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15 Insolvency & Restructuring Int'l 22 (2021)
International Airlines and the Benefits of Chapter 11

handle is hein.journals/iri15 and id is 24 raw text is: International airlines and the benefits of Chapter I I International airlines and the benefits of Chapter I I Timothy Graulich Davis Polk, New York timothygraulich@davispolk.com Stephen Piraino Davis Polk, New York stephen.piraino@davispolk.com Matthew Masaro Davis Polk, New York matthew.masaro@davispolk.com Introduction The international travel industry enjoyed steadygrowth in the first two decades of the 21st century-notwithstanding tragic terrorist attacks, an unprecedented financial crisis and various public health emergencies.' Yet, the coronavirus dramatically stopped what many thought was going to be another banner year for travel.2 While many segments of the broader travel industry have suffered during the Covid-19 pandemic, the effect on airlines has been particularly acute. In certain jurisdictions, central governments infused their domestic carriers with tens of billions of dollars to save them from liquidating or having to restructure through a court-supervised process.4 However, government aid has not been universal, either as a matter of policy or as an economic reality. As a result, some major airlines have found themselves with no choice but to liquidate, while others have filed restructuring proceedings to survive the pandemic. Three Latin American carriers - Aeromexico, Avianca and LATAM - recently chose to file for Chapter 11 bankruptcy protection in the United States to mitigate the effects of the pandemic. Leading up to the pandemic, each of these airlines was sufficiently capitalised and poised for growth through operational initiatives and strategic partnerships. However, due to pandemic-related worldwide travel restrictions and a collapse in consumer demand, these airlines were faced with exponential declines in revenue and monumental cash burn. There was no option other than to enter a proceeding with the principal goal of stabilising the business through a capital infusion. For an international airline with operations, assets and liabilities spread around the world, picking the right jurisdiction in which to restructure is critical, though not necessarily straightforward. This article will explain why the Chapter 11 process can serve as an effective means to restructure an international airline - even one not headquartered in the United States. Filing in the US An entity - even one that is not domiciled in the US or organised under US law -is eligible to file for relief under the bankruptcy code5 as long as it has a place of business or property in US to be a debtor's principal place of business or the location of its principal assets. For Aeromexico, Avianca and LATAM, there was no question they were eligible to file in the US because each had both operations and property in the US. For example, Aeromexico had significant cash accounts in the US, US-law governed debt and flight operations in the US. Any one of these attributes alone would have been a sufficient basis for Aeromexico to file in the US. In addition, the Southern District of New York was the appropriate venue for Aeromexico, Avianca and LATAM because at least one of the debtors in each case had its main US asset in New York.6 LATAM, for example, had hundreds of millions of dollars of cash and investments in accounts located in New York City. Insolvency and Restructuring International Vol 15 No I April 2021 22

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