• Joe Breitfeller

LATAM Airlines Group Reports Second Quarter Net Loss of $890 Million, Provides Chapter 11 Update

LATAM Airlines Group announced on Tuesday their second quarter financial results and provided an update on advances in the Chapter 11 process. The Group reported a second quarter net loss of $890 million on a 75.9 percent revenue decline to $571.9 million.

LATAM Airlines Airbus A320neo Empennage - Courtesy Airbus

On Tuesday (August 18, 2020), LATAM Airlines Group S. A. (IPSA: LTM) announced a second quarter 2020 operating loss of $694.8 million and a net loss of $890 million on a 75.9 percent year-over-year revenue decline to $571.9 million. The Group’s decline in revenue was partially offset by an 18.4 percent increase in cargo revenues, while operating costs were reduced 45.6 percent compared to the second quarter of last year to $1.27 billion. During the quarter the Group’s affiliates in Chile and Brazil operated with limited capacity, while domestic operations in Ecuador and Peru resumed in June and July respectively. From April to date, the company’s workforce has been reduced by 12,600 to approximately 30,000. In Tuesday’s announcement, LATAM Airlines Group’s CEO, Roberto Alvo said,

“These results reflect the profound impact that the crisis has had on the aviation industry and underline the need to transform the group to guarantee its sustainability in the medium term. We will continue working to adapt to this new environment and transform LATAM into a more agile, competitive and efficient company.”

LATAM’s second quarter revenue decline was largely attributable to a 93.9% decrease in passenger revenue resulting from a 93.7 reduction of capacity, measured in available seat kilometers (ASKs). Freighter operations increased by 28% and other quarterly revenues increased by 60.7% due to the recognition of proceeds from Delta Air Lines as part of the Framework Agreement signed in 2019. The Group’s 45.6% reduction in second quarter expenses reflects lower passenger operations, a reduction in fixed expenses, a voluntary 50% salary reduction of all affiliate airline employees, early retirements, unpaid leaves and redundancies.

On May 26, 2020, LATAM Airlines Group S.A. and its affiliates in Chile, Peru, Columbia, Ecuador and the U.S. filed for Chapter 11 voluntary reorganization under U.S. law. On June 17, 2020, LATAM Airlines Argentina ceased operations but the Group’s other affiliates will continue to provide service to and from Argentina. LATAM Airlines Brazil became an additional debtor under the Chapter 11 reorganization on July 9, 2020. The Group started the second quarter operating 3.3% of capacity versus the same period last year in terms of ASKs, which rose to 9.2% in July. On June 16, 2020, LATAM Airlines Brazil and Azul Brazilian Airlines announced a codeshare agreement to connect their respective domestic networks in Brazil.

At the close of the second quarter, LATAM’s total debt was $6.8 billion, a decrease of $803.6 million compared to the close of the first quarter, while their leverage ratio reached 5.8x versus 4.0x at the end of Q1. The Group closed the second quarter with $1.42 billion in cash and equivalents, including a total drawdown of their $600 million revolving credit facility between March and April 2020.

Source: LATAM Airlines Group


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