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LATAM Reports Operating Income of $269M on Revenue of $2.67B

Updated: Jan 11, 2020

Santiago, Chile-based carrier LATAM reported a 21.8% improvement in operating income on Tuesday for the third quarter 2019. Operating margin improved 1.2% to 10.1% versus Q3 2018.

LATAM A320neo - Courtesy Airbus

Yesterday, LATAM Airlines Group S.A. (NYSE: LTM; IPSA: LTM) reported third quarter operating income of $269M, a 21.8% improvement compared to the third quarter of 2018. The company reported a net income of $86.3M, a 145% improvement over a net income of 35.2M in Q3 2018. Revenue increased in the quarter to 2.67B, a 6.7% year-over-year (YoY) improvement. Passenger revenue per available seat kilometer (RASK) increased by 9.1%, while cost per available seat mile (CASK) increased 3.6%. Excluding fuel (CASK-ex) increased YoY by 8.2% largely attributable to hyperinflation in Argentina and the Q3 2018 performance bonus reversal. Margin guidance for the full year has been reduced to 7%. Unattributed management comments from LATAM’s third quarter report state,

“During the third Quarter, LATAM reached an operating margin of 10.1%, and improvement of 1.2 percentage points compared to the third quarter of last year. This operating margin improvement reflects the adjustments made by the Company in order to improve profitability as we focus on managing capacity and achieving healthy load factors across all markets.

Even though currencies across the region remained devalued, capacity adjustments in international routes are improving the pricing environment of our operations, especially from Brazil to the US. On the other hand, domestic operation of our affiliates – both in Brazil and Spanish-speaking markets – operated 10% more ASKs during the quarter, carrying more than 1.5 million additional passengers than in the third quarter last year and maintaining a healthy RASK environment in local currencies. Regarding domestic Brazil, RASK rose by 24% in Brazilian real and 23% in USD, while in Spanish-speaking domestic markets RASK showed a 10% decline in USD mainly as a result of the year-over-year devaluation of local currencies.

When looking at LATAM’s cost performance, third quarter 2018 represents a tough comparison basis as the Company reached the lowest cost per ASK excluding fuel ever, in part due to the performance bonus reversal in 2018. However, the commitment to maintain an efficient and competitive cost structure remains unchanged and the Company continues working on further devolving its cost initiatives going forward to offset inflation across the region. Cost per ASK excluding fuel in the third quarter 2019 reached US$4.4 cents, which is lower than the US$4.5 cents of the first half of 2019. In this line, cost per ASK excluding fuel for the nine months ending in [the] September period showed a decline of 2.3% year-over-year.

All of the above, evidences the resilience of the Company to challenging market conditions and reaffirms our commitment with the goals set for the year.”

Last September LATAM and Delta Air Lines announced a major strategic partnership which will link North America and Latin America, building on the market and network strength of each carrier. Pending regulatory approval, Delta will acquire a 20% equity stake in LATAM.

Source: LATAM Airlines Group S.A.



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