LATAM Airlines Group has released an updated Business Plan as part of its ongoing Chapter 11 bankruptcy proceedings in the United States. The airline expects total revenue to surpass pre-pandemic traffic levels by 2024, fueled by solid cargo income and recovery capacity levels in commercial passenger flights. LATAM updates its business plan.
Earlier this week, and in the context of the Chapter 11 process, LATAM Airlines Group provided an updated business plan, which contains 5-year financial projections (through 2027), adjusted to the new global macroeconomic context.
This updated business plan reports that LATAM has been actively working to improve its cost structure over the past few years. It has also been taking advantage of the restructuring opportunity via its Chapter 11 process. On June 18, the Bankruptcy Court of the Southern District of New York confirmed the group’s Plan of Reorganization and financing to exit the Chapter 11 process, which is expected to occur in the last quarter of this year.
In the new version of the plan, LATAM Airlines updated its cost savings estimate from US$900 million to more than US$1 billion annually, thanks to several initiatives that have already been implemented.
Additionally, LATAM has implemented an ongoing fleet renegotiation, has improved its relative cost position, strengthened its network, and reduced its total debt by approximately 36% compared to pre-pandemic levels.
In terms of fleet, LATAM Airlines expects to close the year with a fleet of 306 aircraft (compared to 340 when it filed for Chapter 11). By 2027, LATAM’s fleet size will be 326 aircraft. The company currently has an order for 100 Airbus A320neo-family-based jetliners and two Boeing 787-9 Dreamliners, plus taking new leases, including several Dreamliners in the coming years.
Domestic and international recovery
On the demand side, the group expects a recovery in the domestic markets of the subsidiaries to 2019 levels by the end of 2022. However, in the case of Colombia, such recovery was achieved in the first quarter of this year, and Brazil and Ecuador are expected to fully rebound within the third quarter.
Regarding international traffic, LATAM estimates that the recovery will be slower, reaching 2019 levels by mid-2023. It is worth noting that international traffic accounted for approximately 45% of 2019 revenues. Overall, LATAM estimates that it will return to 2019 capacity levels by 2024, when ASKs reach approximately 148 billion, driven primarily by demand recovery in affiliate domestic markets. Load factor will remain stable at 83% between 2023 and 2024.
For 2024, the group projects passenger operations measured in available seat kilometers (ASK), similar to 2019.
Finally, regarding revenue, LATAM Airlines Group expects to exceed 2019 levels by 2024, reaching US$11.5 billion. Operational cash flow is expected to exceed US$2 billion from 2023 onwards. EBIT margin is expected to be positive next year, going from 5.6% in 2023 to 12.1% in 2027.
LATAM Airlines Group CEO, Roberto Alvo, said:
“Our updated business plan reflects how LATAM group is better prepared to face future challenges, with a more competitive and flexible cost structure, a more complete offering for customers and important progress towards more sustainable aviation.”
Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.