LATAM Airlines Group continues its fleet consolidation program and recently announced that it had canceled an order for four Boeing 787 and one B777F aircraft. Plus, since the start of the Chapter 11 bankruptcy process, LATAM has rejected the leasing contracts of up to 42 planes. Let’s investigate further.
How’s LATAM’s current order with Boeing?
Before the COVID-19 pandemic, LATAM had an unfilled order for seven Boeing units, according to Boeing’s order book. This order has been reduced by 72% now, following LATAM’s announcement. The airline said,
“On April 29, LATAM and Boeing came to an agreement regarding the acquisition of some B787 and B777 aircraft”.
The agreement effectively ends the order for four B787 and one B777F. Now LATAM only has an unfilled order for two B787-9 which should be delivered by December 2021, said the airline.
The Bankruptcy court still has to approve this latest agreement between Boeing and LATAM.
What about the A350s?
Last month, LATAM Airlines announced the immediate lease rejection of the remaining 11 Airbus A350XWB in its fleet.
The decision to reduce its long-haul fleet by rejecting the leasing contracts of the highly effective A350s was interesting, although not surprising. LATAM is looking for airplane commonality on its long-haul fleet, and the A350 was the odd man out.
The airline said,
“LATAM recently announced the retirement of the A350 aircraft, in an effort to simplify its widebody fleet, composed of the Boeing types 767, 777, and 787.”
Now, LATAM will be able to obtain better results due to having a single OEM long-haul fleet. It will reduce costs in many aspects, like maintenance.
What else has LATAM done, fleet-wise?
The South American company has strongly reduced its fleet in the last year. In fact, it has rejected more leasing contracts than any other of the two Latin American carriers under Chapter 11.
On December 31, 2019, LATAM had a total fleet of 342 aircraft. Now, this has been reduced to 297, according to its latest financial report.
Looking closely, LATAM’s passenger fleet was 320 aircraft in 2019 and now is composed of 283 units. The cargo fleet is unchanged between both years, 11 Boeing 767-300F (though it may increase in the next two years).
Along its Chapter 11 process, LATAM has rejected the leasing contracts of 31 aircraft. LATAM doesn’t specify how the remaining 14 airplanes exited its fleet; they were likely sold or scrapped. Moreover, we have to clarify that LATAM is still not accounting for the exit of the A350 fleet in this tally. So, in total, LATAM has rejected the leasings for 42 planes.
Most likely than not, LATAM will continue reducing its fleet. Last week, LATAM’s CEO Roberto Alvo said that the current plan is to renovate the short-haul fleet during the next decade. The airline is currently at 25% to 30% of this phase, he added. LATAM is receiving A320neo airplanes while phasing out A320-200s and A321-200s.
A quick look at LATAM’s financial performance
During 2021’s first quarter, LATAM had an income of US$913.2 million. That’s a 61.2% decrease compared to last year due to the impact of the COVID-19 pandemic.
Therefore, LATAM had a net loss of US$430.9 million. The airline ended with total liquidity of US$2.6 billion in cash.
Also, LATAM recently launched its sustainability program for the next three decades. Among the objectives, LATAM aims to ditch single-use plastic by 2023 and landfill waste by 2027.
Did you expect LATAM to reduce its Boeing order? Let us know in the comments.