LATAM is first airline in South America to sign a US$300 million loan related to sustainability goals
LATAM Airlines Group signed the first Sustainability-Linked Loan (SLC) in its history for a total of US$300 million, making it the only airline in South America to have carried out a financial transaction of this type to date.
The agreement signed with Credit Agricole Corporate & Investment Banking and BNP Paribas, corresponds to a revolving credit line that allows LATAM to access additional long-term financing under special interest rate conditions if it meets a series of sustainability-related goals.
The new banking commitment comes against a favorable backdrop for LATAM, which, following its return to the New York Stock Exchange with the symbolic “Ring the Bell”, reported net income of US$301 million in the third quarter of the year, accumulating US$705 million in net income between January and September 2024.
→ LATAM invests US$7 million in largest aircraft maintenance base in South America
“We continue to add good news. This is our first financial product associated with sustainability and we see it as a first step to continue exploring other similar instruments in the future, such as sustainability-linked bonds. This milestone not only reinforces our commitment to be a more sustainable group, in line with our strategy and actions focused on climate change, circular economy and shared value, but also allows LATAM to be a pioneer in promoting sustainability-related finances in the aviation sector in the region,” said Andrés del Valle, Director of Corporate Finance at LATAM Airlines Group.
The loan is a refinancing of an existing Spare Engine Facility (SEF), which has been part of LATAM’s capital structure for the past decade. The refinancing enabled a significant reduction in the interest rate, as well as optimizing the collateral of the facility, i.e., reducing the number of engines that are pledged as collateral, and extending its duration in the future.
The transaction includes sustainability-linked provisions in which LATAM may receive pricing adjustments based on its performance with respect to the carbon intensity of operations, measured as tons of CO2 emissions/revenue per tonne-kilometer (RTK). This inaugural sustainable financing transaction supports the company’s strategy, in particular the group’s goal of achieving net zero emissions by 2050.
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