LATAM sees post-chapter 11 growth with a significant fleet expansion

Wednesday, October 23, 2024

Less than two years after emerging from Chapter 11 bankruptcy, LATAM Airlines Group is now operating at a higher capacity than it did before the pandemic.

The airline has set ambitious growth plans, with 125 new aircraft on order through 2030, primarily from Airbus and Boeing.

Executives shared their outlook during an investor day on October 22, highlighting a strong recovery and future expansion.

Of the 125 aircraft ordered, 80% will come from Airbus and Boeing, with a significant portion being narrowbody jets.

The airline expects to receive 22 aircraft in 2025 (20 narrowbodies and 2 widebodies), followed by 15 in 2026, and 85 between 2027 and 2030. Among these will be a dozen Airbus A321XLRs, slated to join LATAM’s fleet from 2027 onwards.

CFO Ramiro Alfonsin emphasized the strategic advantage LATAM has in securing these orders. “If I were to purchase aircraft today and didn’t have our orderbook, I’d probably receive aircraft after five years from now,” he explained, adding that aircraft lessors are facing capacity constraints.

LATAM, however, is not in that position.

LATAM currently operates 341 aircraft, including 56 widebody, 263 narrowbody, and 22 cargo planes. A third of its fleet consists of unencumbered assets valued at over $1.2 billion.

The airline’s fleet costs are 40% below current market rates, thanks to favorable terms negotiated during the Chapter 11 restructuring. Alfonsin noted that 90% of the fleet’s pricing is locked in through 2029.

The airline also upgraded its 2024 financial guidance, projecting adjusted EBITDAR between $3 billion and $3.15 billion, up from a previous estimate of $2.75 billion to $3.05 billion.

LATAM’s available seat kilometers (ASKs) are expected to increase by 15% to 16% in 2024, with further growth forecasted for 2025 and 2026.

CEO Roberto Alvo highlighted LATAM’s dominant position in the South American market, noting that almost one in two passengers in the region now flies with the airline.

“The company is growing profitably, and we’re generating 40% more EBITDAR than we used to,” Alvo told investors. He attributed LATAM’s success to diversified revenues, low costs, and improved liquidity, stressing that the airline’s restructuring gave it a competitive edge over rivals that did not undergo similar changes.

Looking ahead, LATAM is investing in its products and services.

The airline is retrofitting its Boeing 787 business class with new suites and aims to install Wi-Fi across its narrowbody fleet by mid-2025. LATAM has also introduced a flexible premium economy product, allowing it to adjust cabin configurations based on demand.

“Not all our markets are the same,” said chief customer and experience officer Paulo Miranda, underscoring the need for flexibility.

LATAM’s Investor Day was held at the New York Stock Exchange, where executives rang the opening bell, marking the airline’s return to the NYSE after its listing was suspended during bankruptcy in 2020.

“Today, we are beginning a new chapter in LATAM’s history,” said Chairman Ignacio Cueto, signaling a future focused on innovation, growth, and leadership in the global airline industry.

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