LATAM Airlines Group S.A. Q2 FY2025 earnings call

Opening Remarks: Roberto Alvo highlighted LATAM's sustained growth and profitability, noting 20.5 million passengers transported, 8.3% capacity expansion, 83.5% load factor, and record Net Promoter Score. LATAM was named best airline in South America for the sixth year and best staff in South America for the fourth year at Skytrax awards. ### Operational Performance: Consolidated ASKs grew 8.3%, with LATAM Airlines Brazil domestic up 10.9% and international up 9.6%. Load factor was 83.5%, a 1.2 percentage point improvement. ### Customer Experience: Investments in premium cabins, onboard connectivity (WiFi across narrow-body fleet, rollout to wide-body by 2026), and ground experience (new terminal in Lima with signature check-in). NPS remained at record high. ### Financial Results: Total revenues $3.3 billion, adjusted EBITDA $850 million (25.9% margin), adjusted operating margin 12.9% (highest Q2 ever), net income $242 million. ### Cost Discipline: Adjusted CASK ex fuel remained stable at $0.048. ### Capital Structure: Liquidity $3.6 billion, adjusted net leverage 1.6%. Refinanced $800 million in senior secured notes, saving $33 million annually. ### Fleet: Incorporated 12 aircraft, secured 11 for 2026, delayed retirement of 4 aircraft.

LATAM Group delivered strong financial results in the second quarter. Total revenues grew 8.2% year-over-year, driven by healthy passenger and cargo segments. Passenger revenues rose 8.5%, with premium traveler revenues up 12%, and cargo revenues grew 10.2%. Adjusted EBITDA reached $850 million with a margin of 25.9%, and net income was $242 million, a 66% increase year-over-year. First half net income was nearly $597 million.

LATAM narrowed full-year guidance ranges, expecting higher growth in Brazilian domestic market (7-9% to 9.5-10.5% capacity growth). Adjusted operating margin revised to 14-15% (up from 13-15%), adjusted EBITDAR forecasted $3.65-3.85 billion (up from $3.4-3.75 billion), and adjusted leverage free cash flow increased to above $1.3 billion (up from above $1.2 billion). Target to maintain adjusted net leverage at or below 1.5x.

Potential risks include ongoing macroeconomic volatility in key markets, aircraft availability issues (e.g., Pratt & Whitney AOG), and market evolution affecting growth opportunities.

Q: Guilherme Mendes asked about growth outlook for 2026 and beyond and capital allocation.

A: Roberto Alvo said high single-digit growth prospect for 2026 based on fleet plan, with more detailed guidance later. Ricardo Bottas mentioned financial policy framework including liquidity and leverage targets, with decisions on capital distribution to shareholders made after reviewing growth prospects.

Q: Michael Linenberg inquired about other revenues and June quarter profitability.

A: Tori Creighton said other income was $36 million, including LATAM travel and joint ventures. Roberto Alvo discussed seasonality, diversification of network, and premium traffic growth mitigating seasonal impact.

Q: Gabriel Rezende followed up on capacity growth underpinning and cost efficiency.

A: Roberto Alvo said capacity growth due to timely aircraft receipt, improved AOG situation, wet lease aircraft, and network utilization. On cost efficiency, emphasis on daily cost monitoring and technology-driven operational streamlining for future improvements.