AAirlines

LATAM continues to show operational recovery in first quarter

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Despite a challenging first quarter following the emergence of the Omicron variant of Covid-19 and the significant increase in fuel prices, LATAM Airlines has continued to improve its performance at the operational level and reduction in its ex-fuel CASK (cost per ASK). In the period, the group’s consolidated capacity (measured in ASKs) reached 68.2% of 2019 levels and an increase of 89.7% compared to the first quarter of 2021, a result that was mainly driven by the subsidiaries’ domestic operations.

→ LATAM was Brazil’s most punctual airline in first quarter.

Total revenues amounted to US$1,959 million during the period, 22.4% below 2019 levels, but had a 114.5% increase compared to 1Q2021. While passenger revenues fell 31.4% compared to 2019 (+199.1% vs 1Q21), LATAM’s cargo affiliate operations maintained a solid performance, with revenues of US$430.7 million, representing an increase of 63.5% over the same period in 2019.

Total costs were US$2,097.2 million, representing a decrease of 14.2% compared to 2019. In particular, CASK ex-fuel improved by 6.8% compared to the fourth quarter of last year, from US$5.6 cents to US$5.2 cents, which also represents an improvement of 29.3% versus the first quarter of 2021. The above results are explained in the context of the cost reduction measures implemented by the group since the beginning of the reorganization process, which will result in savings of more than US$900 million per year.

However, during the quarter, a significant rise in the average fuel price was seen, reaching US$3.25 per gallon (excluding hedges), an increase of 75.8% versus the same period last year and even 29.9% above the fourth quarter of 2021. This increase is largely due to the conflict in Ukraine.

→ LATAM resumes routes from Río de Janeiro to Florianópolis and Foz do Iguaçu.

Roberto Alvo, CEO of LATAM Airlines Group, commented that “we have had a relevant improvement in our results compared to the same period of 2021 in an environment that still continues to be challenging.” He added that “we remain cautiously optimistic about the future, as while we have seen a healthy recovery in passenger demand, the continued increase in fuel prices is a variable that we are watching closely”.

Operating income reached losses of US$138.2 million, while bottom-line income was a loss of US$380.1 million, which compares to a net loss of US$60.1 million in the same period of 2019 and a loss of US$430.9 million during the first quarter of the previous year.

With respect to Chapter 11, on May 6, 2022, LATAM reported the results of the vote on its Plan of Reorganization which achieved sufficient support of approximately 82% in dollar terms and approximately 65% of the number of creditor voters of the classes affected by the Plan. These results do not include RCF claim holders, who still have until May 10, 2022 to vote. This follows the U.S. Court’s approval of the Disclosure Statement on March 21, 2021, which allowed the Debtors to begin the process of soliciting votes. The Plan Confirmation Hearing is scheduled to take place on May 17 and 18, 2022, as scheduled by the U.S. Court.

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