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LATAM reports Q4 and full year 2016 results

LATAM Airlines Group reported an operating margin of 7.6% for fourth quarter 2016, an improvement of 1.4 percentage points over the same quarter in 2015, and net income of US$54.3 million, a US$70.6 million improvement over the fourth quarter 2015. The improvement in operating results was driven by a 6.7% increase in total revenues, reflecting a positive revenue per ASK trend in domestic and international routes in Brazil as well as a stronger Brazilian currency.

Total revenues in fourth quarter 2016 reached US$2,569.3 million showing an improvement of 6.7%, mainly driven by an increase of 6.9% in passenger revenue, after nine consecutive quarters of decline. This revenue improvement consolidates and further improves third quarter’s positive trend in revenue per ASK. For full year 2016, revenues reached US$9,527.1 million, a decrease of 6.0% compared to the same period 2015, with the decline of 14.7% occurring during the first half of the year, while increasing by 3.4% during the second half of 2016.

LATAM Airlines Brazil continues to see positive resulting from the strategy of adjusting passenger capacity on both domestic and international routes in the Brazilian market, with a significant increase in revenues per ASK. Domestic capacity was reduced by 10.9% during the fourth quarter, and consequently revenues per ASK increased by 34.8% as compared to the same quarter of 2015, driven by a 14.8% increase in RASK in BRL as well as by the 14.3% average appreciation of the Brazilian Real. Furthermore, LATAM Airlines Brazil reduced capacity on international routes between Brazil and the US, reaching a reduction of approximately 36% during the fourth quarter compared to the same period last year.

For the full year 2016, operating income reached US$567.9 million, an increase of 10.5% compared with 2015. Operating margin reached 6.0%, 0.9 percentage points above full year 2015, and in line with the upper bound of the guidance. Net income reached US$69.2 million for the year 2016, compared to a net loss of US$219.3 million for 2015, showing a positive net income for the first time since 2011.

During the quarter, LATAM says it made significant progress in its plan to reduce total fleet assets and fleet commitments, reaching the lowest fleet commitment levels in the recent history of LATAM for 2017 and 2018. LATAM reduced fleet commitments for 2018 by US$1,039 million and it will also reduce existing fleet assets by returning additional aircraft as compared to the previous quarter fleet plan. With this, LATAM will have reached US$2.2 billion reduction in fleet assets for 2016–2018, in line with our previously announced plans to achieve a decrease of US$2.0 to US$3.0 billion in our expected fleet assets by 2018.

During 2016, LATAM achieved a significant improvement in its balance sheet deleveraging to 5.3x as compared to 5.8x in 2015. Furthermore, liquidity reached US$1.8 billion including undrawn committed credit lines, representing 19% of last twelve months revenues. Liquidity was bolstered by the US$608.4 million capital increase that was completed in December 28, 2016, through which Qatar Airways acquired 10% of LATAM’s total shares.

At the end of the fourth quarter 2016, LATAM reported US$1,486 million in cash and cash equivalents, including certain highly liquid investments accounted for as other current financial assets, equivalent to 15.6% of net revenue of the last twelve months. Furthermore, the airline’s liquidity position is also enhanced by US$325 million in undrawn revolving credit facility (RCF) line, which was totally available as of December 31, 2016.

Additionally, on December 28, 2016, LATAM announced the successful conclusion of its capital increase, in which 60.8 million shares were subscribed at a price of US$ 10 per share, generating proceeds of approximately US$608 million with Qatar Airways completing its acquisition of 10% of LATAM.

Fleet commitments for 2017 amount US$469 million, all of which are pre-arranged operating leases, being the lowest amount in the recent history of LATAM. For 2018, LATAM’s fleet commitments have been substantially reduced to US$555 million, a reduction of US$1,039 million compared with September 2016.

Additionally, LATAM expects to have non-fleet CAPEX, including intangible assets, of approximately US$500 million per year, including fleet and non-fleet maintenance, expenditures on spare engines, fleet components, and new business model implementation costs, among others.

LATAM’s financial debt during the fourth quarter 2016 totaled US$8,605 million, a decrease of US$457 million as compared to same period 2015. For 2017, the Company has debt maturities of approximately US$1,543 million.

Capacity growth guidance for 2017 remains unchanged; while the group has maintained its guidance for an operating margin of between 6.0% and 8.0% for full year 2017.

Date: March 20, 2017

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