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Having exited Chapter 11 less than two years ago, LATAM Airlines Group is now operating more capacity than it did pre-pandemic and is projecting continued growth ahead with 125 aircraft on order through 2030.
Over 80% of that orderbook will come directly from Airbus and Boeing, executives told analysts and investors during an Oct. 22 investor day. Of 106 incoming narrowbodies, 63% are A321neos. LATAM expects delivery of 22 aircraft in 2025 (20 narrowbodies/2 widebodies), 15 in 2026 (13 narrowbodies/2 widebodies), and 85 between 2027-2020 (70 narrowbodies/15 widebodies). Among those will be a dozen XLRs expected to join the fleet from 2027 onward. The airline is planning for three additional narrowbodies before year’s end.
“If I were to purchase aircraft today and didn’t have our orderbook, I’d probably receive aircraft after five years from now. It’s very difficult to find delivery slots before that, and we’re seeing that lessors are running out of capacity and space also to allocate leases,” CFO Ramiro Alfonsin said. “But that’s not the situation of LATAM.”
LATAM’s fleet currently numbers 341: 56 widebody, 263 narrowbody, and 22 dedicated cargo aircraft. Approximately one third of LATAM’s fleet are unencumbered assets worth over $1.2 billion, and its current fleet cash cost is 40% lower than current market prices, executives noted during the investor event. “That’s because of the unique timing of our negotiations during Chapter 11 and big concessions that we obtained from our financial counterparts at a very specific moment in time when it was very difficult to repossess an aircraft and reallocate that aircraft,” Alfonsin said. Until 2029, 90% of the current fleet has pricing locked-in, he added.
In updated guidance for 2024 announced during the event in New York, LATAM now expects adjusted EBITDAR (earnings before interest, taxes, depreciation, amortization and restructuring/rent costs) of $3 billion-$3.15 billion for the full year, versus prior projections of $2.75-$3.05 billion. Capacity measured in ASKs is expected to be up by 15%-16% year-over-year in 2024 and is projected to grow by high single digits in 2025, and by mid-to-high single digits in 2026.
“We’re going to be a $3 billion company in 2024,” Alfonsin told analysts and investors. “That’s 40% more than what we had pre-pandemic and that was the norm for us ... today, the company is growing. It’s growing profitably, and we’re generating 40% more EBITDAR than we used to.”
Today, almost one in every two passengers in South America now flies with LATAM group, said CEO Roberto Alvo, describing his company as having the tools necessary to continue robust growth, including diversified revenues, low costs, and improving liquidity.
“Yes, we had to restructure; we had hard times,” said Alvo. “But you know what? The airlines in the northern hemisphere were saved by their governments, and they were not allowed to do that. Their costs increased; their debt increased. Some of the most important players that competed with us in South America decided not to restructure. That gives us the opportunity to be relatively better than them and ... take advantage of the hard decisions they have to make from time to time.”
Continued investments in products and services are ahead, including in-house retrofits of a new business class suite onboard its 787s, and installations of Wi-Fi on the narrowbody fleet expected to be completed in the first half of 2025. Additionally, a flexible premium economy product has helped streamline narrowbody cabin configurations and suit different routes, with the ability to flex its up-front class from two rows to seven on an A321, or from two to five on an A320.
“Not all our markets are the same,” said chief customer and experience officer Paulo Miranda. “We can have a flight that goes out in the morning with 100% load factor in the Premium Economy cabin, and we can have the same airplane turn around with four people in that market ... this allows us to be very flexible with the offer, making sure that we tailor it to the demand that we see on specific markets.”
LATAM held its Investor Day at the New York Stock Exchange (NYSE), where executives rang the opening bell to celebrate the return of the listing that was suspended when LATAM entered Chapter 11 bankruptcy proceedings in 2020. It returned to the NYSE in late July.
“Today, we are beginning a new chapter in LATAM’s history,” Chairman Ignacio Cueto said. “A chapter in which we aim to lead, innovate, and grow in ways that positively impact our customers, the communities we serve, the markets we compete in, and the world at large.”
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