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A LATAM Brasil A320 landing in São Paulo/Congonhas Airport. (Photo: AirlineGeeks | João Machado)

LATAM Airlines Group Reports $190 Million Net Income in 2019

LATAM Airlines Group, Latin America’s largest airline, presented its financial results of the fourth quarter and full year of 2019 last week. The group had its fourth consecutive year of positive results, registering a USD $190 million net income.

This represents a reduction of 38.5 percent over the numbers of 2018, when LATAM had a net profit of USD $310 million. Results of the fourth quarter were also positive, with net income reaching USD $227 million — a 41.8 percent reduction against the same period of 2018.

LATAM celebrated its best-ever year in terms of transported passengers, carrying 74 million customers throughout its network, five million more than in 2018.

Total operating costs grew 2.2 percent on a year-over-year basis, while operating revenues grew 0.6 percent only, which helps to explain the reduction of the operating margins from 8.6 percent to 7.1 percent from full-year 2018 to 2019.

EBITDA (earnings before interest, taxes, depreciation and amortization) fell 2.1 percent, from USD $2,260 billion in 2018 to USD $2,212 billion in 2019. Percent wise, the EBITDA margin decreased 0.6 points from 21.8 to 21.2.

LATAM’s International Operations

International operations saw an increase in unit revenues brought, according to LATAM’s VP of Corporate Finance, Andres del Valle, as “a result of the active capacity management of the company,” he mentioned at the investor’s revenue call early this week.

Indeed, international capacity in ASKs saw a decrease of 5.4 percent in the fourth quarter when compared to the same period of 2018, while traffic in RPKs fell 5.2 percent. Parallelly, unit revenue in RASKs grew 4.6 percent to six U.S. cents.

LATAM’s Brazilian Operations

The domestic operations in Brazil saw a good 2019 as well, following the demise of Avianca Brasil, which directly competed with LATAM. A better economic scenario also pushed overall demand in the country up.

These specific aspects meant that LATAM could aggressively grow in the Brazilian market while maintaining control over the unitary revenue.

While the capacity in ASKs at the Brazilian domestic operations grew 17.7 percent from the fourth quarter of 2018 to the same period of 2019, traffic in RPKs grew 20 percent, while the unit revenue in RASKs grew 5.9 percent.

LATAM’s Spanish-Speaking Country Operations

The biggest issues in LATAM’s network were located at the domestic operations in Spanish-speaking countries, where capacity growth outpaced the demand, along with a reduction in the unit revenue.

This was driven especially by social unrest in Chile, which dragged demand down. Currency devaluations in Colombia and especially in Argentina also influenced the negative results.

From the fourth quarter of 2018 to the same period of 2019, ASKs in these markets grew nine percent, while the RPKs grew only 3.8 percent. Additionally, unit revenues in RASKs decreased by 4.7 percent.

Cargo

Cargo operations, which represent just over 10 percent of LATAM’s total revenues, also saw a negative performance when compared to 2018.

Revenue with cargo fell 10.3 from 2018 to 2019, much given to LATAM’s sale of its stake in Mexican cargo airline MasAir. Additionally, Andres del Valle attributed this decrease to the disruptions in Chile and lower imports, especially to Argentina and Brazil.

Excluding MasAir from the equation, however, numbers also turn out negatively. While capacity in ATKs grew 0.6 percent from the last quarter of 2018 to the same period of 2019, traffic in RTKs fell by the same proportion. Unit revenue, measured in RATKs, fell by 8.7 percent.

Expectations for 2020

LATAM maintained its December guidance for the 2020 numbers. It expects its International ASKs to keep stable, growing up to two percent. Domestic operations in Brazil are expected to grow between seven and eight percent, while the domestic flights in Spanish-speaking countries is to grow from six to eight percent.

The group expects total ASKs to grow between three and five percent in 2020, with cargo in ATKs growing from four to six percent. The operating margin should remain stable, varying between seven and 8.5 percent.

João Machado
João Machado
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