LATAM cargo revenue is down 20.2% YoY

LATAM Airlines Group today reported $3.1 billion in revenue for the third quarter of 2023, an increase of 18.1% year over year. The carrier reported a 20.2% YoY decrease in cargo revenue in Q3 to $329 million. [caption id="attachment_78027" align="alignright" width="300"] (Photo/LATAM Airlines)[/caption] WHY IT MATTERS: LATAM filed for Chapter 11 bankruptcy in May 2020, struggling to stay afloat during the pandemic. The carrier has now recovered significantly and is no longer in bankruptcy. “The group is approaching the one-year anniversary of the emergence from Chapter 11 on Nov. 3 and, reflecting on this part of the year, [we have] consistently delivered increasingly impressive results financially and operationally, differentiating [ourselves] in the region and globally,” Chief Executive Roberto Alvo said in today’s earnings call. “I am proud of where we are.” THE BIG PICTURE: LATAM’s earnings are in line with those reported by other carriers this quarter and throughout 2023. While overall revenue is up due to increased passenger demand, cargo revenue is down due to high capacity and low demand. BY THE NUMBERS: While cargo revenue decreased 20.2% from Q3 2022, it increased 30.7% from Q3 2019. Additionally, LATAM reported in Q3: EBITDA was $690.7 million, up 81.8% YoY; Available tonne kilometers were 1.8 billion, up 9.6% YoY; Revenue tonne kilometers (RTKs) were 889 million, down 0.9% YoY; Cargo yields were 37 cents per RTK, down 19.5% YoY; and 230,000 tonnes of cargo were transported, up 1.4% YoY. WHAT THEY’RE SAYING: S&P Global Ratings upgraded LATAM’s corporate rating to “B” with a positive outlook in September and Moody’s upgraded the carrier’s rating to “B1” with a stable outlook in September. “The upgrade of LATAM’s ratings to B1 from B2 reflects the better-than-anticipated operating and financial performance of the company during 2023, which allowed the company to strengthen its credit metrics and liquidity,” Moody’s stated in the upgrade announcement. “The rating is also supported by LATAM’s improved post-bankruptcy capital and cost structures and adequate liquidity, which will allow the company to weather the volatile recovery of the industry.” Moody’s acknowledged that LATAM still faces several challenges. “LATAM will have to contend with higher costs derived from labor (denominated in local currencies), fuel and other U.S. dollar-denominated inputs, which can hamper profitability despite firm demand and capacity discipline in its key markets,” Moody’s stated. FLASHBACK: In addition to emerging from Chapter 11 one year ago, LATAM is marking one year since it entered a joint venture with Delta Air Lines to offer additional routes and capacity. “ After one year of the joint venture agreement, Delta and LATAM have implemented new routes and increased their frequency, improving connectivity between South America and North America,” LATAM Chief Financial Officer Ramiro Alfonsin said in the earnings call. Since the JV was launched, LATAM and Delta have jointly operated 15,000 flights on more than 20 routes between North and South America, according to the earnings report. THE BOTTOM LINE: “LATAM Group is working,” Alvo said. “The strength and diversity of the business model have been critical factors that have contributed to the positive public financial results despite factors like the currently weaker air cargo industry.” MARKET REACTION: Shares of LATAM Airlines (OTCMKTS: LTMAY) were up 4.21% from market open to 49 cents as of market close today. The company has a market capitalization of $4.86 billion.

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