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LATAM AIRLINES GROUP REPORTS CONSOLIDATED OPERATING INCOME OF US$15 MILLION FOR SECOND QUARTER 2014

Written by thomas · Filed Under Commercial 

August 13, 2014

thomas

Santiago, Chile, August 12, 2014 – 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 second quarter ended June 30, 2014. “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 2.23 per USD.

HIGHLIGHTS

·         LATAM Airlines Group reported operating income of US$15.4 million with an operating margin of 0.5% for second quarter 2014, representing a decrease of 0.8 percentage points as compared to the second quarter 2013. Results this quarter were negatively affected by reduced passenger and cargo demand during the FIFA World Cup soccer tournament held in Brazil, as well as by very week seed exports in the cargo business.

·         The Company was highly successful in managing the extremely complex operations during the World Cup in Brazil. We are very satisfied with our performance during this challenging period, where we transported almost 3 million passengers in the domestic markets with more than 1.100 extra domestic and international flights, maintaining excellent service standards for our customers, which resulted in an on-time performance of 95%.

·         In advance of the World Cup, TAM reduced capacity by 5.1% for the month of June, period during which most of the soccer tournament was held. This allowed us to operate with high load factors during a month in which traffic decreased by 5.2% as compared to the same period in 2013. Decreased traffic during the World Cup period was a result of reduced corporate travel due to 12 holidays in Brazil, as well as a reduction in domestic and international leisure demand during the winter holidays, which are usually a period of high seasonal demand. We estimate the impact of the World Cup on LATAM’S operating margin – in both domestic and international operations – to be approximately between US$ 140 million and US$160 million during June and July, of which approximately US$30 million impacted the month of June, with a higher impact during the month of July.

·         “The significant infrastructure investments in Brazil prior to the World Cup, especially in airports, will have a lasting and very positive impact on the continued development of the airline industry in Brazil,” said Enrique Cueto, CEO of LATAM Airlines Group. “TAM’s move to Terminal 3 at Guarulhos Airport and to Pier 2 at the Brasilia airport will enable us to continue improving connectivity through our hubs, and increasing on time performance.”

·         LATAM continues to rationalize capacity in both passenger and cargo operations with reductions of 1.5% and 7.5%, respectively during the second quarter 2014 as compared to the same period of the previous year. Passenger load factors continue to increase in all markets, reaching record levels at 82.4% and driving higher RASK.

·         During the second quarter 2014, LATAM adjusted the exchange rate for its cash held in Bolivares in Venezuela to the “SICAD I” exchange rate, recognizing a one-time non-operating charge of US$56.3 million. In order to continue serving Venezuela, the Company has been adjusting the number of frequencies since the first quarter of 2014, resulting in a decrease of 44% in ASKs in the second quarter of 2014 as compared to the same period 2013.

·         LATAM Airlines Group’s net loss reached US$58.9 million for second quarter 2014, compared to a net loss of US$329.8 million for the same period 2013.

·         LATAM has successfully restructured its balance sheet and has a solid financial position, having reduced its net debt by US$1.8 billion in the last twelve months. Additionally, LATAM has continued to reduce its exposure to the Brazilian real on TAM’s balance sheet from US$2.0 billion on December 31, 2013 to US$1.0 billion on June 30, 2014, and expects to reduce this exposure to approximately US$0.5 billion by September 2014.

·         LAN and TAM Airlines, members of LATAM Airlines Group, have been recognized as the “Best Airlines in South America” in first and second places respectively by the SkyTrax World Airline Awards. The awards are considered the global barometer for customer satisfaction within the industry, thanks to their exclusive reliance on the opinion of passengers. We are very proud that LAN and TAM have once more been recognized as the best airlines in our region.

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