By Juan Pedro Sanchez Zamudio
LATAM Shows Improvements and is Close to Exit Its Chapter 11 Process
LATAM Airlines Group showed considerable progress in its operation in the 2022 fourth quarter. The 2021 was a challenging year for the carrier, since it has had to fight against new variants, infections, restrictions, and measures.
Despite all the difficulties, the Chilean carrier has been able to overcome all the complications that have arisen and continue its way out of its reorganization process.
LATAM Airlines Group released its financial results corresponding to the 2021 fourth quarter, which show the continuous improvement in air traffic levels.
During the 2021 last quarter, LATAM’s total operating income totaled $1,995.9 million, that is, 30.5% below 2019 levels, but 51.9% higher than the 2021 third quarter.
And for the first time since the COVID-19 pandemic, the LATAM Airlines Group posted a positive operating result, amounting to $73.4 million during the 2021 fourth quarter.
The Group’s total revenues for 2021 reached $5,111.3 million, representing a decrease of 51.0% compared to 2019.
LATAM Airlines Group’s operations reached 63.5% of 2019 levels during the 2021 fourth quarter (measured in ASK), corresponding to a capacity increase of 29.6% compared to the 2021 third quarter.
As in previous 2021 quarters, LATAM’s cargo operations continued to show a solid performance, with revenues that increased 66.0% compared to the same period of 2019, amounting up to $464.8 million.
Total operating expenses were $1,992.4 million in the 2021 fourth quarter, representing a decrease of 23.7% compared to the same period in 2019.
The group is aiming to get out of Chapter 11 bankruptcy proceedings during the second half of 2022, closing a stage of important transformation.
This new LATAM Airlines will be a renewed organization, more agile, with a solid balance sheet, a competitive cost structure and a good level of liquidity.
During 2021, LATAM Airlines Group not only simplified processes, redesigned fleet strategies, renegotiated contracts, and restructured costs, but also took a fundamental step for the future projection of operations.
Amid the Chilean carrier’s operations recovery after the COVID-19 pandemic and Chapter 11 reorganization process effects, a new struggle affects the airline.
The increase in oil prices, which have reached record levels because of the conflict between Russia and Ukraine, is leading LATAM to analyze the possibility to reduce flight frequencies or temporarily suspend destinations to reduce costs.
According to La Tercera, LATAM consumes approximately 2.8 million barrels per month, and the price of fuel two days ago was $50 lower than what we are seeing now.
The Chilean carrier is adapting its offer to this context, so there are many scenarios, and it is difficult to specifically comment on how much LATAM will be flying in the next May or June, since the fuel price is volatile, and the carrier is adapting its capacity based on what is happening in the markets.
Although it is true that LATAM expects to exit the Chapter 11 process in May, if this fuel price crisis continues, it is possible that the long-awaited exit will not take place in the time estimated by the Chilean carrier.