DOHA: Santiago, Chile-based LATAM Airlines Group reported a $92.1 million net loss for the 2016 second quarter, deepened from the group’s $49.7 million net loss in 2Q 2015.
Revenues for the South American airline group—which comprises LATAM Airlines and its affiliates in Peru, Argentina, Colombia and Ecuador, LATAM Cargo, TAM S.A. and its affiliates in Brazil and Paraguay, plus loyalty-program company Multiplus S.A.—fell 12.5% year-over-year (YOY) to $2.11 billion.
The drop in 2Q revenue is attributable to the continuing “weak macroeconomic environment in South America—especially in Brazil—and the devaluations of Latin American currencies during the period,” LATAM said.
LATAM’s 2Q passenger revenue decreased 13.7% YOY to $1.71 billion; 2Q cargo revenue fell 22.3% YOY to $260 million. The group’s consolidated yield fell 12.9% YOY to 5.7 cents. The group’s operating margin for the quarter was 0.1%, down 0.7 point YOY.
LATAM’s operating expenses for the quarter declined 12% YOY to $2.11 billion. The company reported $1.3 million in operating income for the quarter, down 92.4% from $17.2 million in operating income in 2Q 2015.
In an ongoing effort to reduce fleet assets by $2 billion to $3 billion by 2018, LATAM said it had reduced its fleet assets by $1.1 billion as of August 2016 through deferrals, cancellations and redeliveries. LATAM said the company has deferred 12 Airbus A320neo and two A350 aircraft, and has also opted to redeliver five additional A320s, three A319s and one Boeing 777-200 freighter in 2017.
July, LATAM entered into an agreement with Qatar Airways to acquire up to 10% of LATAM’s total shares. A shareholders meeting on Aug. 18 will determine whether the agreement is approved. Once approved, the capital infusion of $613 million should come in the 2016 fourth quarter. “[It] will be used to strengthen the financial position of the company, reducing debt while expecting to end the year with a cash position of approximately $1.5 billion, which we consider to be an adequate level for the company under current market conditions,” LATAM said.
LATAM’s 2Q consolidated system traffic was down 2.3% YOY to 34.7 billion RPKs on a 1.8% YOY systemwide decrease in capacity to 49 billion ASKs, producing a load factor of 70.8%, down 0.4 point YOY.
Passenger traffic grew 1.8% YOY during the second-quarter to 26.3 billion RPKs. Passenger capacity was up 0.8% YOY to 31.8 billion ASKs and LATAM’s passenger load factor rose 0.8 point YOY to 82.7%. In particular, passenger demand is on the rise (up 8.4% YOY) in LATAM’s Spanish speaking country (SSC) affiliates (Chile, Peru, Argentina, Colombia and Ecuador). Capacity in the SSC markets were up 7.2%, driven by growth in Peru and Chile, and load factors reached 78.8%. LATAM dropped its capacity in Brazil 13.7% YOY during the quarter as traffic decreased 11.9% YOY, which raised the Brazil load factor to 81.2%. Capacity on international routes increased 7.9% YOY, driven by added capacity on healthy SSC routes to the US and Europe, LATAM said.
As of June 30, LATAM Airlines Group’s consolidated fleet comprised 333 aircraft including 241 Airbus A320 family aircraft, five A330-200s and three A350-900s. LATAM’s Boeing fleet includes 37 767-300 passenger aircraft, 11 767-300F cargo aircraft, 10 777-300ERs, four 777-200Fs, plus 10 787-8 and 12 787-9 Dreamliners.
