LATAM Airlines Group S.A. Q1 FY2026 earnings call

LATAM began 2026 with strong results reflecting execution consistency and model strengths. Operational performance led to record financials. Revenue strength and disciplined cost execution contributed to net income of $576 million. Continued progress in revenue quality, solid execution, product differentiation, strong customer preference and increasing premium revenues supported results. Faced increasing fuel prices starting in March, implemented targeted revenue management actions. Highlighted model resilience including passenger and cargo business integration, loyalty program, passenger experience, focus on premium traffic, competitive cost, strong balance sheet and liquidity, and quality of people.

During the first quarter, LATAM grew capacity by 10.4% and transported close to 23 million passengers, with a solid load factor of 85.3%. Revenue reached $4.1 billion, adjusted EBITDA was $1.3 billion, and adjusted operating margin was close to 20%. Passenger business grew 24.4% and cargo revenues increased 3.4%. Latin Airlines Brazil domestic market had strong dynamics with demand growing above capacity, higher load factors and solid passenger RASC performance. Domestic Spanish-speaking affiliate markets saw improved traffic, higher load factors and strong unit revenue performance. International segment capacity and traffic grew at similar pace with high flow factors. Premium revenues increased 28% year over year, accounting for 27% of passenger revenues. Latam Pass has 55 million members including 2.6 million elite members, with close to 60% of LATAM's passenger revenues generated by LATAM PASS members.

The company replaced full-year 2026 guidance. Fuel price assumptions: $107 per barrel for Q2 and Q3, $150 per barrel for Q4. Passenger unit cost ex-fuel updated to 4.5 - 4.7 cents. Adjusted EBITDA expected in range of 3.8 - 4.2 billion dollars. Net leverage expected somewhat higher than previously guided but still healthy. Liquidity expected to remain at or above $4.5 billion. Expected additional fuel expenses of more than $700 million for Q2 2026, and mid to low single-digit adjusted operating margin in Q2.

Conflict in the Middle East pushed up jet fuel prices sharply starting in March, expected to be reflected in second quarter financial results. Environment remains extremely uncertain with variables outside of LATAM's control.

Q: On the guidance, share top-line assumptions and price increases in different segments.

A: Not providing top line and capacity guidance as volatile. Segments have solid and stable demand, corporate segment strong in almost every country, international and domestic Brazil stronger, more elastic segments seeing slowdown but compensated by network.

Q: Follow-up on demand elastic segments and long-term premium revenues target.

A: Slowdown in elastic segments normal, airlines with more elastic segments decreasing capacity faster. No public long-term premium revenues target, expect premium revenues to grow faster than total revenues.

Q: How much higher fuel cost captured in June quarter and full capture by end of year.

A: Don't provide specific info, but mid to low single-digit operating margin and Q2 fuel spent can estimate impact.

Q: Comment on forward booking curve.

A: Significant domestic passengers have low APs, booking curve visibility not too far, rest of Q2 and July bookings look healthy.

Q: Comment on competitive landscape in region.

A: Normally don't comment on competition, see downward capacity trend on most airlines, ULCCs decreasing capacity faster.

Q: Impact into second quarter from fuel prices and weighting market share vs profitability.

A: Petrobras issue is about price lagging, no subsidies. Market share not a goal, manage business looking at flows and strengths, focus on long-term network development.

Q: Jet fuel price assumption and XLR deployment.

A: Guidance captures hedge contracts until end of April. 13 XLRs starting in 2027, evaluating deployment, initially considering Lima but now evaluating, bought for long segments like to US.

Q: Question on JETFIELD guidance.

A: Forecasting fuel prices is difficult, guidance is slightly conservative, focus on metrics showing LATAM model's resilience.