In the first half of 2022, LATAM Airlines Group posted a US$905 million net loss due to the challenges presented by the sharp increase and volatility in fuel prices. It also faced a challenging macroeconomic context driven by inflationary pressures, the depreciation of emerging market currencies, and a reduction of worldwide economic activity.
LATAM’s second-quarter results
The South American giant LATAM has recovered around 72.6% of its consolidated capacity (measured in ASK), compared to 2019 levels, prior to the COVID-19 pandemic. These figures are mainly a result of strong domestic markets, especially in Brazil, Colombia, and Ecuador, where LATAM has already surpassed the pre-pandemic capacity levels. Additionally, South America's international market has been recovering strongly this year.
Nonetheless, the heavy increase in the average fuel price (around US$4.14 per gallon, or a 94.7% increase compared to 2021) led LATAM to post a US$905 million net loss in the year's first half. The airline managed to pass on some expense increases through higher fares and yields. Roberto Alvo, CEO of LATAM Airlines Group, commented,
“Although the group has made advances in its operational recovery, we continue to remain cautiously optimistic about the coming months, closely monitoring fuel prices and macroeconomic variables, as the industry still finds itself in the midst of a very dynamic environment.”
What the remainder of the year holds for LATAM
This year, LATAM Airlines received authorization from the US Court for its Plan of Reorganization. The airline is looking to emerge from its Chapter 11 bankruptcy process in the second half of 2022. Additionally, it signed debt commitment letters with various financial entities, securing its exit financing consisting of US$2.25 billion in new debt.
During the period, the US Department of Transportation (DOT) also tentatively approved LATAM’s TransAmerican Joint Venture Agreement with Delta Air Lines. The airlines are currently awaiting the DOT’s final order approving the Joint Venture, which would mark the last milestone of the process after having been granted approval from the rest of the necessary authorities in South America. You can read more about the benefits of Delta and LATAM’s JV here.
LATAM fleet plans
In 2022, LATAM continued expanding its cargo dedicated fleet. The current plan is to convert a total of ten Boeing 767 passenger aircraft to cargo freighters by the end of 2023. Moreover, as of June 30, the group’s fleet totaled 301 aircraft. LATAM reached agreements with Boeing for two 787 Dreamliner aircraft and Airbus for a total of 87 A320neo family aircraft. The Airbus commitment now contains an amendment that includes 17 additional A320neo family aircraft, including the A321XLR model, and extended the delivery dates until 2029, with purchase options for 13 additional planes.
First half results across Latin America
Most airlines in Latin America have been heavily impacted by the economic uncertainty and rising fuel prices. So far, five regional carriers (plus LATAM) have filed their financial results, and only one had a net profit in the first half of 2022. Copa Airlines posted a US$143.8 million net profit between January and June 2022.
Meanwhile, GOL Linhas Aéreas posted a US$540 million net loss, Aeromexico lost US$198 million, Volaris lost US$98 million, and Viva Aerobus lost US$26 million. The Colombian ultra-low-cost carrier Viva did not make public its financial results, but it is expected the airline is also in a challenging financial situation. On Monday, the airline said it faces “a complex financial situation that requires immediate intervention.”