LATAM AIRLINES GROUP S.A.(LTM) - 2025 Q3 - Earnings Call Transcript

Financial Data and Key Metrics Changes - LATAM Airlines Group reported total revenues of $3.9 billion, an increase of 17.3% year-over-year, driven by growth in both Passenger and Cargo segments [16] - Passenger revenues rose by 18.5%, with premium traveler revenues increasing by more than 15% compared to the same period last year [17] - Adjusted operating margin expanded to 18.1%, while adjusted EBITDAR reached $1.15 billion during the quarter, and net income totaled $379 million, up 26% year-over-year [8][18] Business Line Data and Key Metrics Changes - LATAM transported over 22.9 million passengers, with a consolidated load factor of 85.4% [8] - Passenger RASK increased by 8.4% year-over-year in US dollars, reflecting strong operational performance [11] - Cargo revenues grew by 6.3%, contributing to overall revenue growth [17] Market Data and Key Metrics Changes - In Brazil, LATAM Airlines Brazil grew capacity by over 12% year-over-year, with a load factor increase of 2.2 percentage points [11] - Spanish-speaking affiliates saw passenger RASK increase by 18% year-over-year, indicating improved performance in those markets [11] - The international segment operated with high load factors, although demand to the U.S. was noted to be softer, particularly in leisure travel [27][28] Company Strategy and Development Direction - LATAM is focused on maintaining disciplined execution and cost control while enhancing customer experience through product improvements [5][14] - The company plans to launch a new Premium Comfort Class in 2027, reflecting its commitment to offering more choices to passengers [15] - LATAM's fleet modernization strategy includes the acquisition of up to 74 Embraer E2 aircraft, which will improve regional connectivity and fuel efficiency [9][10] Management's Comments on Operating Environment and Future Outlook - Management expressed confidence in the demand environment and the company's ability to maintain profitable growth despite some softness in international leisure travel [28] - The company anticipates high single-digit consolidated capacity growth for the next year, supported by efficiency and a robust fleet delivery schedule [14][21] - LATAM updated its full-year 2025 guidance, projecting adjusted EBITDAR between $4 billion and $4.1 billion, reflecting a more constructive outlook [21][22] Other Important Information - LATAM executed a share repurchase program totaling $433 million, demonstrating a disciplined approach to capital allocation [9][20] - The company ended the quarter with a liquidity level of 25.8% and an adjusted net leverage ratio of 1.5 times, aligning with financial policy targets [20] Q&A Session Summary Question: International performance compared to Brazil and Spanish-speaking countries - Management noted stable demand in most international segments, with softer demand to the U.S. linked to leisure travel preferences [27][28] Question: Update on Brazil's legislation regarding free baggage - The law passed in Brazil allows passengers to carry a bag without charge for both domestic and international flights, but its implementation is still uncertain [33][34] Question: Impact of premium experience investments on revenue growth - Premium revenue is growing faster than capacity, contributing significantly to RASK improvements, driven by enhanced customer experience and product offerings [45][46] Question: Reasons for growth slowdown in international traffic - Management attributed the slowdown to external factors affecting leisure travel to the U.S., rather than a fundamental decline in demand [51] Question: Outlook on fleet and booking curve for next year - LATAM expects high single-digit ASK growth for 2026, with a total fleet of around 410 aircraft by year-end [60][62] Question: Lower percentage of hedge fuel this quarter - Management clarified that the current hedge fuel percentages are standard and consistent with past practices, with expectations for increases as quarters progress [66][68] Question: Expected impact of the pallet strike in Chile - Management indicated no clarity on the potential impact of the strike at this time [73]