LATAM reports operating income of $17 million

AUG 14, 2015: LATAM Airlines Group reported operating income of $17.2 million with an operating margin of 0.7 percent for second quarter 2015, an increase of 0.2 percentage points as compared to the second quarter 2014. This result was driven by a strong 20.7 percent reduction in the Company’s cost per ASK equivalent, including the effect of lower fuel prices. Excluding fuel, cost per ASK equivalent decreased by 13.8 percent.

Total revenues during the second quarter 2015 declined by 20.8 percent, reflecting a weak macroeconomic environment in Brazil and significant devaluations of Latin American currencies. The challenging economic scenario in Brazil, caused by an increase in inflation, GDP decline -estimated between 1.5 percent to 2 percent for 2015- and a significant depreciation of the Brazilian real versus the U.S. dollar, has resulted in a slowdown in demand for domestic and international passenger operations, as well as cargo operations.

Passenger and cargo demand in all of the Group’s operations outside of Brazil, including its affiliates domestic operations in the Spanish Speaking Countries and international operations throughout LATAM’s network outside of Brazil, has generally proved resilient to local currency devaluations. As a result, and in addition to cost efficiencies, profitability in all these operations shows positive trends as compared to 2014.

Furthermore, LATAM Airlines Group is reviewing its fleet plan and fleet requirements for the coming years, and is currently evaluating whether to postpone a number of wide body passenger aircraft currently scheduled for delivery in 2017 and 2018, as well as to sublease at least one freighter aircraft.

During the second quarter 2015, LATAM Airlines Group completed two significant financial transactions through which raised a total of $1.5 billion. With this, the company completed approximately 57 percent of fleet financing requirements for 2016, and strengthened debt profile and financial position. As of June 30, 2015, the Company has $1.6 billion in cash and cash and equivalents, and has reduced its net leverage to 5.1x.

On August 6, LATAM Airlines Group took an important step towards enhancing value proposition by announcing the union of brands under one name, “LATAM”. The new brand will be implemented over a three year period, gradually becoming visible starting in 2016, and will allow offering an improved, consistent service throughout network, which in turn strengthens the position in the region.

As of the end of the quarter, the Company had installed Wireless entertainment system for personal devices in 68 single-aisle airplanes, and expects to complete the implementation in all of narrow body fleet by the first quarter 2016. Regarding ground services, the Company is unifying check-in counters between LAN and TAM, and is also testing a Self-Bag Tag service at the Guarulhos and Brasilia airports, expecting to implement this service at other main airports network by 2016. In addition, the company is improving contingency channels such as Live Chat and Flight Status.

The Company ended the quarter with 88.9 percent of its flights on time, increasing 4.8 p.p. as compared to the same quarter of last year. These record punctuality indicators, together with the optimization of fleet, renewed cabin design and harmonization of processes and services, have resulted in a renewed customer experience and have led LAN and TAM to be recognized for the seventh consecutive year as the leaders in the World Airline Survey in the categories “Best Airline in South America” and “Best Service in South America”. This survey is considered the main reference for satisfaction levels for the industry globally.