LATAM Airlines Posts First Annual Profit

March 15, 2017

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LATAM Airlines reported its full year 2016 results showing net income of USD$69.2 million, its first profit since the merger of LAN and TAM in 2012.

Despite a revenue drop of 5.9 percent to USD$9.53 billion, LATAM increased its operating income by 10.5 percent as it pushed costs down to USD$8.96 billion. Operating income came in at USD$567.9 million as fuel costs for the year dropped 22.4 percent to USD$2.06 billion.

LATAM flew just under 67 million passengers, a slight drop from the previous year. Passenger RPKs increased 1.9 percent on an ASK capacity increase of 0.6 percent. Load factor for the year was 84.2 percent, a 1.1 percentage point increase.

RPK-based yield fell 8.1 percent in the year to end December.

For its fourth quarter, LATAM’s net income was USD$54.3 million, from a USD$16.3 million loss in 4Q15. The improvement was driven by a 6.7 percent increase in revenue to USD$2.57 billion.

LATAM said it continued to see positive results from its capacity reduction in the Brazilian market as it reacted to that country’s fall in demand due to its economic woes.

LATAM had a total of 329 aircraft at the end of 2016, which included 10 freighters. It plans to reduce its narrow-body fleet to 225 at the end of 2017 as it retires Airbus A320 aircraft and continues their replacement with A320neos. The wide-body fleet will increase by only one aircraft as it limits capacity expansion.

Looking forward, the company said its guidance on capacity growth for 2017 remains unchanged, and an operating margin of between 6 and 8 percent for full year 2017 also is unchanged.

LATAM Airlines was formed in a 2012 merger between Chile's LAN Airlines and Brazil's TAM Airlines. Qatar Airways acquired 10 percent of LATAM in December 2016.