LATAM AIRLINES GROUP S.A.(LTM) - 2024 Q3 - Earnings Call Transcript

Financial Data and Key Metrics - LATAM Airlines Group reported adjusted EBITDAR of $828 million with a 25.2$301 million, bringing year-to-date net income to $705 million, a 41.3$157 million in cash flow in Q3 2024, with adjusted operating cash flow totaling $655 million [27] - LATAM's liquidity position stood at$6.3 billion, with a leverage ratio of 1.7 times [12][30] - Adjusted passenger CASK ex-fuel decreased by 8.5% year-over-year to $0.04, contributing to improved margins [23][25] Business Line Performance - Passenger revenues increased by over 6$381 million, marking the second consecutive quarter of improvement [22] - LATAM transported 21.1 million passengers in Q3 2024, a 7.1% increase compared to the same period last year [9] - The company maintained a high load factor despite a 51% increase in capacity [9] Market Performance - LATAM's capacity grew by 15% in Q3 2024, with strong demand across all markets [19] - The company saw a 13% increase in passengers transported over the last 12 months, reaching 80.6 million passengers [18] - Overcapacity in Colombia showed signs of moderation, suggesting a gradual rebalancing in the market [21] Strategic Direction and Industry Competition - LATAM continues to focus on operational excellence, network strength, customer focus, sustainability, and financial discipline [8] - The company has a strong capital structure, with $3.6 billion in liquidity and no significant debt maturities until 2028 [29][32] - LATAM's recent refinancing efforts reduced the average cost of debt to 8$118 million in interest payments for 2025 [31][36] Management Commentary on Operating Environment and Future Outlook - Management expects demand to remain stable in the short term, leading to positive top-line results and continuous cost delivery [15] - The company updated its 2024 guidance, targeting adjusted EBITDAR of over $3 billion, reflecting strong growth, cost control, and margin improvements [37] - LATAM's resilience to business cyclicality and exchange rate volatility was highlighted as a key strength [14] Other Important Information - LATAM successfully renegotiated its revolving credit facilities, increasing total revolving facility lines to$1.55 billion, fully committed until 2029 [28] - The company refinanced $1.4 billion of debt at an interest rate of 7.875%, significantly lower than its Chapter 11 exit financing rate [31] - LATAM's credit rating was upgraded by Standard & Poor's to BB- with a positive outlook and by Moody's to Ba2 with a stable outlook [36] Q&A Session Summary Question: Why does LATAM not report earnings per ADS? - LATAM focuses on EBITDAR and EBIT margins due to volatility in non-operating areas like tax credits and FX impacts [41] - The company plans to start reporting EPS in the future to reflect the benefits of its strong capital structure [44] Question: Impact of US election on LATAM's operations - LATAM does not anticipate significant operational impacts from the new US administration, given its dollar-denominated revenues and historical resilience to currency volatility [46][48] - The company's cargo business could benefit from potential near-shoring trends [49] Question: Yield decline and capital allocation - Yield decline was influenced by currency depreciation and a faster-growing international segment, but RASK in domestic Brazil increased in local currency [52][53] - LATAM is considering shareholder returns, including dividends or buybacks, as part of its capital allocation strategy [54][55] Question: International segment performance and fuel hedges - Over 60% of LATAM's international capacity is wide-body, with strong demand and high load factors [63][65] - The company uses asymmetrical collars for fuel hedging, focusing on the next 12 months and maintaining a consistent policy [66] Question: FX depreciation in Brazil and yield protection - LATAM has seen strong demand in domestic Brazil, with RASK increasing in local currency despite capacity growth [68] - The company's dollar-based revenues provide some insulation against currency volatility [70] Question: Q4 margin expectations - LATAM expects a slight deceleration in margins in Q4, consistent with historical trends, but remains confident in meeting its full-year guidance [73]