LATAM sees dip in Q2 cargo traffic, revenue

LATAM Airlines’ cargo traffic declined 2.9% y-o-y during the second quarter to 849 million freight tonne kilometers (FTKs), leading to a 10.2% y-o-y decline in cargo revenue to US$269.3 million, the company said today during its earnings call. LATAM said that these figures were particularly impacted by the sale of the company’s former subsidiary MasAir in the second half of 2018, which reduced LATAM’s cargo revenues by approximately US$10 million. 

According to the carrier, excluding MasAir, cargo yield declined by 4.6% while load factors rose 1.3 percentage points to 55.8%. As a result, cargo revenues per FTK declined by 2.2% in comparison to Q2 last year. 

For the six-month period ended June 30, cargo revenue for the carrier declined 10.5% compared to the same period the year prior, to US$532.8 million. 

The carrier also said that import markets continued to show declines y-o-y, especially for Brazil and Argentina. These declines were driven by weaker currencies and general economic uncertainty in those markets, the carrier said. However, LATAM also reported that export markets continued improving, especially salmon from Chile. Trade with the U.S., which dipped in Q1, has also rebalanced, the carrier said. 

In May this year, the Chilean Supreme Court also ruled against the joint business agreement LATAM Airlines had submitted in partnership with American Airlines and International Airlines Group. However, this ruling only covers the passenger air transportation market, leaving LATAM free to form cargo agreements with American and IAG.  

Responding to a question regarding the slots and aircraft made available by Avianca Brasil, the carrier said that the process of slot allocation at three airports is still an open process from a legal perspective. However, the carrier also said that it is very happy in what the company have been able to achieve in terms of slot use in Sao Paulo (GRU) and Rio de Janeiro (SDU). 

Overall the carrier reported $2.4 billion in revenue for Q2, with a net loss of $62.8 million. Passenger and cargo revenues accounted for 85.2% and 11.4% of the total operating revenue of the quarter, respectively. In its guidance for the rest of 2019, the carrier anticipates 0–2% growth in its cargo traffic. 

“We are confident on what we’re seeing in the second semester. We had a difficult first quarter, but the second quarter is more in line with the previous year,” said LATAM CFO Ramiro Alfonisin. “We have had the margins we expect for the second quarter.” 

“Traditionally the second quarter is our weaker quarter and the third quarter is generally a positive quarter. The main point of comparison for the previous years since the devaluation of currency in the second half of 2018 is more benign. So, we do expect to reach the percentage of our guidance course,” Alfonisin added.