LATAM Airlines Group Reports Operating Income Of US$227 Million And Operating Margin Reaches 8.1% In First Quarter 2015
LATAM Airlines Group S.A. (NYSE: LFL; IPSA: LAN; BOVESPA: LATM33), the leading airline group in Latin America, announced today its consolidated financial results for the first quarter ended March 31, 2015. “LATAM” or “the Company” makes reference to the consolidated entity, which includes passenger and cargo airlines in Latin America. All figures were prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in U.S. dollars. The Brazilian real / US dollar average exchange rate for the quarter was BRL 2.87 per USD.
- LATAM reported strong operating results for first quarter 2015, with operating income reaching US$227 million, 102% higher than the US$113 million reported in first quarter 2014. Operating margin reached 8.1%, compared to 3.5% in the same period 2014.
- The significant margin expansion during the first quarter 2015 was mainly driven by a 16% reduction in the Company’s operating costs. Cost per ASK equivalent decreased by 17%, including the effect of lower fuel prices. Furthermore, excluding fuel, cost per ASK equivalent decreased by 10%, reflecting efficiencies achieved as a result of our ongoing cost reduction programs, as well as the effect of local currency depreciations on our costs denominated in those currencies.
- LATAM reported a net loss of US$40 million in first quarter 2015, similar to a net loss of US$41 million in first quarter 2014. Non-operating losses were driven by a non-cash foreign exchange loss of US$205 million mostly recognized at TAM as a result of the 20% devaluation of the Brazilian real during the quarter. The Company has mitigated foreign exchange losses by consistently reducing the exposure to the Brazilian real on TAM’s balance sheet.
- On May 14, 2015, LATAM Airlines Group successfully priced its first EETC issuance, becoming the first EETC issuer in Latin America and the largest outside the United States. The total amount of US$1,021 million will finance 17 new aircrafts (11 Airbus A321s, 2 Airbus A350-900 and 4 Boeing 787-9s), which are currently scheduled for delivery between July 2015 and March 2016.
- The company ended the quarter with 85.8% of its flights on time, increasing 3.9 p.p. as compared to the same quarter of last year. The increase of our on-time performance is a result of a 6.6 p.p. increase in the domestic Brazil operations and a 5.2 p.p. increase in the international operations.
- LATAM continues to work on enhancing its passenger experience by providing better service before and during the flight. During the quarter, the Company installed a new entertainment system in 10 single-aisle airplanes to allow passengers access to a selection of content from their own devices, and enabled the use of devices in airplane mode during the whole flight. Additionally, our in-flight entertainment on the aircrafts’ individual screens is now active from gate-to-gate in LAN flights, so that passengers may enjoy them during the whole flight. Regarding ground services, the Company installed single check-in modules in Miami, Madrid and Sao Paulo Guarulhos airports, and also launched a new VIP Lounge in Santiago, the largest in South America.
- In May, LATAM Airlines Group announced the selection of Sabre Corporation as the technology provider for our combined Passenger Service System (PSS), the platform for reservation, inventory and check-in. As part of this new agreement, TAM will migrate to the SabreSonic CSS technology, creating a unified reservation system for the entire airline group and resulting in improved service for our customers as well as increased efficiency for the Group.
- In line with LATAM’s focus on creating the best connectivity within, to and from South America, the Company announced in April that it started feasibility studies to develop a new hub in the Northeast region of Brazil. “The project will expand the capillarity of the Group in Brazil, South America, and internationally, particularly by increasing the number of destinations in Europe. It will also reaffirm the Group’s leadership in Latin America, increase connectivity options for customers and optimize coverage of passenger and cargo flows between Brazil and other markets,” said Claudia Sender, CEO of TAM S.A. and of TAM Linhas Aereas.
- In line with the Company’s fleet renewal plan, during first quarter 2015 LATAM took delivery of the first two B787-9s in Latin America. These aircraft are the first wide body aircraft to feature the new unified cabin interior for LATAM Airlines Group, and are testament to the airline’s constant pursuit of innovation to offer passengers the best possible travel experience.
- On April 28, 2015, LATAM Airlines Group held its Annual General Shareholders’ Meeting in Santiago during which the Board of Directors was reelected for a two year period.