LATAM Airlines Group has reported net income of US$8.5 million for fourth quarter 2012, excluding US$21.9 million of transaction-related expenses resulting from the business combination between LAN and TAM as well as US$52.7 million in aircraft sale and redelivery costs. Excluding these special items, operating income reached US$ 119.3 million in fourth quarter 2012, resulting in a 3.4% operating margin.
TAM has made significant progress in the turnaround of the domestic Brazil passenger operations, maintaining capacity discipline with a 4.2% reduction in ASKs during the fourth quarter 2012 as compared to the fourth quarter 2011. Healthy traffic growth of 11.9%, as well as improved market segmentation and revenue management practices have resulted in strong load factor improvements of 11.5 percentage points as compared to the fourth quarter 2011, reaching 79.6%. This led to significant improvements in revenue per ASK, as measured in reais. Results in U.S. dollars were affected by a 14% depreciation of the Brazilian currency during the quarter as compared to the fourth quarter 2011. We remain convinced that capacity discipline and an adequate segmentation of the market will provide the basis for continued healthy load factors and a significant improvement in operating results in 2013.
As the integration of LAN and TAM operations progresses, the group remains confident in its synergy target of between US$600 and US$700 million, to be fully achieved by the fourth year after the merger (June 2016).
During 2012, LATAM recognized an estimated US$72 million in merger synergies, before merger-related expenses. “We expect merger synergies to be between US$250 and US$300 million during 2013. Furthermore, we expect to continue to incur certain costs related to the integration process.”
Total revenues in the fourth quarter 2012 reached US$3,476.4 million compared to pro forma revenues of US$3,485.4 million in fourth quarter 2011. The decline of 0.3% is a result of a 0.7% decrease in passenger revenues and a 3.1% decrease in cargo revenues, partially offset by a 61.5% increase in other revenues. Operating revenues this quarter reflect the negative impact of the depreciation of the Brazilian currency, a more challenging operating environment in the long haul passenger business and continued weak market demand in the cargo business. Passenger revenues were impacted by the change in LAN’s passenger service system, containing the reservation, inventory and departure control systems of the airline, to a new system provided by Sabre. This cutover took place in September 2012 and, although it is difficult to measure the exact impact, the Company estimates decreased revenue of approximately US$25 to US$40 million in the fourth quarter 2012. Passenger and cargo revenues accounted for 82.8% and 15.9% of total revenues, respectively, during fourth quarter 2012.
During the fourth quarter 2012, LATAM received a total of 6 Airbus A320 family, 4 Boeing 767-300, 2 Boeing 777-300ER and 2 Boeing 787-800 passenger aircraft, and 1 Boeing 777 freighter.