles to negotiate contracts. Amid issues in the production chain, the market currently operates with a tight demand for aircraft. The scenario is different from what it was at the time LATAM and Colombian Avianca filed for Chapter 11.

In a statement, LATAM neither confirmed nor denied the existence of the letter. According to the statement, the company is in “permanent contact with all relevant stakeholders in the fleet [equipment and maintenance lessors and suppliers] as part of its business.” The airline said it has been active “in the market for several months with the aim of securing the necessary capacity to meet ongoing and long-term needs in the context of global supply chain challenges and aircraft/engine shortages.” When contacted, Gol declined to comment.

The rivalry between the airlines has been quite intense. No one is hoping for a large company’s bankruptcy, which could destabilize the entire transportation industry, but everyone wants to increase market share in the face of the weakness of a competitor who, before the pandemic, was the leader. In the past, Gol had around 38% market share. Last December, it was close to 33%, when it was outperformed by LATAM, with 38.7%.

At the time of Azul’s debt restructuring with lessors, which was concluded last year, sources pointed out that LATAM had made the same attempt to take Airbus aircraft from its competitor in conversations with lessors.

When LATAM filed for court-supervised reorganization in the U.S.—between 2020 and 2022—Azul tried to negotiate with Chilean creditors the acquisition of LATAM Brasil, as reported by Valor.

But Azul’s attempt does not come out of the blue. The company tried to purchase the assets of Avianca Brasil (OceanAir) before it went bankrupt. Gol and LATAM, however, launched a harsh campaign against it, preventing the deal. As a response, Azul decided to leave the Brazilian Association of Airlines (ABEAR), which now includes both Gol and LATAM, among other smaller airlines.

*Por Cristian Favaro — São Paulo

Source: Valor International

https://valorinternational.globo.com/