LATAM Airlines in talks to end agreement with Voepass as soon as July, sources say

By Luciana Magalhaes

SAO PAULO (Reuters) - LATAM Airlines (NYSE:LTM) is seeking to terminate its codeshare agreement with Brazilian regional carrier Voepass as early as the second half of this year, according to two people familiar with the matter.

The move would deliver another blow to Voepass, which is already facing a potential bankruptcy protection process, after Brazil’s aviation regulator earlier this week suspended the company’s operations on safety concerns, months after a deadly crash.

Discussions on terminating the agreement have been underway for months, the sources said.

While a final decision has not yet been made and no contract has been signed, the talks have narrowed to a potential agreement termination window between July and October, although the dates remain subject to change, one of the people said.

LATAM declined to comment. Voepass did not immediately respond to a request for comment.

LATAM does not disclose its sales numbers through codeshare deals. Its partnership with Voepass is one of a total of 18 agreements.

Voepass generates a significant portion of its revenue from the partnership, with an estimated 97% of ticket sales coming from LATAM, according to a third source familiar with the numbers.

Brazilian aviation regulator ANAC’s decision to suspend Voepass’ operations came around seven months after a Voepass ATR-72 crashed near Sao Paulo, killing all 62 people on board.

Newspaper Folha de S.Paulo reported in February that LATAM had informed Voepass that it would not renew their partnership beyond August, without citing sources.

A Brazilian court earlier this year granted Voepass judicial protection, temporarily shielding the airline from creditors and preventing the seizure of its aircraft.

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Voepass, formerly known as Passaredo, has accumulated a debt of 215 million reais ($36.97 million); it alleges that part of it is due to late payments by LATAM.

One of the two people familiar with Voepass’ situation said the airline is now more likely to pursue bankruptcy protection in the near term, as its flights have been halted. Although a formal timeline has not been established, preliminary discussions are underway, with April emerging as a possible timeframe for the move, the person said.

Even before the airline’s suspension by the regulator, one of the sources had told Reuters that LATAM was concerned about safety issues at Voepass and associated reputational risks, motivating its desire to sever ties with the company.

Following ANAC’s decision, Voepass said in a statement that its operational fleet was capable of conducting flights in accordance with safety standards and the halt was going to impact thousands of people.

ANAC said it had identified systematic non-compliance with the requirement.

($1 = 5.8151 reais)

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