Financial Performance

LATAM reports a net income of US$ 69.2 million

The LATAM Airlines Group recorded an operating performance of US$ 567.9 million during 2016; an increase of 10.5% as compared to the operating performance of the year 2015. The operating margin reached 6.0%, representing an increase of 0.9 percentage points with respect to the previous year. LATAM’s improved financial performance is mostly explained by a reduction of its operating costs as a result of a drop in fuel prices and cost savings initiatives carried out by LATAM.

Total income for the year 2016 reached US$ 9,527.1 million, as compared to US$ 10,125.8 million in 2015. This 5.9% drop is explained by a 6.3% drop in passenger revenues and a 16.5% drop in cargo revenues, partially offset by a 39.7% increase in other revenues. Such revenue decrease was mainly explained by a weaker macroeconomic scenario in Latin America and by the devaluation of Latin American currencies throughout the period, especially the 59% devaluation of the Argentinean Peso, the 11% devaluation of the Colombian Peso, and 6% devaluation of the Peruvian Sol.  In 2016, passenger and cargo income represented 82.7% and 11.7% of total operating revenues, respectively.

The 6.3% decrease in passenger income during the year reflects a 0.6% capacity increase, offset by a 6.9% decline in Revenue per Available Seat-Kilometer (RASK), in comparison to 2015. The RASK reduction was the result of a 8.1% reduction in yields and an increase of 1.1 p.p. in load factor, reaching 84.2%. Yield performance continued to be affected by the weak macroeconomic scenario in South America.

In terms of capacity, during the year 2016, LATAM experienced a 0.6% increase, explained mostly by a 5.6% increase in the capacity of the international business, centered around strengthening the capacity of our international hubs, from which we began operating new destinations, such as to Washington from Lima, and to Johannesburg from Sao Paulo, offset by a reduction of those routes with less demand, such as the operations between Brazil and the United States.  Moreover, the capacity of Spanish-speaking domestic markets expanded by 8.0%, boosted mostly by the Chilean and Peruvian markets.  On the other hand, during 2016, we continued to downsize our operations in the Brazilian domestic market, reducing our supply for the fifth consecutive year, closing the year with a capacity 11.5% smaller than that of 2015 and leading the downsizing of capacities in that country.

Cargo revenues declined by 16.5% in 2016 as a result of an 8.7% decline in cargo demand and a 8.5% decrease in yields.  Throughout the entire year, the demand for cargo services remained weak, especially in local markets and in Brazil’s international market, as a result of a decline in that country’s overall economic activity that directly impacted imports. To the latter, is added a drop in Chile’s exports as a result of the algae bloom affecting its salmon production.  The foregoing, added to the drop in fuel prices, explains most of the downturn in the yields of the cargo business.

Operating costs during the year 2016 reached US$ 8,959.2 million, a 6.8% reduction as compared to the operating costs of 2015, resulting in a 5.1% reduction in Cost of Available Seat-Kilometer (CASK) equivalent (including net financial expenses).  Such cost reduction is mostly attributable to the 16.8% drop in fuel prices, as well as to the result of the cost reduction program driven by the Company.

Fuel spending decreased by 22.4% reaching US$ 2,056.6 million, as compared to the US$ 2,651.7 million spent in 2015. Such fuel spending drop is attributable to the drop in fuel prices as well as to a 1.4% drop in fuel consumption per ASK-equivalent, as a result of the Company’s fuel efficiency programs and an ever more efficient fleet.

Additionally, the Company recognized a fuel hedge loss of US$ 48.1 million in 2016, as compared to the US$ 239.4 million fuel hedge loss incurred in 2015.  In terms of foreign exchange hedges, the Company recognized a currency hedge loss of US$ 40.8 million in 2016, versus a gain of US$ 19.2 million in 2015.

Wages and benefits declined by 5.9% in the year 2016, mainly due to a reduction in the number of employees as compared to the year 2015, in line with the supply drop in Brazil, and the efficiency initiatives executed by the Company.

As to its non-operating performance, the company showed a non-cash profit caused by foreign exchange rate differences amounting to US$ 121.7, mostly attributable to the appreciation of the Brazilian Real during the year, as compared to the US$ 467.9 million loss acknowledged in the previous fiscal year.

In cumulative terms, LATAM recorded a net profit attributable to its controllers totaling US$ 69.2 million, as compared to the net loss of US$ 219.3 million incurred in 2015.  The foregoing entails a positive net margin of 0.7%, which represents an increase of 2.9 percentage points, as compared to the net margin of the year 2015.

For the twelve month period ended December 31

 20162015% Change
REVENUE
Passenger7.877.7158.410.614-6,3%
Cargo1.110.6251.329.431-16,5%
Other538.748385.78139,7%
TOTAL OPERATING REVENUE9.527.08810.125.826-5,9%
EXPENSES
Wages and Benefits-1.951.133-2.072.805-5,9%
Aircraft Fuel-2.056.643-2.651.067-22,4%
Comissions to Agents-269.296-302.774-11,1%
Depreciation and Amortization-960.328-934.4062,8%
Other Rental and Landing Fees-1.077.407-1.109.826-2,9%
Passenger Services-286.621-295.439-3,0%
Aircraft Rentals-568.979-525.1348,3%
Aircraft Maintenance-366.153-437.235-16,3%
Other Operating Expenses-1.422.625-1.283.22110,9%
TOTAL OPERATING EXPENSES-8.959.185-9.611.907-6,8%
OPERATING INCOME567.903513.91910,5%
Operating Margin6,0%5,1%0,9 pp
Interest Income74.94975.080-0,2%
Interest Expense-416.336-413.3570,7%
Other Income (Expense)47.358-532.757-108,9%
INCOME BEFORE TAXES AND MINORITY INTEREST273.874-357.115-176,7%
Income Taxes-163.204178.383-191,5%
INCOME BEFORE MINORITY INTEREST110.670-178.732-161,9%
Attributable to:
Shareholders69.220-219.274-131,6%
Minority Interest41.45040.5422,2%
NET INCOME69.220-219.274-131,6%
Net Margin0,7%-2,2%2,9 pp
Effective Tax Rate-59,6%-50,0%-9,6 pp
EBITDA1.528.2311.448.3255,5%
EBITDA Margin16,0%14,3%1,7 pp.
EBITDAR2.097.2101.973.4596,3%
EBITDAR Margin22,0%19,5%2,5 pp.

For the twelve month period ended

 20162015Var. %
System
ASKs-equivalent (millions)205.538208.723-1,5%
RPKs-equivalent (millions)150.110151.478-0,9%
Overall Load Factor (based on ASK-equivalent)%73,0%72,6%0,5 pp
Break-Even Load Factor (based on ASK-equivalent)%71,2%71,3%-0,1 pp
Yield based on RPK-equiv (US Cent)6,06,4-6,9%
Operating Revenues per ASK-equiv (US Cent)4,44,7-6,3%
Costs per ASK-equivalent (US Cent)4,524,77-5,1%
Costs per ASK-equivalent ex fuel (US Cents)3,523,500,8%
Fuel Gallons Consumed (millions)1.185,51.221,1-2,9%
Fuel Gallons Consumed per 1,000 ASKs-equivalent5,85,9-1,4%
Fuel Price (with hedge)1,72,2-22,9%
Fuel Price (without hedge)1,62,0-17,6%
Average Trip Length (km)1,71,63,2%
Total Number of Employees (average)49.61952.887-6,2%
Total Number of Employees (end of the period)45.91650.413-8,9%
Passenger
ASKs (millions)134.968134.1670,6%
RPKs (millions)113.627111.5101,9%
Passengers Transported (thousands)66.96067.835-1,3%
Load Factor (based on ASKs) %84,2%83,1%1,1 pp
Yield based on RPKs (US Cents)6,97,5-8,1%
Revenues per ASK (US cents)5,86,3-6,9%
Cargo
ATKs (millions)6.7047.083-5,3%
RTKs (millions)3.4663.797-8,7%
Tons Transported (thousands)9441.009-6,4%
Load Factor (based on ATKs) %51,7%53,6%-1,9 pp
Yield based on RTKs (US Cents)32,035,0-8,5%
Revenues per ATK (US Cents)16,618,8-11,7%

* Fuel Gallons Consumed per 1,000 ASKs-equivalent

For the twelve month period ended

Thousands of US$December 31  
20162015Var. %
Peru627.215681.340-7,9%
Argentina1.030.973979.3245,3%
U.S.A933.1301.025.475-9,0%
Europe714.436723.062-1,2%
Colombia343.001353.007-2,8%
Brazil2.974.2343.464.297-14,1%
Ecuador198.171238.500-16,9%
Chile1.512.5701.575.519-4,0%
Asia Pacífico & Other Latin America654.610699.521-6,4%