LATAM Airlines Second Quarter Loss Deepens

August 17, 2017

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LATAM Airlines Group dropped deeper into the red in its second quarter, as foreign exchange losses hit the bottom line.

The Santiago-based airline group increased its operating revenue by 7.7 percent to USD$2.27 billion during the quarter to end June, as passenger revenue rose by 10.6 percent.

Operating expenses came in at $2.22 billion, up 5.5 percent, with fuel costs up 9.1 percent at $510.6 million, and aircraft rental costs 10.5 percent higher at $153.1 million. The resulting operating profit was $48.2 million, up from $1.3 million in 2Q16.

LATAM registered $60.9 million of pre-tax expenses, including a $45.9 million hit for foreign exchange losses, which helped push the group to a $138 million net loss, from a $92 million loss in the prior year period.

The group flew 15.2 million passengers during the second quarter, down 1.7 percent, in what is usually its quietest quarter of the year.

Passenger traffic in revenue passenger km (RPK) terms was up 1.1 percent on an available seat km (ASK) capacity increase of 0.3 percent. The resulting load factor rose 0.7 percentage points to 83.7 percent. Passenger yield rose a useful 9.4 percent in the quarter.

LATAM returned seven aircraft during the quarter and said it was on track to reduce overall fleet size from 329 at the start of the year to 306 by year end. It will have reduced its fleet commitments by $448 million by 2019.

Looking forward, the company adjusted its initial target for 2017 ASK growth to between 1 and 3 percent, from flat to 2 percent. Operating margin guidance was unchanged at between 6 and 8 percent for the full year.

The quarter marked the fifth anniversary of the merger of Chile’s LAN Airlines with Brazil’s TAM to form LATAM Airlines Group.

(Airwise)