Latam Airlines Group reports improvement in operating and net income

Santiago, Chile - LATAM Airlines Group S.A. (NYSE: LFL; IPSA: LAN), the leading airline group in Latin America, announced today its consolidated financial results for the fourth quarter ended December 31, 2016. “LATAM” or “the Company” makes reference to the consolidated entity, which includes passenger and cargo airlines in Latin America. All figures were prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in U.S. dollars. The Brazilian real / US dollar average exchange rate for the quarter was BRL 3.29 per USD. HIGHLIGHTS

• LATAM Airlines Group reported an operating margin of 7.6% for fourth quarter 2016, an improvement of 1.4 p.p. over the same quarter in 2015, and net income of US$54.3 million, a US$70.6 million improvement over the fourth quarter 2015. The improvement in operating results was driven by a 6.7% increase in total revenues, reflecting a positive revenue per ASK trend in domestic and international routes in Brazil as well as a stronger Brazilian currency. 
• Total revenues in fourth quarter 2016 reached US$2,569.3 million showing an improvement of 6.7%, mainly driven by an increase of 6.9% in passenger revenue, after nine consecutive quarters of decline. This revenue improvement consolidates and further improves third quarter’s positive trend in revenue per ASK. For full year 2016, revenues reached US$9,527.1 million, a decrease of 6.0% compared to the same period 2015, with the decline of 14.7% occurring during the first half of the year, while increasing by 3.4% during the second half of 2016.
• LATAM Airlines Brazil continues to see positive resulting from the strategy of adjusting passenger capacity on both domestic and international routes in the Brazilian market, with a significant increase in revenues per ASK. Domestic capacity was reduced by 10.9% during the fourth quarter, and consequently revenues per ASK increased by 34.8% as compared to the same quarter of 2015, driven by a 14.8% increase in RASK in BRL as well as by the 14.3% average appreciation of the Brazilian Real. Furthermore, LATAM Airlines Brazil reduced capacity on international routes between Brazil and the US, reaching a reduction of approximately 36% during the fourth quarter compared to the same period last year.
• For the full year 2016, operating income reached US$567.9 million, an increase of 10.5% compared with 2015. Operating margin reached 6.0%, 0.9 p.p. above full year 2015, and in line with the upper bound of the guidance provided by the Company. Net income reached US$69.2 million for the year 2016, compared to a net loss of US$219.3 million for 2015, showing a positive net income for the first time since 2011.
• During the quarter, the Company made significant progress in its plan to reduce total fleet assets and fleet commitments, reaching the lowest fleet commitment levels in the recent history of LATAM for 2017 and 2018. LATAM reduced fleet commitments for 2018 by US$1,039 million and it will also reduce existing fleet assets by returning additional aircraft as compared to the previous quarter fleet plan. With this, the Company will have reached US$2.2 billion reduction in fleet assets for 2016–2018, in line with our previously announced plans to achieve a decrease of US$2.0 to US$3.0 billion in our expected fleet assets by 2018.
• During 2016, the Company achieved a significant improvement in its balance sheet deleveraging to 5.3x as compared to 5.8x in 2015. Furthermore, liquidity reached US$1.8 billion including undrawn committed credit lines, representing 19% of last twelve months revenues. Liquidity was bolstered by the US$608.4 million capital increase that was completed in December 28, 2016, through which Qatar Airways acquired 10% of LATAM’s total shares.