LATAM Airlines boosts yearly earnings outlook after solid Q1 results

By Gabriel Araujo and Kylie Madry

SAO PAULO/MEXICO CITY (Reuters) – Chilean carrier LATAM Airlines (OTC:) hiked its earnings forecasts for this year on Thursday, backed by a strong first-quarter performance and increased demand.

LATAM sees its revenues ranging from $12.8 billion to $13.1 billion for the year, up from a previous estimate of $12.4 billion to $12.8 billion.

Meanwhile, its adjusted EBITDAR – earnings before interest, tax, depreciation, amortization and restructuring or rent costs – for the year were estimated at a record $2.75 billion to $3.0 billion, up 10% to 22% from 2023.

The previous estimate in December had been for between $2.6 billion and $2.9 billion.

In a presentation to journalists, LATAM executives cited boosted operations, cost-containment measures and an improved capital structure as the reasoning behind the fresh EBITDAR outlook.

In the first quarter, LATAM brought in $796 million in EBITDAR. Net profit more than doubled in the quarter to $258 million, from revenues up 18% to $3.32 billion.

Passenger traffic, as measured by available seat kilometers (ASK), grew 17.5% in the quarter, topping the pre-pandemic capacity logged in 2019.

LATAM said the increase came as it moved a record number of passengers in the quarter and upped its occupation levels on flights.

Meanwhile, LATAM’s passenger costs were steady in the quarter at 4.3 cents per ASK, the carrier said, while generating $137 million in cash.

LATAM’s liquidity “allows us to be competitive, to grow more steadily, to more calmly take on new projects and to obtain better terms with providers,” Chief Financial Officer Ramiro Alfonsin told journalists.

The carrier, which currently operates a 330-plane fleet, is waiting on several aircraft deliveries this year, Alfonsin said.

LATAM Airlines said late last month that it was no longer seeking to acquire Boeing (NYSE:) B737 planes, opting to look for alternative narrowbody aircraft after talks failed.

Alfonsin said that LATAM was targeting Airbus’ A320 or A321 aircraft in the absence of B737s, but that the carrier was open to alternatives.

Alfonsin said going forward LATAM would deleverage “more than expected” after closing out the quarter with a financial net debt to adjusted EBITDAR ratio of 1.9 times. He later added that the firm was weighing a debt refinancing later this year.