LATAM Q1 Net Drops As Fuel Costs Weigh

LATAM Airlines Group reported a drop in net income for the first quarter as fuel costs jumped 29 percent from the previous year.

Net income for the quarter to end March 2017 came in at USD$65.5 million, a 36 percent drop from 1Q16 as fuel costs rose $133.6 million.

Operating revenue was up 6.4 percent to $2.48 billion, helped by stronger local currencies. Passenger revenue was 7.6 percent higher, but cargo revenue dropped 8.1 percent in the quarter as tonnage carried fell by 9.1 percent. Operating income fell by 30.5 percent to $152.3 million.

Operating costs rose 10.3 percent to $2.32 billion, with fuel costs up 29 percent at $595 million, and staff costs up 7.5 percent to $525.2 million. The rise in wages and benefits was mainly due to the appreciation of local currencies during the period.

LATAM group carried 16.7 million passengers during the quarter, a 2.4 percent drop on the previous year quarter. Passenger traffic (RPK) was up 0.6 percent on virtually unchanged ASK capacity. Load factor rose 0.5 of a percentage point to 84.7 percent as a result.

Passenger yield was up 6.9 percent and revenue per available seat km also rose, by 7.5 percent.

LATAM continued to reduce capacity in the Brazilian market, with domestic capacity down 9.5 percent, and on international routes to the United States down by 26 percent.

Chief executive Enrique Cueto said “We are in the middle of transforming LATAM and improving the value proposition for our clients… While we still have a lot of work to do, we are off to a solid start and remain focused on improving margins, cash flow generation and on deleveraging the balance sheet.”

LATAM said it will continue to take a flexible approach to its fleet needs, with lower leasing expenses and capital expenditures, along with a decreased need for financing over the next few years.