Earnings call transcript: LATAM Airlines Q2 2025 earnings beat expectations

LATAM Airlines Group, with a market capitalization of $12.83 billion, reported a robust financial performance for Q2 2025, with earnings per share (EPS) of $0.66, surpassing the forecast of $0.54 by 22.22%. The company’s revenue reached $3.3 billion, marking an 8.2% year-over-year increase. Following the announcement, LATAM Airlines’ stock rose by 2.79%, closing at $41.38, reflecting investor confidence. According to InvestingPro analysis, the stock appears undervalued based on its Fair Value metrics, suggesting potential upside opportunity.

Key Takeaways

• LATAM Airlines’ EPS exceeded expectations by 22.22%.
• Revenue increased by 8.2% year-over-year to $3.3 billion.
• The stock price rose by 2.79%, nearing its 52-week high.
• Record-high adjusted operating margin for Q2.
• Updated guidance suggests continued growth.

Company Performance

LATAM Airlines demonstrated strong performance in Q2 2025, with significant growth in both passenger and cargo revenues. The company transported 20.6 million passengers, a 7.6% increase from the previous year, and incorporated 12 new aircraft into its fleet. The airline’s operational efficiency and strategic initiatives contributed to a record-high adjusted operating margin of 12.9% for the quarter. InvestingPro data reveals the company maintains an attractive P/E ratio of 11.73 and a strong free cash flow yield of 14%, indicating efficient capital management. For deeper insights into LATAM’s valuation metrics and 12+ additional ProTips, consider exploring InvestingPro’s comprehensive analysis tools.

Financial Highlights

• Revenue: $3.3 billion, up 8.2% year-over-year.
• Earnings per share: $0.66, a 22.22% surprise over the forecast.
• Adjusted EBITDAR: $850 million, with a 25.9% margin.
• Net income: $242 million, a 66% increase year-over-year.

Earnings vs. Forecast

LATAM Airlines’ EPS of $0.66 significantly exceeded the forecast of $0.54, resulting in a 22.22% earnings surprise. This strong performance is indicative of the company’s ability to manage costs and optimize operations effectively.

Market Reaction

Following the earnings announcement, LATAM Airlines’ stock rose by 2.79%, closing at $41.38. The stock’s movement reflects positive investor sentiment, as it approaches its 52-week high of $43.068. The market’s reaction underscores confidence in the company’s strategic direction and financial health. The stock has demonstrated remarkable momentum, delivering a 53.38% return year-to-date. InvestingPro’s Financial Health Score of 3.37 (rated as GREAT) further validates the company’s strong position. Access the complete Pro Research Report, available for LATAM and 1,400+ other top stocks, for comprehensive analysis and actionable insights.

Outlook & Guidance

LATAM Airlines updated its full-year guidance, projecting capacity growth of 9.5-10.5% and an adjusted operating margin of 14-15%. The company anticipates adjusted EBITDAR of $3.65-3.85 billion and adjusted leverage free cash flow above $1.3 billion. These projections indicate a strong growth trajectory for 2025 and beyond.

Executive Commentary

Roberto Alvo, CEO of LATAM Airlines, emphasized the importance of premium traffic, stating, "Premium traffic is less seasonal, and our mix is changing." He also highlighted the company’s focus on cost efficiency, noting, "We do cost cutting every day. This is very much embedded in the culture."

Risks and Challenges

• Uncertainty in the Chile-US travel market could impact revenue.
• Potential geopolitical events, though currently minimal, may affect operations.
• Economic fluctuations in key markets could influence demand.

Q&A

During the earnings call, analysts inquired about LATAM Airlines’ growth opportunities and capital allocation strategy. The company highlighted its focus on network diversification and the role of technology in enhancing operational efficiency.

Full transcript - LATAM Airlines Group SA ADR (LTM) Q2 2025:

Operator: Hello, and welcome, everyone, to the 2Q twenty twenty five LATAM Airlines Group Earnings Conference Call. My name is Becky, and I’ll be your operator today. Before I turn the call over to management, I’d like to remind you that certain statements in this presentation and during the Q and A may relate to future events and expectations and as such constitute forward looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company’s future plans, objectives and expected performance or guidance are forward looking statements. These statements are based on a range of assumptions that Latam believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in the published twenty F-twenty twenty five updated guidance, earning release, financial statements and related CMF and SEC filings.

The company’s actual results may differ significantly from those projected or suggested and any forward looking statements due to a variety of factors, which are discussed in detail in our SEC filings. If there are any members of the press on this call, please note that for the media, this is a listen only call. I will now hand over to your host, Ricardo CFO to begin. Please go ahead.

Ricardo Bottas, CFO, LATAM Airlines Group: Thank you. Hello, everyone and good morning. Welcome to our second quarter twenty twenty five conference call and thank you all for joining us today. My name is Ricardo Bottas and I am the CFO of LATAM Airlines Group. Here with me is Roberto Alvo, our CEO Andres Del Valle, the Corporate Finance Director and Tore Craton, Head of Investor Relations.

And, we will present our highlights and the results for the second quarter. I’ll hand it over to Roberto to share opening remarks about the quarter highlights. Once finished, I will present then in more detail alongside the financial results. Roberto?

Roberto Alvo, CEO, LATAM Airlines Group: Thank you, Ricardo. Good morning, everyone, and thank you for joining us today. I’m pleased to open our second quarter twenty twenty five earnings call by saying that LATAM Group continues to sustain growth and profitability once again, leaving robust results, a clear indication of the strength of the group’s operating model, its commercial strategy and above all, the extraordinary commitment of its people and the relentless dedication to improve the customer experience every day. Let me start with a few headline numbers. During the second quarter, Latamian Group transported over 20,500,000 passengers, expanded capacity by 8.3% year over year and reached consolidated load factor of 83.5%, all while maintaining operation stability and growing customer preference across all markets.

In terms of the LATAM Group product and experience, the focus is on strengthening the value proposition in every flight, every interaction, every decision that is made. This quarter, we have a few updates in investments we’re making in customer experience that Ricardo will comment on, which are supporting improved levels of customer satisfaction. During the quarter, LATAM Group’s Net Promoter Score matched the record high achieved in the 2025. Additionally, in June, at the twenty twenty five Skytrax World Airline Awards, LATAM was named the best airline in South America for the sixth year in a row and best airline staff in South America for the fourth consecutive year. These awards are based on over 22,000,000 passenger votes from more than 100 nationalities, and they reflect not just operational excellence, but trust, service, and consistency.

From a financial standpoint, LATAM delivered another quarter of strong and balanced performance. Total revenues grew by 8.2 year over year supported by healthy trends in both passenger and cargo segments. This top line expansion, combined with disciplined cost control and a favorable fuel environment, drove an adjusted EBITDA of $850,000,000 with a margin of 25.9%, reflecting a strong 5.5 percentage point improvement from the same period last year. LATAM also reached a record second quarter adjusted operating margin with 12.9%, a 3.9 percentage point improvement from the second quarter twenty twenty four, a clear sign of how strategy and execution are delivering results. Net income reached to $242,000,000 marking a 66% increase year over year.

That figure brings first half net income to nearly $597,000,000 These results are particularly significant when considering the context of ongoing macroeconomic volatility across several of our key markets. They highlight the strength of the group’s diversified and flexible business model, the ability to adapt to shifting external conditions and the disciplined focus on both operational execution and financial strength. This performance also supported a robust capital structure with $3,600,000,000 in liquidity and a 1.6 times adjusted net leverage, even after returning $445,000,000 to shareholders through dividends and repurchase of 1.6% of LATAM’s capital on the Santiago Stock Exchange. Looking ahead, current booking trends remain solid across both domestic and international markets, providing additional confidence in the demand environment for the coming quarters and reinforcing the outlook for the second half of the year. This is expressed in its improvements in most dimensions of LATAM’s group full year 2025 guidance, narrowing the ranges giving improved visibility for the year.

This revision reflects the strength of the group’s commercial momentum, driving more high quality traffic through its network, the flexibility of its operating model and the disciplined approach to cost and investment that continues to guide the decision making. Ricardo will later elaborate a little bit more on these changes. During the quarter, the group incorporated 12 aircraft, including 10 A320neos, one A321neo and one wide body Airbus three thirty operating under a short term lease. With this, LATAM Group is on track with its fleet plan and has received 14 of the 26 aircraft scheduled for delivery in 2025. At the same time and consistent with the strategy, business development and demand growth currently being experienced, medium term opportunities for incremental growth have been identified in most markets where LATAM Group affiliates operate.

In this context, during the quarter, 11 additional A320neo family aircraft were secured for delivery in 2026 along with a decision to delay the progressive retirement of four of our three nineteen aircraft. Moreover, there may be potential opportunities for further growth over the next two to three years. In this context, LATAM Group is analyzing the acquisition of additional aircraft from various manufacturers and the source. This includes additions to its wide body and narrow body fleet, the latter including aircraft from the A320 family as well as other similar jets from manufacturers such as Airbus and Embraer. The primary focus of these additions will be to serve and grow passenger transportation within the region and cargo traffic in regional markets.

As might be expected, the materialization of these options depends, of course, on several factors, including aircraft availability and the evolution of the markets in which the group operates. The group continues nonetheless to maintain significant flexibility to adjust capacity if we need to. Building on LATAM’s strong results, in June, shareholders approved a broader repurchase program of up to 3.4% of total shares. As part of that program, a second share repurchase for up to 2.4% of the company’s outstanding shares is currently being executed through a thirty day pro rata mechanism on the Santiago Stock Exchange and is expected to conclude by the end of this month. We also carried out the final step in optimizing our non fleet financial debt.

In June, we fully eliminated our interest debt from 2022, high interest debt, I may recall, refinancing $700,000,000 of high cost notes with a new $800,000,000 issuance at significantly lower rates. This is expected to generate $33,000,000 in annual interest savings. In summary, we’re very pleased to share with you the strong second quarter, the results and the confident and positive view on the remainder of 2025. Thank you again for being here today. I’ll hand it over to Ricardo for the operational and financial review.

Ricardo Bottas, CFO, LATAM Airlines Group: Thank you, Roberto. I invite you to move to the next slide, Slide four. In terms of operational performance, LATAM Group continues to deliver solid year over year growth. Consolidated capacity measured in ASKs increased by 8.3% driven primarily by a 10.9% expansion in LATAM Airlines Brazil domestic operations, a figure that partially reflects the impact of the temporary closure of Solgado Filho International Airport in Porto Alegre during 2024, now fully recovered, as well as 9.6% increase in the group’s international capacity supported by positive momentum in both regional and long haul travel. Commercially domestic capacity across the group’s affiliates in Chile, Colombia, Ecuador and Peru recorded a slightly decline of 0.3%.

This is explained by the strategic reallocation of part of LATAM Airlines Colombia’s domestic fleet to support growth in international routes. Both effects are aligned with the updated 2025 guidance and reflect the ability to dynamically adjust capacity strategically towards high demand markets. Load factors remain healthy across all segments with the consolidated load factor reaching 83.5%, a 1.2 percentage point improvement compared to the same period last year, reflecting strong demand and display and capacity growth. During the quarter, LATAM Group transported 20,600,000 passengers, a 7.6% year over year increase. In terms of consolidated passenger revenue per ASK, it remained stable year over year even as the group faced the current depreciation in several key domestic markets and with the jet fuel price.

This coupled with its continued growth expansion speaks to the resilience of the commercial performance and the strength of LATAM’s group’s diversified network. In particular, LATAM Airlines Brazil’s domestic passengers RASK in local currency grew a solid 7.8% year over year reflecting strong underlying demand. However, when we expressed in dollars, Latanderline Brazil domestic passengers RASK declined by 3.3% due to the year over year depreciation of the Brazilian real. Meanwhile passenger RASK in domestic markets of the affiliate spaces in Spanish peak countries remained robust, supported by continued strength across geographies and the stabilization of capacity of LATAM’s line in Colombia’s markets. Lastly, international passenger RASK held nearly flat despite a 9.6% increase in capacity underscoring healthy demand dynamic and network optimization efforts across the long haul markets.

Moving to the next slide, Slide five, beyond operational performance, LATAM Group continued to make progress on elevating the customer journey through investments in product, technology and services design. In particular, in the premium segment have elevated the overall experience and customer satisfaction, while also drive driven a stronger revenue contribution. Regarding LATAM Group fleet retrofit, significant progress has already been made on the narrowboat fleet and the current focus is now retrofitting the wide body aircraft. In May, a new premium business cabin was introduced and is already operational in select aircraft. This redesigned cabin features suite doors for full privacy, full flat seats, 18 inches high definition screens in a layout inspired by South America landscapes and testers.

The new retrofitted aircraft are resonating with passengers delivering the improvement in customer satisfaction levels of NPS versus the previous generation of retrofitted aircraft. In terms of connectivity, Wi Fi is now available across the entire narrow body fleet of LATAM Airlines Brazil and continue to scale rapidly across the region, reaching nearly 90% of all affiliate carriers narrow body aircraft operating domestic international intra South America flights. The implementation remains on track to complete the rollout across the entire LATAM Group narrow body fleet network by the 2025. Looking ahead, LATAM Group is preparing to expand connectivity with wide body fleet beginning in 2026 through a commercial agreement with ViaSat. This next generation system will be implemented across long haul aircraft operating intercontinental routes for the strengthened Latins Group’s commitment to offering a modern and connected onboard experience.

LATAM Group is also elevating the premium on ground experience. On June 1, the new terminal at Lima International Airport opened its doors and LATAM launched its signature checking services for Black and Black signature members, a feature that previously exists in that hub. With this addition, LATAM Group now offers signature checking services at the three major hubs Santiago, Sao Paulo and now in Lima. Moving to the next slide, Slide six, the results on these ongoing investments in the passenger experience are clearly reflected in LATAM Group’s customer satisfaction metrics. During the second quarter, LATAM Group maintained an operational Net Promoter Score of 56 points matching the record high reached in the 2025.

Among premium passengers, NPS rose to 60 points confirming the continued positive response to enhancements across our product and service touch points. This progress was reinforced by a global recognition as Roberto mentioned at the beginning. In June at the twenty twenty five Skytrax Work Airlines Awards, LATAM received nine distinctions marking the first time the group won every award available in the South America category. These included recognitions for best business and economy class, onboarding catering, cabin cleanliness and creole and lounge. This broad recognition is a testament to the dedication of LATAM Group’s teams and the strength of the travel experience the affiliate air carriers of the group offer across the region.

It also confirms its position as the airline group of choice in South America, not only because of the scale of its network, but because of the quality and consistency of the journey the group delivers. Turning to the next slide, Slide seven, about the LATAM financial results. The second quarter’s reflect a strong and disciplined execution across all fronts. Total revenues reached $3,300,000,000 an increase of 8.2% year over year supported by healthy demand across both passengers and cargo segments. Passenger revenues rose by 8.5%, while revenues from premium travelers performing even better increasing by 12% year over year.

Cargo revenues also grew by 10.2% with notable performance during seasonal peaks such as Mother Days, particularly in Colombia and Ecuador. On the cost side, LATAM Group benefited from a favorable fuel environment with jet fuel costs decreasing by 10.6% year over year. At the same time, it maintains a disciplined approach to controllable costs supporting margins expansions. As a result, LATAM delivered an adjusted EBITDAR of $850,000,000 with a 25.9% margin improving 5.5 percentage points year over year and reaching an adjusted operating margin of 12.9%, the highest ever for a second quarter, a clear demonstration of improved operating leverage. Ultimately, net income for the quarter totaled $242,000,000 up 66% year over year bringing first half net income close to $600,000,000 Moving to the next slide, Slide eight, the strength of second quarter performance is not only the result of revenue growth of favorable food dynamics, but it’s also a reflection of LATAM’s long standing discipline on cost containment.

In the second point quarter,

Operator: adjusted CASK ex fuel remained at

Ricardo Bottas, CFO, LATAM Airlines Group: $48 and adjusted passenger CASK ex fuel held at $0.43 both aligned with the updated full year guidance. LATAM Group’s cost strategy continues to be one of defining pillars of its business model. It is what allows the group to invest in the customer, expand the network and consistently deliver healthy margins. Turning to the Slide nine, looking at LATAM’s trailing twelve months performance, the company reached an adjusted EBITDA of $3,500,000,000 from the last twelve months with a margin of 26.2% continue the upward trend we have seen over the past several quarters. This sustained growth reflects the strength of this operating model combining solid demand, strategic capacity deployment and strict cost discipline.

And also reinforce LATAM’s ability to invest in the business, improve the customer journey and preserve financial flexibility, all while maintaining healthy leverage and delivering returns to shareholders. Turning to next slide, Slide 10. The cash generation as we show in this slide, the second quarter LATAM delivered another solid performance driven by strong adjusted operating cash flow of $753,000,000 in this quarter, continued discipline in capital allocation. Throughout the quarter, the company maintained an investment plans to support fleet growth and maintenance resulting in an adjusted unlevered free cash flow of $522,000,000 After accounting for interest expenses, levered free cash flow amounted to $395,000,000 Overall, LATAM generated $367,000,000 in net cash before implementing shareholders return initiatives. In total, dollars $445,000,000 was returned to shareholders during the quarter, comprising $293,000,000 in dividends equivalent to the 30% of the fiscal year twenty twenty four net income and $152,000,000 through the first share repurchase program as Roberto mentioned at the beginning.

After accounting for these returns, LATAM’s cash balance was largely unchanged with a slightly decrease of $78,000,000 quarter over quarter supported by healthy underlying profitability and solid liquidity management. Considering the first half of the year, LATAM has generated $1,300,000,000 in net adjusted operating cash flow, dollars $743,000,000 in net adjusted unleveraged free cash flow and $592,000,000 in net adjusted leverage free cash flow. And also net cash variation of $111,000,000 in the first semester. Looking ahead, LATAM remains confident that the operation will continue to generate cash throughout the second half of the year in line with the updated 2025 guidance, given the company the flexibility to support strategic initiatives, reinvest in the business and return value to shareholders in a sustainable and disciplined way. Moving to the next slide, now Slide 11 about the capital structure.

At the end of the second quarter, LATAM reported liquidity of $3,600,000,000 equivalent to 27.2% of last twelve months revenues. These strong financial position was maintained and supported by continued access to committed revolving credit lines even after deploying cash during the quarter to return capital to shareholders. In terms of leverage, LATAM closed the quarter with an adjusted net leverage ratio of 1.6%, which reflects the company consistent financial discipline and well below the financial policy targets. LATAM capital structure continues to be one of its key strengths both in absolute terms and relative to the industry. As we move forward, we will remain focused on protecting the solid financial position, staying within the parameters of our financial policy while continuing to explore opportunities to enhance efficiency and create long term value.

Moving to the Slide 12, an important update and milestone for the group in the continuous strength of LATAM’s capital structure in June, last June, the second and the final stage of our post restructuring pre financing plans was completed with the issuance of $800,000,000 in senior secured notes during 2031 and July coupon. This transaction allow us to fully prepay the remaining high interest rate debt from 2022 with a strong reduction above five seventy basis points in the cost of the refinance of debt. These represent additional annual sorry, in interest about $33,000,000 savings. Together with the savings from last year of negotiation, we are counting now combined savings close to $151,000,000 Let’s turn to the Slide 13. As LATAM Group moves into the second half of the year, the business fundamental remains strong and and there is less uncertainty in the macroeconomic environment.

In the sense, we are pleased to report that we have been closely monitoring demand trends in both passengers bookings and cargo have remained stable in the recent weeks. And in light of this, we have narrowed the range of LATAM Group’s guidance for the full year and made certain revisions and upwards adjustments including capacity and some key financial indicators. In terms of capacity, the company has narrowed its consolidated growth range while now expecting larger growth in the Brazilian domestic market with the updated guidance reflecting an increase from between 7% to 9% to 9.510.5%. This is supported by stable demand trends and the group’s ability to deploy capacity in markets with a strong performance and better opportunities. The company also expects an adjusted operating margin between 1415%, up from previous range between 13% to 15%.

Additionally, adjusted EBITDAR is now forecasted between 3,650,000,000 and $3,850,000,000 revised upward from $3,400,000,000 to $3,750,000,000 In terms of capital structure, the expectations for adjusted leverage free cash flow have been increased to above $1,300,000,000 up from above $1,200,000,000 The company is also reaffirming the targets of maintaining adjusted net leverage ratio at or below 1.5 times. These updates reflect LATAM Group’s consistent execution and confidence in its ability to generate sustainable data going forward. Moving to the last slide before we move to the Q and A, let me quickly recap the main takeaways from this strong second quarter. First, we saw solid performance operational performance with continued growth and efficiency. LATAM Group transported over 20,000,000 passengers in this last quarter and ended this quarter with a consolidated load factor of 83.5% supported by strong demand across all business segments.

Second, financial results were robust. LATAM delivered a solid adjusted EBITDAR and a double digit adjusted operating margin of 12.9% supported by stable unit revenue, lower fuel prices and continued cost discipline. Third, we continue to deliver value to shareholders. LATAM reported net income of $242,000,000 for the quarter and close to $600,000,000 for the first half of the year, demonstrating consistent execution and profitability. Additionally, the company returned $445,000,000 to shareholders through dividends and the repurchase of 1.6% of its outstanding shares in the Santiago Stock Exchange.

Fourth, customer satisfaction remain at record levels driven by the continued investments in premium cabins and enhanced onboard connectivity. This is also reflected in the recognition that we have mentioned regarding the LATAM recognized as the best airline in South America in twenty twenty five Skytrax awards. Fifth, we reached a major milestone in capital structure optimization through the recent 800,000,000 refinancing significantly reducing our interest costs and unlocking over $30,000,000 in annual savings. And finally, LATAM Group’s fleet plans remain firmly on track. The group has already incorporated 14 new aircraft during the first half of the year and expect to receive 12 more in the second half, reinforcing its growth strategy and operational efficiency.

With that now we can open the line for the questions. Thank you.

Operator: Thank Our first question comes from Guillaume Mendez from JPMorgan. Your line is now open. Please go ahead.

Guillaume Mendez, Analyst, JPMorgan: Yes. Thank you and good morning, Roberto, Ricardo, Andre, Asentori. Two questions. The first one is on the growth outlook. You mentioned in the release on the intro that you see growth opportunities for the next two or three years.

But what does it mean in terms of ASK growth? I know there’s no formal guidance beyond 2025, but any color on how each of the markets could grow would be appreciated. And second point is on the capital allocation and leverage. It’s clear that the company continues to generate free cash flow, reduce leverage. And although we saw dividend payments and the ongoing buyback program, Should we think that any gap between the current leverage and what you set as the two times financial target could be distributed as dividends going forward?

Thank you.

Roberto Alvo, CEO, LATAM Airlines Group: Thanks. Hi, Guillermo. How are you? Nice talking to you again. This is Roberto on this side.

So in terms of your first question, what we’re seeing is in general solid demand in most of the markets without many impact from all the geopolitical things that we are seeing. We have been able to improve the connectivity, the quality of our network. Our premium revenue is growing faster than our capacity is growing. The fact that we have remained at pretty much the same cost per ASK since before the pandemic, I think talks well about our discipline in cost. So all of that provides us with a good set of opportunities for growth in the upcoming years.

And as you well mentioned, we are still not providing any guidance on 2026 and onwards. But if you just take the fleet plan and think about how much operation comes from that, I think it’s fair to say that that would give you a high single digits growth prospect for 2026. And that includes already the 11 aircraft that we have secured that I mentioned in the in my introduction. So I I I think that you can use that as a broad level indicator coming out of fleet plan. And of course, we’ll provide more detailed guidance towards the end of the year.

And 2027 onwards, think it’s still early to say. But again, if what we see in the market today in the upcoming months and quarters remains, I think that we have interesting opportunities to keep a momentum on our growth a little bit longer. And if I can give you just a little bit of market color again. So with the overcapacity situation that we saw in Colombia in the first quarters of the year and late last year has been kind of balanced today. Domestic Brazil is in a good place as well as domestic Spanish speaking countries.

International is in a very solid stance as well. I would say that the only small concern is Chile to US point of sale Chile as people are trying to understand US policies regarding traffic between both countries. Cargo has not been affected by the Liberation Day announcements in early April. If you remember, that’s within the quarter, just marginally, and we haven’t seen any significant impacts. And again, our network, our position in cargo has allowed us to continue improving our revenues and our capacity there.

So in general, I would say that we see a good market situation for the time being. And on the second question, I’ll pass it to Ricardo.

Ricardo Bottas, CFO, LATAM Airlines Group: Okay. Thank you for your question, Guy. I think it’s important to mention that the financial policy is part of the framework that we have to deploy capital to shareholders. So it’s not only the leverage itself like you mentioned, but a combination of the performance of the liquidity. Remember that we should target to have under the financial policy between 2125%, also to be below two times under the financial policy, the leverage level, but we have the target for this year as I have mentioned during the presentation to be at the end of this year on at or below 1.5 times.

And also we have an ambitious to target BB plus rating. So we have to combine everything before discuss the alternatives we have to deploy capital to shareholders. But remember that we also together with the Board of Directors, we always evaluate all possibilities we have to deploy capital like incremental dividends, buybacks and other alternatives that we could suggest to shareholders and also to the Board of Directors. So, under the financial policy looking for the framework we have nothing preventing us to start and evaluate and to propose any alternative.

Roberto Alvo, CEO, LATAM Airlines Group: Just as a complement to Ricardo’s question, I think it’s important to point out two things. One is that we are able to do this distribution back to shareholders at the same time while we grow close to very high single digits. And I think that’s very important because we have the ability to do at this moment in time both things. And when you think looking forward, just keep in mind that, of course, the development of the business and seeking market opportunities, commercial opportunities will come of course first. So within the guidance of the financial policy and after we review our growth prospects is when we will make decisions regarding further distribution to shareholders.

Thanks.

Guillaume Mendez, Analyst, JPMorgan: That’s very clear. Thank you both for the answers.

Operator: Thank you. Our next question comes from Michael Linenberg from Deutsche Bank. Your line is now open. Please go ahead.

Michael Linenberg, Analyst, Deutsche Bank: Good morning, Roberto, Riccardo, Tore. Very, very good results. I guess two questions here in revenue. You could see how well your cargo revenues held up despite the Liberation Day announcements. And obviously, we’ve heard other carriers talk about some cargo softness.

But your other revenue was down pretty meaningfully. I know it’s not a big number, but what was driving that other piece? What what’s in there?

Roberto Alvo, CEO, LATAM Airlines Group: So, you wanna answer that?

Tore Craton, Head of Investor Relations, LATAM Airlines Group: Sure. Hi, Mike. This is Tori speaking. With regard to the other revenues that we had in the period, nice to nice to hear from you. Other income, so in in this period amounted to 36,000,000.

It’s not something that really moves moves the needle significantly or materially for us. Usually, what’s what’s considered in other income is a combination of our LatAm travel business. So all of our main other businesses that are not the passenger business or cargo, so we have some revenues there that are considered from LatAm travel. Sometimes we see relative to, you know, the the other joint venture agreements, etcetera. So it’s it’s a little bit of of everything.

Roberto Alvo, CEO, LATAM Airlines Group: Another revenue, like, sale of assets and stuff like that. So it’s it’s a combination of very small things, Michael.

Michael Linenberg, Analyst, Deutsche Bank: Okay. No. No. That’s good. I I didn’t know if there’s a loyalty piece in there or some sort of reclassification.

That’s all I was getting to.

Roberto Alvo, CEO, LATAM Airlines Group: No. FSP revenues loyalty revenues are within the passenger dimension.

Michael Linenberg, Analyst, Deutsche Bank: Okay. Okay, great. And then just my second question and this is more sort of big picture. I mean, the June historically was always the tough quarter when you think about LatAm from a seasonal perspective. And the margin that you just put up in that June quarter, that’s eye opening.

And I have to go back many years. That may be one of your best June quarters ever from a profitability standpoint. And I just as it speaks to seasonality and it may be just as your network has just grown and expanded and also the strength that you have within your domestic markets, are we at a point where the June, I guess, will still always be maybe a seasonally more challenging quarter for LATAM. But when we think about the balance of your network today, is it just is it is it gonna be less of an impact that we would have seen in the past? I mean, it feels like you’ve kinda moved into this sort of next level.

It’s like the next chapter of LATAM where you’ve now found enough markets and you have such a diversified revenue stream that you basically mitigated the seasonal impact that we used to see. I mean, was a time where you would actually lose money in the June. And this margin, this is going to be one of the among some of the best margins for carriers that June seasonally one of their strongest quarters. So I’m just if you can speak to that because it does feel like there’s some structural changes underway that may be permanent that are helping your overall full year profitability. Thanks for taking my question.

Roberto Alvo, CEO, LATAM Airlines Group: Thanks, Michael. Yes, I mean, second quarter is going to be I mean, there we have holidays in January, February and in July in this part of the world. So and no holidays or no important holidays in the second quarter to take that into consideration. People come back from the large summer holidays as well. So I think that trend will be there.

It’s not linked to demand. Having said that, yes, I think that we have seen a little bit less from the demand side seasonality than in the past. I’m not sure I can point out to passenger, changes in passenger behavior yet. Probably, will need a little bit more time to do that. What is true is what you mentioned in terms of the diversification of our network.

Not all the countries have the same seasonality. We have been able to drive significant growth on premium traffic revenue that is less seasonal than the leisure revenue. And that is certainly helping to change a little bit the seasonality curve as well, and that’s important. So for me, the bottom line here, if you ask me, is we’re in this position where we have the financial strength to take opportunities in the market. We have cost discipline.

We are investing a ton of time and effort in increasing our customer experience. And what we have seen is, I think, an untapped avenue of premium revenue that we hadn’t identified in the past. And shame on me in the past, there was the commercial guy and I didn’t see it. But now we’re seeing it, and that helps as well. And together with that, I think that we have a a good demand profile.

So so can’t speak for second quarter twenty twenty six yet, but I think that some of the Mhmm. Things that you point out sound sound sound But if you want to leave with one message from from all this conversation is, again, premium traffic is less seasonal and our and our mix is changing, and that will help the second

Michael Linenberg, Analyst, Deutsche Bank: Great. Thank you.

Roberto Alvo, CEO, LATAM Airlines Group: Thank you.

Operator: Thank you. Our next question is from Gabriel Resende from Itau BBA. Line is now open. Please go ahead.

Gabriel Resende, Analyst, Itau BBA: Hi, Roberto. Hi, Ricardo. Thanks for taking my question. I just wanted to do a follow-up over your guidance update. So just trying to understand what is underpinning your higher than anticipated capacity for the full year.

Just trying to break this down on LATAM’s ability to receive the aircraft maybe at a faster pace than anticipated or whether this is solely related to a better than anticipated demand across the board for your geography. Again, trying to understand how strong is demand at this point that it might also have benefited from aircraft being delivered earlier than you thought. And just trying to follow-up again on the profitability discussions for the coming quarters. If you could help us to understand where you’re seeing more upside for cost reductions. I understand that you’re benefiting from a good mix on your top line.

But just trying to understand what are the other opportunities for you to continue to increase efficiency from a cost perspective line by line on your income statement? Thank you.

Roberto Alvo, CEO, LATAM Airlines Group: Yes. Thanks for the question. So on the capacity growth, I think that this is a factor of several things. One is, yes, we have been able to receive the aircraft that we were expecting in time and we don’t see many risks with respect to that. We’re monitoring very closely the Pratt and Whitney AOG situation, which has remained relatively stable during the last months.

And we expect that to be stable for the remainder of the year. We have improved our expectation on seven eighty seven AOG in the first part of the year. Think we’re a little bit more cautious with that. We’ve done great work and we’ve also been extremely supportive. And hopefully, we will be cleared out of seven eighty seven AOGs next month.

In the last call, if I recall, we had three or four seven eighty seven so that helps as well. We have three wet lease aircraft that we secured last year to support these that we will operate during the second half of the year nonetheless. And and then finally, the benefit of the of the large network, allows us to mix and match our aircraft and increase our utilization. Our utilization numbers are slightly better than 2024. And I I will see a little bit of further opportunity going forward as well.

So I think that all those factors add up to us putting ourselves in the high end of the old capacity guidance. And then the rest is just balancing capacity between the markets as we see how the opportunities evolve. One of the beauties of LatAm is that even though we operate in several different markets, we can move assets around relatively quickly and adjust to market opportunities. And this is not only a factor of diversification that we have, but also the fact that we have have built an operational machine, if I can put it like that, that allows us to do that very quickly. So in general, we feel confident with respect to this capacity outlook and the reasons are the ones I just mentioned to you.

What’s the second?

Ricardo Bottas, CFO, LATAM Airlines Group: The efficiency from cost in terms of advantage.

Roberto Alvo, CEO, LATAM Airlines Group: Second question, cost efficiency. Mean, so me let tell you two important things here. We don’t do, you know, the cost cutting program that we launch one day that where we intend to save millions or hundreds of millions of dollars. We do that every day. And this is very much embedded in the culture.

We have can you hear me? Sorry. We had a little bit of a IT. Can you hear me?

Gabriel Resende, Analyst, Itau BBA: Yes. I can hear you. Yeah. The line was breaking up.

Roberto Alvo, CEO, LATAM Airlines Group: That’s why I can hear you.

Gabriel Resende, Analyst, Itau BBA: Yeah. Alright.

Roberto Alvo, CEO, LATAM Airlines Group: So take that into consideration. We all every day, all day, we’re looking at opportunities. And at the end of the day, there’s always a little bit of drops that you can extract to the lemon as you squeeze it. If you ask me going forward, think that a big change is the inception of technology. Everybody talks about AI and technology and all of these regarding the customer and personalization and offering and so on, which I think is true and we’re working hard on that.

But I think that technology has the opportunity of streamlining, changing the way we operate. I don’t think that we will see in the next twenty years any new or fifteen years, any new significant technology changes in the hardware. So the aircraft we’re operating today are probably going to be the aircraft we will operate in the next decade or so. So the change in this industry in the next ten or fifteen years in terms of efficiency is going to come from the, let me call it software side rather than the hardware side, which is how do we use technology in a way of changing the way we operate. And there’s, in my mind, significant opportunity for that.

And we are very focused today in that we have the whole maintenance organization, for example, is moving into a digital organization internally. We’re transforming all of the cargo operation as well as we speak at the same time. And we have, I think, a good runway to continue looking at efficiency improvements as we understand how to use technology more broadly in our operation.

Gabriel Resende, Analyst, Itau BBA: Thank you. It’s very interesting. I hope that I answered your question. And Tari as well.

Tore Craton, Head of Investor Relations, LATAM Airlines Group: And, Gabriel, just to make sure, were you able to understand and hear the first the first answer?

Ricardo Bottas, CFO, LATAM Airlines Group: Hey, Gabriel.

Gabriel Resende, Analyst, Itau BBA: Yes. Yes. He was breaking a little bit, but I could hear you. Yeah.

Tore Craton, Head of Investor Relations, LATAM Airlines Group: Okay. Perfect. Thank you. You.

Operator: We currently have no further questions. So I’ll hand back to the management team for closing remarks.

Ricardo Bottas, CFO, LATAM Airlines Group: So thank you all for joining us today. And if you have any further other questions, please make a contact and we are fully available for you all. Have a nice day. Thank you.

Operator: This concludes today’s call. Thank you for joining. You may now disconnect your line.

This article was generated with the support of AI and reviewed by an editor. For more information see our T&C.