LATAM makes Q1 profit despite cargo struggling

LATAM Airlines Group LAN Chile Boeing 787-8

LATAM Airlines Group has made a profit of $102.2 million in the first quarter of 2016, despite cargo continuing to struggle due to weakness in Brazil.

The group, which consists of LAN and TAM, and affiliates, turned the result around from a $39.9 million loss in the same period last year, helped by lower fuel prices, local currency devaluations and efficiency initiatives. It comes despite cargo revenue falling by 21.2 per cent to $275.9 million due to weakness in the Brazilian domestic and international market, and yields struggling due to depreciation of local currencies, particularly the Brazilian real.

LATAM chief executive officer, Enrique Cueto says: “Initiatives such as continued capacity adjustments on both domestic and international operations in Brazil, fleet plan restructuring, and additional cost reduction measures, all serve to strengthen the Company and will allow us to maintain a solid financial position.”

The group saw a 9.8 per cent decline in cargo traffic with yields down 12.7 per cent during the quarter. It cut capacity in available tonne kilometres by 3.4 per cent by reducing freighter operations by 8.9 per cent and utilising the bellyholds of passenger aircraft. The load factor was down by 3.6 percentage points to 51.2 per cent.

LATAM is upgrading its fleet having taken delivery of two Airbus A321s, three Boeing 787-9s and one Airbus A350. It will increase its narrowbody fleet to 255 by 2018 by reducing the number of Airbus A319-100s and A320-200s and replacing them with A320Neos, Airbus A321-200s and A321Neos.

The widebody fleet will be increased to 82 aircraft by reducing the number of Boeing 767-300s and Boeing 777-300ERs and taking delivery of A350-900s and Boeing 787-9s.

The freighter fleet, which had 11 aircraft at the end of 2015, will be reduced to eight by 2018 with one 777-200F and two 767-300Fs being retired.