LATAM Airlines Group third quarter results reflected a significant improvement in the LATAM group operations, with an average of 49.7% of 2019 levels (measured in ASKs), driven by a strong recovery in the affiliates’ domestic operations, and a capacity increase of 75.0% compared with the second quarter of 2021. In September, domestic capacities of the Spanish-speaking affiliates and the Brazilian affiliate reached 80.0% and 82.7% of 2019 levels, respectively. Additionally, towards the end of the quarter and following the quarter close, several international border restrictions, namely related with Chile and Brazil, were lifted, adding positive signals for the international demand recovery. LATAM group expects to continue the ramp up of the groups’ operations in all markets through the end of the year, reaching over 65% of consolidated capacity (measured in ASKs) versus 2019.
LATAM’s total operating revenues in the third quarter of 2021 amounted to US$1.3 billion, 50.7% below 2019 levels, though they continue improving and post a 47.8% increase from the previous quarter of 2021. In summary, passenger revenues were down 60.9% and other revenues decreased 48.6% compared to 2019, while cargo revenues helped to offset the impact with an increase of 43.6% compared to 2019.
Passenger revenues amounted to US$914.6 million, 60.9% down compared to the third quarter of 2019 but were more than seven times greater than the same period in 2020, in line with the operational recovery. This marks a sequential improvement from the second quarter 2021 revenues, reaching a 100.7% increase.
LATAM’s cargo affiliates’ operations showed a strong performance, with revenues increasing 43.6% compared to the same period in 2019 and amounting to US$361.4 million. Both cargo capacity and traffic (measured in ATKs and RTKs, respectively) still remained below 2019 levels (26.0% and 15.0% lower, respectively), however, the excess demand for capacity has propelled load factors up
8.0 percentage points compared to 2019 to 61.6%, and driven a 68.9% increase in yields compared to 2019.
Total operating expenses were US$1.8 billion in the period, a decrease of 25.2% compared to the third quarter of 2019, reflecting the group’s efforts to reduce and variabilize its costs.
LATAM’s operating loss in the period amounted to US$479.2 million and a net loss attributable to shareholders of US$691.9 million, impacted by the increase in costs associated with aircraft maintenance due to the catch-up as operations ramp up of certain tasks that were deferred during the pandemic, and certain one-off impacts accounted for in other operating expenses. This result compares with a net profit of US$86.3 million in the same period of 2019 and a loss of US$769.6 million during the previous second quarter of 2021.
On September 29, 2021, LATAM presented a committed offer from Oaktree Capital Management, ("CM) and Apollo Management and certain funds, accounts and entities advised by OCM and Apollo for up to US$750 million for Tranche B of the DIP Financing, representing improved conditions and financial costs compared to Tranches A and C, lowering the overall cost of financing. This was subsequently approved by the US Court on October 18, 2021.
The group received an extension of its exclusivity period to present a plan of reorganization until
November 26, 2021, and to solicit acceptance of the plan until January 26, 2022, in order to allow sufficient time for the finalization of its ongoing negotiations with different exit financiers and certain stakeholders.
During the quarter, LATAM Airlines Group and Delta Air Lines successfully reached an agreement on the implementation, along with certain mitigation measures for their TransAmerican Join Venture Agreement (JVA) with Chile’s Fiscalia Nacional Económica (FNE) and on October 28, 2021 received approval of the agreement from Chile’s Tribunal de la Libre Competencia (TDL”). The JVA has therefore already been granted approval by authorities in Chile, Colombia, Brazil and Uruguay, while the review and approval process continues in the United States. LATAM maintains that the joint venture will improve air connectivity and provide passengers and cargo customers a seamless travel experience between North and South America once all regulatory approvals have been obtained.
By the end of the quarter, the value of LATAM’s financial debt amounted to US$7.5 billion, a US$359.4 million decrease compared to the previous quarter. At the end of the third quarter 2021, LATAM reported US$930.2 million in cash and cash equivalents.
LATAM states that it is currently evaluating the adequate fleet needs for the following years. Agreements regarding its fleet commitments, have been reached with Boeing for two 787 Dreamliner aircraft and Airbus for a total of 70 A320-Neo family aircraft. The delivery dates are expected through 2028, though could be modified as a result of the ongoing discussions held with aircraft manufacturers in the context of the current situation.