Published on : Friday, August 12, 2016
LATAM Airlines Group S.A. , the leading airline group in Latin America, announced today its consolidated financial results for the second quarter ended June 30, 2016. “LATAM” or “the Company” makes reference to the consolidated entity, which includes passenger and cargo airlines in Latin America. All figures were prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in U.S. dollars. The Brazilian real / US dollar average exchange rate for the quarter was BRL 3.50 per USD.
· LATAM Airlines Group reported operating income of US$1.3 million for second quarter 2016 and US$220.4 for the first half of 2016. Operating margin reached 0.1% for the quarter, representing a slight decrease of 0.7 percentage points as compared to the second quarter 2015. Operating margin for the first half of 2016 reached 5.0%, in line with our guidance and 0.3 percentage points above the same period of 2015.
· Total revenues during the second quarter 2016 declined by 12.5% due to a 13.7% decline in passenger revenues and a 22.3% decline in cargo revenues. This revenue decrease continues to reflect a weak macroeconomic environment in South America – especially in Brazil – and the devaluations of Latin American currencies during the period. Part of this decline was offset by the continued positive trend in costs, with total operating expenses declining by 12.0%, resulting in a 10.5% decline in costs per ASK equivalent.
· As of August 2016, LATAM Airlines Group has reduced fleet assets for 2017 – 2018 by US$1.1 billion, in line with the Company’s previously announced plans to achieve a decrease of US$2.0 to US$3.0 billion in our expected fleet assets for 2018. This reduction was achieved through the deferral of twelve Airbus A320neos and two Airbus A350s, which represent a total reduction of US$829 million in fleet commitments for 2017 and 2018. The Company will also redeliver five more Airbus A320s, three Airbus A319s, and one Boeing 777-200F in 2017 as compared to our previous quarter´s fleet plan, representing a total reduction of approximately US$260 million in fleet assets.
· LATAM Airlines Brazil continues to adjust capacity in Brazil in line with demand conditions on both domestic and international operations in that market. LATAM Airlines Brazil reduced domestic capacity by 13.7%, while revenues per ASK increased by 6.2% in second quarter 2016 as compared to the same quarter of 2015, when measured in Brazilian reais. Furthermore, as previously announced, LATAM Airlines Brazil continues to reduce capacity on international routes between Brazil and the US, reaching a reduction of approximately 35% during the second half of 2016 compared to the same period 2015.
· Meanwhile, the Company continues to strengthen its network, taking advantage of specific opportunities for profitable growth in LATAM’s South American Spanish-speaking markets (SSC, which include Chile, Peru, Argentina, Colombia and Ecuador). In July, LATAM Airlines Chile began flying directly between Santiago and La Paz and will fly direct between Santiago and Los Angeles, USA in the fourth quarter. Additionally, LATAM Airlines Peru will connect its Lima hub with Barcelona by the end of the year, and with Cartagena, Colombia in January 2017.
· On July 12th, the Company announced that it had entered into a subscription agreement under which Qatar Airways will acquire up to 10% of LATAM’s total shares, which will be acquired through the issuance of new shares at a price of US$10 per share in connection with a capital increase in the amount of US$613 million. On July 18th, LATAM announced that its Board of Directors agreed to call an Extraordinary General Shareholders Meeting for August 18, 2016, in order to submit for shareholder approval the increase for the purpose of strengthening the financial position of the Company. The transaction is expected to be concluded during the fourth quarter 2016.