Latam Airlines Group Reports Q4 and full year results

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By admin March 9, 2016 11:45

Latam Airlines Group Reports Q4 and full year results

LATAM Airlines Group has reported operating income of US$149.2 million for fourth quarter of 2015 and US$513.9 for full year 2015. Operating margin reached 6.2% for the quarter, and reached 5.1% for the full year, slightly above the upper bound of the guidance provided by the Company and 1.0 p.p. above the operating margin reached during full year 2014. LATAM’s improved results were mainly driven by a significant reduction in operating costs due to lower fuel prices, as well as by the Company’s ongoing cost savings initiatives and the positive effect of local currency devaluations on our costs. Cost per ASK equivalent decreased by 20.5% as compared to fourth quarter 2014.

LATAM reported a net loss of US$16.3 million in fourth quarter 2015, as compared to a US$98.3 million gain in fourth quarter 2014. This result in 2015 includes a one-time provision of US$71.0 million related to aircraft redelivery costs, mainly associated with the phase out of the Airbus A330 fleet expected to occur during 2016, as well as an exchange rate loss of US$57.1 million related to the devaluation of the Argentinean peso and the Venezuelan bolivar.

For full year 2015, LATAM reported a net loss of US$219.2 million, compared to a net loss of US$109.8 million in 2014. Non-operating results for 2015 include non-cash foreign exchange losses of US$467.9 million, mainly resulting from the 49.0% devaluation of the Brazilian real during the year.

Considering the challenging scenario in Brazil and the resulting slowdown in the airline industry, TAM reduced domestic capacity in Brazil by 9.4% during the fourth quarter 2015 and 2.5% for full year 2015. Despite this reduction, TAM has remained the leader in market share as measured in RPKs. Furthermore, the Company has intensified its planned capacity reductions in Brazil for 2016, modifying guidance from a reduction of between 6% and 9% to a reduction of between 8% and 10%, as compared to 2015. Additionally, LATAM has revised downward its capacity growth guidance for international routes from 4% and 6% to between 3% and 5% for 2016, also driven by further ASK reductions on routes to and from Brazil.

As of March 2016, LATAM reached a US$2.9 billion reduction in fleet commitments for 2016 – 2018, which represents a decrease of 37% during the last year. This is in line with the Company’s previously announced plans to achieve a 40% reduction in its fleet commitments for the period, and represents a further reduction of $1.0 billion compared to the fleet plan shown in November 2015. In addition to this plan, the Company sold four Airbus A330s, redelivered three Airbus A330s, one Boeing 767, and four Airbus A320s and subleased one Boeing 777 Freighter to a third party during 2015, and it continues to seek opportunities to adjust fleet commitments beyond the US$3.0 billion announcement.

“For the airline industry in South America, 2015 was a challenging year, especially in Brazil. Despite the slowdown in GDP growth in the region and the depreciation of all local currencies, LATAM was able to improve our operating result by one percentage point compared to 2014, as a result of our focus on cost discipline and network enhancement,” said Enrique Cueto, LATAM’s CEO.

The Company’s ongoing cost savings initiatives launched in 2014 have resulted in efficiency gains during the quarter and throughout 2015. During the year, LATAM achieved total cost reductions of approximately US$325 million, above our initial estimates. In addition to these efficiencies, operating costs have also benefited from the devaluations of local currencies and, together, have resulted in an 11.5% decline in our cost per ASK-equivalent (excluding fuel) for 2015.

admin
By admin March 9, 2016 11:45