LATAM AIRLINES GROUP S.A.(LTM) - 2025 Q2 - Earnings Call Transcript

Financial Data and Key Metrics Changes - LATAM Airlines Group reported total revenues of $3.3 billion, an increase of 8.2% year over year, driven by healthy demand in both passenger and cargo segments [21][7] - Adjusted EBITDA reached $850 million with a margin of 25.9%, reflecting a 5.5 percentage point improvement from the same period last year [7][22] - Net income for the quarter was $242 million, marking a 66% increase year over year, bringing first half net income to nearly $597 million [8][29] Business Line Data and Key Metrics Changes - Passenger revenues rose by 8.5%, while revenues from premium travelers increased by 12% year over year [21] - Cargo revenues grew by 10.2%, with notable performance during seasonal peaks [22] - Consolidated capacity measured in ASKs increased by 8.3%, with a 10.9% expansion in LATAM Airlines Brazil domestic operations [13][14] Market Data and Key Metrics Changes - LATAM transported over 20.5 million passengers, achieving a consolidated load factor of 83.5%, a 1.2 percentage point improvement year over year [4][15] - Domestic capacity across affiliates in Chile, Colombia, Ecuador, and Peru recorded a slight decline of 0.3% due to strategic reallocation of resources [14] - International passenger RASK remained nearly flat despite a 9.6% increase in capacity, indicating healthy demand dynamics [16] Company Strategy and Development Direction - LATAM Group is focused on strengthening its value proposition and enhancing customer experience through investments in product and technology [5][17] - The company is on track with its fleet plan, having incorporated 14 new aircraft in the first half of the year and expecting 12 more in the second half [10][30] - LATAM is analyzing opportunities for further growth, including potential acquisitions of additional aircraft to serve passenger and cargo traffic [10][11] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in current booking trends across domestic and international markets, reinforcing a positive outlook for the second half of the year [8][27] - The company has narrowed its full-year guidance, expecting adjusted operating margins between 14% and 15% and adjusted EBITDAR between $3.65 billion and $3.85 billion [28][27] - Management highlighted the strength of LATAM's diversified business model and its ability to adapt to shifting external conditions [8][7] Other Important Information - LATAM's liquidity at the end of the second quarter was $3.6 billion, equivalent to 27.2% of last twelve months revenues [25] - The company completed a refinancing of $800 million in senior secured notes, significantly reducing interest costs and generating annual savings of $33 million [26][30] - LATAM Group received multiple awards at the 2025 Skytrax World Airline Awards, reinforcing its position as the best airline in South America [6][20] Q&A Session Summary Question: Growth outlook and ASK growth - Management indicated solid demand across most markets and suggested a high single-digit growth prospect for 2026 based on the fleet plan [36][37] Question: Capital allocation and leverage - Management emphasized the importance of financial policy and performance in determining capital distribution to shareholders, with no immediate plans to increase dividends [41][42] Question: Cargo revenue performance - Management clarified that "other revenues" are minor and consist of various small income sources, with loyalty revenues included in passenger revenue [48][52] Question: Seasonal impact on profitability - Management acknowledged reduced seasonality impacts due to network diversification and growth in premium traffic revenue, which is less seasonal [56][58] Question: Capacity growth drivers - Management attributed capacity growth to timely aircraft deliveries, improved utilization, and the ability to adjust capacity across markets [67][70] Question: Cost efficiency opportunities - Management highlighted ongoing efforts to improve operational efficiency through technology and daily cost management practices [74][76]