LATAM Airlines Group Q2 2026 Earnings Report

LATAM Airlines Group EPS Results

• Actual EPS: $0.44
• Consensus EPS: $0.41
• Beat/Miss: Beat by +$0.03
• One Year Ago EPS: N/A

LATAM Airlines Group Revenue Results

• Actual Revenue: $4.12 billion
• Expected Revenue: $4.06 billion
• Beat/Miss: Beat by +$61.94 million
• YoY Revenue Growth: N/A

LATAM Airlines Group Announcement Details

• Quarter: Q2 2026
• Date: 8/4/2026
• Time: After Market Closes
• Conference Call Date: Wednesday, August 5, 2026
• Conference Call Time: 9:00AM ET

LATAM Airlines Group (NYSE:LTM) is a Chilean-based airline holding company formed in 2012 through the merger of LAN Airlines of Chile and TAM Linhas Aéreas of Brazil. The Group offers passenger and cargo air transportation services across South America and beyond, operating under a multi‐brand strategy that encompasses several nationally recognized carriers. Headquartered in Santiago, Chile, LATAM is structured to serve diverse market segments with full-service, premium and low‐cost offerings.

The core business activities of LATAM Airlines Group include scheduled domestic and international passenger flights, air cargo services and maintenance, repair and overhaul (MRO) capabilities through its technical divisions. Its passenger network connects major cities in Argentina, Brazil, Chile, Colombia, Ecuador and Peru, while its dedicated cargo operations transport perishables, pharmaceuticals and industrial goods across Europe, North America, Asia and other key markets. LATAM also provides ancillary revenue services such as loyalty programs, charter flights and in‐flight catering.

LATAM maintains hubs in Santiago, Lima and São Paulo, facilitating over 140 destinations across five continents. The airline group has invested in fuel-efficient aircraft, onboard connectivity and digital customer solutions, aiming to enhance operational efficiency and passenger experience. LATAM is a member of the oneworld alliance, which expands its global connectivity and offers reciprocal frequent‐flyer benefits with partner carriers.

Under the leadership of Chief Executive Officer Roberto Alvo, who took the helm following a period of corporate restructuring, LATAM continues to refine its long‐term strategy. The company emerged from a Chapter 11 reorganization process in late 2022, positioning itself for renewed growth in the post-pandemic environment. A board of directors representing institutional shareholders oversees governance, with regional management teams responsible for day-to-day operations across its various markets.

LATAM Airlines Group Q2 2026 Earnings Call Transcript

Key Takeaways

• Positive Sentiment: Despite an 80% year-over-year increase in all-in fuel prices and a 93% rise in fuel costs, LATAM delivered a 5.4% adjusted operating margin, $125 million in net income, and $476 million in adjusted operating cash flow.
• Positive Sentiment: Strong revenue management and resilient demand lifted total revenue nearly 28% to approximately $4.2 billion, while passenger RASK rose 17.5%; premium revenue reached 29% of passenger revenue and LATAM Pass members generated 67% of passenger revenue.
• Positive Sentiment: LATAM reinstated and improved its 2026 guidance, forecasting $17.3 billion-$17.7 billion in revenue and $4.1 billion-$4.4 billion in adjusted EBITDA, supported by a stronger second-half seasonal backdrop and more favorable fuel assumptions.
• Positive Sentiment: The company ended the quarter with more than $4.2 billion of liquidity and 1.5x adjusted net leverage, while shareholders approved a buyback program for up to 5% of shares, giving the board another capital-allocation tool.
• Negative Sentiment: Management remains cautious about continued fuel-price volatility and noted softer demand in Argentina and domestic Chile, while the FIFA World Cup temporarily disrupted South American travel patterns during the quarter.

Presentation

[Operator]

Hello, everyone. Thank you for joining us, and welcome to the second quarter 2026 LATAM Airlines Group earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. Before I turn the call over to the management, I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements. Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance, or guidance are forward-looking statements.

[Operator]

These statements are based on a range of assumptions that LATAM believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in the published 20-F 2026 guidance, earnings release, financial statements, and related CMF and SEC filings. The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. If there are any members of the press on the call, please note that for the media, this is a listen-only call. I will now hand the conference over to Ricardo Bottas, CFO. Mr. Bottas, please go ahead.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Thank you. Hello, everyone, and good morning. Welcome to our second quarter 2026 conference, and thank you all for joining us today. Here with me is Roberto Alvo, our CEO, Andres del Valle, Corporate Finance Director, and Tori Creighton, Head of Investor Relations, and we will present the highlights and results for the second quarter 2026. I'll hand it over to Roberto to share his opening remarks. Roberto.

[Roberto Alvo, CEO at LATAM Airlines Group]

Good morning and thank you, Ricardo. The second quarter of 2026 was an important demonstration of the resilience of LATAM Airlines Group's business model. During this period, the industry faced one of the sharpest increases in jet fuel prices in recent years, creating a significant cost headwind across the sector. As we estimated back in May, alongside our first-quarter publication, the impact of higher jet fuel prices was in excess of $700 million in the second quarter alone. Yet, despite this environment, LATAM delivered profitable results, reflecting an adjusted operating margin of 5.4%, which was also on the higher end of the estimate that we had made of mid to low single digits back then. These results are not explained by a single initiative. They are the outcome of a business that has been consistently strengthened over the last several years to perform across different environments.

[Roberto Alvo, CEO at LATAM Airlines Group]

Which starts with a dedicated effort to care for our customers, constantly improving their experience and making them willing to experience LATAM. In addition to this, a diversified business structure integrating our passenger, cargo, and LATAM Pass businesses, together with an effective commercial strategy, a competitive cost structure, a strong balance sheet, and above all, the commitment of more than 43,000 employees across the Group, enable LATAM's agile response while maintaining a focus on profitability. Throughout the quarter, this ecosystem delivered exactly what it was designed to deliver. Customer preference remains strong across the network, particularly in the premium segment, which now accounts for 29% of the passenger revenues, allowing the Group to partially offset higher fuel costs through deferred adjustments while preserving healthy demand. At the same time, cargo, loyalty, and other ancillary sources of revenue diversification reinforced the resilience of the model during a particularly challenging period.

[Roberto Alvo, CEO at LATAM Airlines Group]

Diversification only becomes an asset when it's supported by effective execution. LATAM has consistently demonstrated that capability. During the period, the Group rapidly activated multiple commercial operation initiatives to mitigate the impact of higher fuel prices while continuing to invest in customer experience, operational reliability, and the long-term competitiveness of the business. Financial strength also remained a key enabler, particularly in such a volatile environment. A strong balance sheet and healthy liquidity over 26% of last 12 months revenues provided LATAM with the flexibility to navigate a period of heightened uncertainty without losing focus on its long-term strategy and value-creating objectives. As we enter the second half of 2026, the environment remains highly dynamic. The significant swings in jet fuel prices we have seen over the last few weeks are a clear reminder that volatility continues to be present.

[Roberto Alvo, CEO at LATAM Airlines Group]

The second quarter provided us with one of the most severe fuel crises the industry has experienced in recent years. We believe we have navigated it well. We don't expect that price volatility to decrease during the remainder of the current quarter. In this sense, we remain cautious, although this quarter also reinforced our confidence in the Group's ability to navigate these challenging environments. As we now enter what is seasonally a stronger half of the year for the business, we do so with the confidence that comes from having demonstrated the resilience of our business model. LATAM Airlines Group has commercial and financial tools, operational flexibility, and most importantly, the people and the mindset to continue adapting effectively, navigating volatility, and creating long-term value.

[Roberto Alvo, CEO at LATAM Airlines Group]

Finally, regarding guidance, given the information we gathered during the past quarter and therefore better visibility, we are reinstating our full list of parameters. We have improved our outlook for the year. However, it is important to note that because of the high fuel price volatility, these numbers should not be only seen as our expectation, given the stated assumptions, but also as an understanding of the resilience of the model in the current environment. With that said, I'll hand it over to Ricardo to go over specifics of LATAM's performance during the quarter. Thank you.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Thank you, Roberto. Please join me on slide four to have a look at our overall results. As Roberto just explained, the second quarter was defined by an unprecedented increase in jet fuel prices. During the quarter, the all-in average fuel price, including hedges, increased by more than 80% year-over-year, resulting in a 93% increase in total fuel costs and creating one of the most significant cost headwinds the industry has faced in recent years. In response, LATAM rapidly implemented revenue management actions and targeted capacity adjustments. With these, total revenues increased almost 28% year-over-year, reaching nearly $4.2 billion. This was propelled by passenger revenues, which grew 28%, reflecting the consistent capacity growth together with their successful implementation of continued fare adjustments, while preserving resilient demand across the network.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Cargo revenues increased almost 22%, benefiting from both higher yields and continued growth in tons transported, which demonstrate the flexibility of this business to adjust pricing given its significantly shorter booking cycle. On the cost side, adjusted costs, excluding fuel, increased by 14%, broadly in line with the continued growth of the operation. It is worth noting that part of this increase reflect costs that are directly linked to higher passenger fares, together with the appreciation of local currencies, particularly the Brazilian real, which pressures the dollar-denominated cost base. Just as a reference, the Brazilian reference in Q2 2025 was BRL 5.6, and now was BRL 5.05. That said, passenger CASK ex-fuel remaining sequentially in line at $0.045.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Despite this unprecedented fuel environment and while growing capacity by 8.9% at a healthy 82% consolidated load factor level, LATAM remained profitable and delivered an adjusted operating margin, as Roberto mentioned, at 5.4% during what is seasonally the weakest quarter of the year. This translated all the way to the bottom line, with the Group generating a positive net income of $125 million. These results demonstrate that while the fuel shock had a significant impact on costs, the combination of effective execution, commercial flexibility, and the resilience of LATAM's diversified business model allowed the Group to increase unit revenues this quarter, successfully mitigating a substantial portion of that impact. Let us now take a closer look at the commercial execution behind these results on the next slide number five.

[Ricardo Bottas, CFO at LATAM Airlines Group]

During the quarter, LATAM Airlines Group continued executing its profitable growth strategy, increasing consolidated capacity by 8.9% year-over-year, alongside some targeted capacity adjustments to mitigate the impact of higher fuel prices. These actions were selective, allowing LATAM to preserve profitability without compromising the strength, connectivity, or integrity of its overall network. Importantly, demand for LATAM Airlines Group remained resilient across all markets, even under a high fare environment. Consolidated load factors declined modestly from 83.5% to 81.8%, remaining at healthy levels across all markets where the Group's affiliates operate during the quarter. It is worth mentioning that, particularly in June, there was a higher impact on demand, reflecting the temporary impact of the FIFA World Cup on travel patterns across South America.

[Ricardo Bottas, CFO at LATAM Airlines Group]

This combination of effective capacity management, a differentiated value proposition, revenue actions, and resilient demand translating to a 17.5% increase in consolidated passenger RASK during the quarter, which allowed LATAM Airlines Group affiliates to successfully pass through a significant portion of the increase in fuel costs. Looking at the different markets, LATAM's affiliates in the Spanish-speaking countries' domestic markets delivered a particularly strong performance, increasing passenger RASK by 15% in local currency or 20% in U.S. dollars. For its part, LATAM Airlines Brasil and its domestic market also successfully increased its unit revenues, with passenger RASK growing 12% in local currency and almost 24% in U.S. dollars, demonstrating its ability to implement fare adjustments while preserving healthy demand. Lastly, the international segment increased passenger RASK by almost 13%, even while expanding capacity by 12%. The quality of LATAM's revenues also played an important role.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Premium demand continued to demonstrate greater resilience than the broader market, allowing the Group to implement fare adjustments while preserving passenger preference across the network. Let's jump now to slide six to take a better view at this. LATAM's resilient revenue quality was particularly evident in two areas that continued to deliver exceptional results for the Group, premium traffic and the LATAM Pass ecosystem. In a quarter as challenging as this one, these two elements once again proved to be especially valuable because they make up a part of the LATAM customer base that is structurally less elastic and more resilient. On the premium side, demand remained strong and continued to enhance the quality of the Group's revenue mix, with premium revenues now representing 29% of the passenger revenues and growing at a rate faster than main cabin revenues.

[Ricardo Bottas, CFO at LATAM Airlines Group]

More importantly, this segment continued to respond positively to the differentiated value proposition LATAM has built over time. Reflected in net promoter score that remained three points above the overall passenger average, in line with historically high levels. This confirms that the investments made in product and services continue to strengthen customer preference. LATAM Pass also remained a key lever during the quarter. The program continued to deepen customer engagement and strengthen loyalty across the network, while supporting a more resilient and higher quality revenue base. Over time, LATAM Pass has evolved well beyond a traditional frequent flyer program into a broader engagement ecosystem, allowing the Group affiliates to strengthen their customers' relationship, both in and beyond the travel experience. Today, more than 67% of passenger revenues are generated by LATAM Pass members, up from 60% previously, reinforcing the growing importance of the program within the commercial ecosystem.

[Ricardo Bottas, CFO at LATAM Airlines Group]

The engagement of elite members also continues to deepen. While the numbers of elite members increased by 26% year-over-year, third-party sales generated by this segment grew 48% compared to the same period of 2025, highlighting the increasing relevance of these customers across the broader LATAM Pass ecosystem and their growing engagement with the partner network. Altogether, the trust in the LATAM brand by customers, the alignment with the premium customers, and the LATAM Pass ecosystem help explain why LATAM affiliates were able to preserve revenue quality and successfully pass through a significant portion of higher fuel costs during the quarter. More importantly, they represent the strategic pillars that create value across the cycle, not only strengthening the Group's resilience during periods of heightened volatility, but also structural growth drives that will continue to support LATAM Airlines Group's commercial performance as the operating environment improves over time.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Let's move to slide seven. The differentiated value proposition we just discussed is not only reflected in Premium and LATAM Pass, it is the result of several complementary elements working together, with the network playing a central role. The incorporation of the Embraer E-Jet E2 family is a key enabler of this strategy, allowing LATAM Airlines Group to further strengthen its premium offer, expanding connectivity and open new sources of profitable growth. The entry into service initiatives are advancing positively and are on track. The first aircraft have already been manufactured, cabin certification is currently underway, and the seventh aircraft is already in production. LATAM Airlines Brasil expects to receive the first 12 aircraft between October and December this year, with commercial operations confirmed to begin on November 3rd, 2026. The network will increase capillarity while further strengthening LATAM Airlines Brasil connectivity.

[Ricardo Bottas, CFO at LATAM Airlines Group]

The initial deployment will cover a total of 42 domestic routes within the Brazilian market, which includes eight new routes: four connecting Guarulhos with the new destinations of Cabo Frio, Ji-Paraná, Rondonópolis, and Macaé, enabling LATAM Airlines Brasil to expand into markets that were previously not part of its network, and four additional routes linking existing bases. These aircraft provide the flexibility to expand the Group's connectivity across Brazil, increasing capillarity and broadening access to regions with attractive corporate and leisure demand profiles, while creating new opportunities. Altogether, LATAM Airlines Brasil will reach a total of 67 domestic destinations, the largest network in its history, compared to 44 in 2019. Looking ahead, the airline is also evaluating up to 18 potential new bases for the next phase of its Embraer E-Jet E2 expansion as additional aircraft are delivered beginning early 2027.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Beyond the domestic market, while this network expansion significantly enhanced connectivity within Brazil, the strategic value goes well beyond domestic travel. By connecting smaller regional markets into the main focus cities, the Embraer E-Jet E2 will provide customers with access to LATAM Airlines Group's extensive network across South America and the four continents served by the Group. They increase the connectivity of the overall network, broadening LATAM Airlines Group's addressable market, and further enhance the Group's value proposition. From a product perspective, the Embraer E-Jet E2 will feature both the economy and premium economy cabin, reinforcing consistency across the fleet and preserving the differentiated experience that LATAM Airlines Group customers expect. Even with a differentiated aircraft configuration, the Group will continue delivering a consistent product standard, so that the new aircraft type does not mean a different customer experience.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Overall, the incorporation of the Embraer E-Jet E2 is not only about adding aircraft, it's about reinforcing the network, improving connectivity through a more efficient and versatile aircraft, and continuing to build on the differentiated value proposition that LATAM Airlines Group has developed across the region. Moving on to slide eight. Let's skip back into the quarter's performance and take a look at the cash generation. The Group's strong operating performance continued to translate into solid cash generation during this quarter. LATAM generated $476 million in adjusted operating cash flow, even considering the impact of high jet fuel prices, once again demonstrating the business' ability to consistently convert earnings into cash. As a result, the Group generated a positive change in cash close to $150 million before dividend payments and ended the quarter with a positive net cash variation of $110 million.

[Ricardo Bottas, CFO at LATAM Airlines Group]

It's worth noting that these dividend payments correspond only with the remaining balance required to complete the mandatory 30% dividend distributed based on 2025 net income. As you may recall, LATAM had already distributed $400 million in interim dividends during the fourth quarter of 2025, with this payment simply reflecting the final remainder. This consistent cash generation remains one of LATAM's key pillars, providing the financial flexibility to continue investing in the business, strengthening the balance sheet, and executing the Group's long-term strategy. Moving to slide nine, see how this translates into continuing to strengthen the balance sheet and level of liquidities. The Group closed the quarter with liquidity of more than $4.2 billion, equivalent to 26.2% of last 12 months revenues.

[Ricardo Bottas, CFO at LATAM Airlines Group]

On the leverage side, adjusted net leverage remained at 1.5x, comfortably below the company's financial policy target and consistent with the planned capital management that has characterized LATAM over the last several years. This liquidity and net leverage position, together with management's perception that the stock is undervalued at the current prices, supported the board's decisions to propose a new share repurchase program, which was approved by shareholders early this week. The new program contemplates a duration of no more than five years and allows for the repurchase up to 5% of the company's total subscribed and paid shares. With this, shareholders have delegated to the board of directors the authority to determine the terms of the program's execution, including its time, mechanisms, price, and other relevant conditions.

[Ricardo Bottas, CFO at LATAM Airlines Group]

With this, we remain confident that the strength and fundamentals of LATAM business model, the commercial strategy and execution capacity, both commercially and operationally, combined with the strength of the capital structure, maintain the solid foundations of the aspiration contained in the financial policy. The policy, which considers the preservation of liquidity ratios between 21% and 25%, and a net leverage below 2x, allow us to continue on the path of improving LATAM's credit ratings. Now let's move to slide number 10. Following the second quarter, and also as Roberto mentioned, we see a more constructive outlook for jet fuel prices over the remainder of the year. LATAM is updating its full-year guidance for 2026, reincorporating the full set of metrics, including capacity with year-over-year growth between 9% and 10%, and revenue projections between $17.3 billion and $17.7 billion, among others.

[Ricardo Bottas, CFO at LATAM Airlines Group]

The updated guidance reflects a more constructive backdrop for the remainder of the year than the one anticipated when the prior guidance was issued, particularly with respect to fuel prices. Based on the assumptions incorporated today, LATAM expected the second quarter to have represented the most challenged operating environment of the year. As the Group enters a seasonally stronger second half of the year under more favorable fuel assumptions, the updated outlook also incorporates what LATAM demonstrated during this quarter, its ability to execute with discipline and deliver solid results even under challenging conditions. Turning first to the assumptions behind the updated guidance. In the prior guidance, LATAM assumed an average fuel price of $107 per bbl for the third quarter and $150 for the fourth quarter.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Today, reflecting the evolution of the market, the company now expects average fuel prices of $147 per bbl in the third quarter and $130 per bbl in the fourth quarter. Based on these updated assumptions, LATAM now expects adjusted EBITDA between $4.1 billion and $4.4 billion, improving the midpoint of the prior guidance by $250 million. Passenger CASK ex-fuel is expected to remain in line with the prior guidance, between $0.045 and $0.047, as the assumption of BRL exchange rate stays at the same level of 5.15 reais per dollar. In terms of the balance sheet, liquidity is expected to end the year of at least $4.7 billion, while adjusted net leverage is projected to be equal to or below 1.6x.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Overall, the updated guidance reflects a business that has multiple levers to deliver results and that's now supported by a more constructive macroeconomic backdrop, despite the level of uncertainty and the fuel price volatility. Lastly, let's move on to slide 11 for a few closing remarks. First, the second quarter did not change our strategy. It validated. In one of the most challenging operating environments in recent years, LATAM once again demonstrated that the business has built and planned to perform across different macro and market conditions, with now even more solid and tested foundations. Second, the Group showed that it has multiple levers to deliver results. Effective execution, commercial flexibility, and the Group diversified ecosystem allowed LATAM to preserve profitability, increase unit revenues, and mitigate a substantial portion of the fuel shock.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Third, the high level of trust from customers and the quality of the Group's revenues base continued to be among LATAM's key elements. Premium customers and LATAM Pass ecosystem, once again, supported by a more resilient demand profile, allowing the Group to preserve revenue quality even in a significantly higher fare environment, holding the profitable growth strategy, combining capacity increase with healthy load factors levels. Finally, LATAM is updating its full-year guidance for 2026 to reflect a more constructive outlook for the remainder of the year, having demonstrated the ability to deliver solid results during what we expect to have been the most challenging quarter of the year, the Group now enters a more favorable operating backdrop while remaining focused on discipline execution, risk, and revenue management. Thank you, let's open the line for the questions.

[Operator]

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Please stand by while we compile the Q&A roster. Your first call comes from Michael Linenberg from Deutsche Bank. Your line is now open. Please go ahead.

[Michael Linenberg, Analyst at Deutsche Bank]

Oh, yeah. Hey, good morning, everyone, and well done. The fact that we're now back to an EBITDA guide for the year that is within spitting distance of where you were prior to the war even beginning. Well done on the revenue recapture, revenue recovery. I have two questions here. Just more specifically on the international, where the PRASK was up just under 13%. Can you just give me a better feel for how that looked via geography? I don't care about Oceania or Africa, I care more about Europe, North America, and just regional, how those may have differed, the trends in those various key markets.

[Roberto Alvo, CEO at LATAM Airlines Group]

Hi, Mike, and thanks for the comments.

[Michael Linenberg, Analyst at Deutsche Bank]

Oh, hey, Roberto.

[Roberto Alvo, CEO at LATAM Airlines Group]

Yeah. Across the board, international was solid. In the previous quarters, I mentioned that we saw a little bit of weakness from South America to the U.S., linked at some point in time with potential visa restrictions, also with the announcements and policies of the U.S. government. In general, we have seen, I would say, a little bit of an improvement in those lines vis-à-vis what we had seen in previous quarters. Europe remains very solid. We have a little bit of a slowdown in demand generally for the World Cup, actually a little bit more than what we expected. We know that these events always have a little bit of an impact, this, I think also had some impact on the second quarter results. Otherwise, probably would've been a little bit better. Regardless of that, the demand remains very solid.

[Roberto Alvo, CEO at LATAM Airlines Group]

In the regional, I would divide it in two. I would say that Argentina is a little bit slower, and this is probably a function of the economic situation of Argentina at this point in time. It was very strong in the beginning of the year, a little bit weaker in that sense. The northern part of South America is in a good place. I wouldn't mark any specific large concerns with respect to how we're seeing international demand. Oceania, even though you don't want to hear, it's also in a good place.

[Michael Linenberg, Analyst at Deutsche Bank]

Okay, good. Okay, thank you. Just my second question to Ricardo. I did see that you took a tax credit in the quarter. What drove that, and what's a good tax rate that we should use for the back half of 2026? Thanks for taking my question.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Thanks. Hello, Michael. That mention in the tax credit, I call a regular business as usual situation because remember that we have a different tax environment in each country. In some country, we could have, in some moment, some additional provisions or some tax credits that could take in some local administrative or even the judicial decision. That was the reason that we have that situation today in one affiliate. I think the best way to see, Michael, because I mentioned there is not a one-off itself, I think is to have a last 12 or 24 months average tax rate, and I think it could be a good driver for you.

[Michael Linenberg, Analyst at Deutsche Bank]

Okay, great. Okay, thank you.

[Analyst]

[audio distortion] Hey. Hello, guys. Can you hear me?

[Ricardo Bottas, CFO at LATAM Airlines Group]

Now we can hear you, yes.

[Analyst]

Okay. Yeah, sorry, it was mute for me. Thanks so much for taking the time. Hi, Roberto, Ricardo, Andres, sorry. My question is think about 2027, now that the visibility is gradually improving, and looking at your fleet plan, the average number suggests that fleet should be increasing by mid to high single digits into next year. Just wondering if that's a fair assumption for capacity growth into 2027. Think about this fuel environment that we are seeing, given the fuel spike. Is it fair to assume that once fuel comes down, LATAM and the rest of the industry should be able to keep most of that price increases that we saw throughout 2026 for 2027? Thank you so much.

[Roberto Alvo, CEO at LATAM Airlines Group]

Thank you, [Guilherme]. Let me see if I understood your fleet question correctly. Yes, we have on the fleet plan that increase in fleet that you see in 2027. Do remember that we're receiving a significant number of Embraers in the last two months of the year. Even though the count for the end of the year of 410 accounts for a dozen Embraers, they basically will not fly almost anything in 2026. We'll see the impact of the Embraer fleet most significantly in 2027. We haven't finalized our capacity plans for 2027, we don't have a figure for you. We have the potential of growing significantly with this part of the fleet. Also remember that we have a number of old aircraft that we have decided to keep, these 319s, that are the flexibility that we have downwards in case of need.

[Roberto Alvo, CEO at LATAM Airlines Group]

Regarding your fare question for 2027, I would love to have a crystal ball here. I think that the comment here is demand is strong and stable. Premium revenues are growing. We see a lot of premium leisure, we see a lot of corporate. Ultimately, I think that the fare environment in 2027, let's assume that fuel goes down to something that looks a little bit more like 2024 or 2025. It'll end up being, I guess, a function of industry capacity, probably. What we have seen in the past is that, normally you see fares sticking a little bit longer when they're high before coming down than going the other way around. Let's see how the environment behaves for the time being and for the rest of the year.

[Roberto Alvo, CEO at LATAM Airlines Group]

We have a good outlook in terms of demand, and the capacity we are deploying matches well what we believe is what we can serve on what the passengers want to fly for the remainder of the year.

[Analyst]

Very clear. Thank you, Roberto.

[Operator]

Your next call comes from the line of André Ferreira with Bradesco BBI. Your line is now open. Please go ahead.

[André Ferreira, Analyst at Bradesco BBI]

Hi, good morning. André from Bradesco. Thanks for taking my question. I have two here. One is, recently, the Brazil Development Bank approved the credits for airlines using the civil aviation funds at attractive rates. My question is if you plan on using it, and what's the latest on when the credit will actually be disbursed? My second question, in the guidance, LATAM raised domestic Brazil ASK guidance to 8%-9%, continued rates compared to the December guidance, right? While cutting domestic Spanish-speaking countries to 4%-5%. Looking at RASK in the two regions year-over-year, they are somewhat similar. My question is that a relative demand strength, capacity discipline by competitors, fuel-driven economics? What was the driving force in that decision? Thank you.

[Roberto Alvo, CEO at LATAM Airlines Group]

Sorry, the audio was quite bad. I think we understood your questions. First one regarding FNAC, I'll pass it to Ricardo, and I'll take the capacity question on the domestic Brazil for the guidance.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Regarding FNAC, I think it was public that was a line of credit provided to the Brazilian airlines. We are taking part of the access of that line of credit. Yes, we are still having some ongoing conversations with the BNDES in terms of the ways that we should execute that line. So far, it's the information we have in terms of the line available for the entire market in Brazil until the end of this year. Okay?

[Roberto Alvo, CEO at LATAM Airlines Group]

Regarding capacity for domestic Brazil, I think I understood you were comparing it to the guidance for domestic Spanish-speaking countries. Remember again that we have the Embraer fleet coming into domestic Brazil specifically, so we're accounting for that in the guidance. We see very healthy demand in Brazil in general. We see a number of opportunities to continue growing our network as it was explained before. Domestic Brazil capacity is a little bit higher in this guidance than what we published in the beginning of the year when we gave the first outlook of 2026. This is basically a function of the robustness that we see in demand and the solidity of our network and our presence in Brazil. Also, remember that our fleet has a lot of flexibility, so we can move capacity around within the network.

[Roberto Alvo, CEO at LATAM Airlines Group]

The current spread of capacity that you see between Spanish-speaking Brazil is basically a function on where we see the opportunities. I think it is fair to say, finally, on domestic Spanish-speaking, that we are seeing a little bit of a weak domestic Chile environment. Actually, the economy has not grown for the last six or seven months, if you see the reports on the economy altogether. That has a little bit of an impact on the average that we see in Spanish-speaking. The position we have in domestic Chile is very healthy, still 65% market share. But the outlook still is positive for the remainder of the year. I hope we answered your questions because we have heard them pretty well. Okay.

[André Ferreira, Analyst at Bradesco BBI]

Yeah. Sorry for the audio, but you answered it perfectly. Thank you.

[Operator]

A reminder, if you would like to ask a question, please press star one. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you are muted locally, please remember to unmute your device. Your next question comes from Jens Spiess from Morgan Stanley. Your line is now open. Please go ahead.

[Jens Spiess, Analyst at Morgan Stanley]

Yes. Hello. Congrats on the results concerning the challenging environment. Quite impressive. I have two questions, basically. One, on your hedging and the hedging results for the quarter. You had a negative fuel hedging result, so just trying to understand how to forecast it into the future, because at the end of the day, I do understand that your hedging strategy protects up to a certain range, but we were still a bit surprised to see a negative result on that line specifically, and just want to have a better understanding on how we can do a better job in forecasting that line going forward. Also considering that you are now incorporating more downside protection without limits. My second question goes to, in general, the Brazilian market environment. How are you seeing the competitive environment evolving? Not just in terms of capacity, but prices.

[Jens Spiess, Analyst at Morgan Stanley]

You've been very successful in raising prices. Just wondering what's your sense of how things are heading. Thank you.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Thank you, Jens. It's Ricardo speaking. Remember that the last quarter, we have disclosed that we have hired some additional calls, together with the traditional callers that regular LATAM use to protect against the fuel price volatility. After all the negative impact on this quarter came from the premiums that we pay for those calls. Because of the positive evolution in terms of prices, we have a relevant concentration about the negative impact from the premiums, much more than the positive impact that will come from the settlement of the hedge. Also, if you see the disclosure that we have for the next quarter, we have close to 8% of the protection in terms of volumes for Q3 in terms of calls. That was also higher at the beginning of the crisis. Everything that you should project, it's connected with this.

[Ricardo Bottas, CFO at LATAM Airlines Group]

The level of calls that we used to have in the Q2 was higher than the level of calls that we have for Q3. Because of that, the level of premium should be lower. That's the way that you should forecast. Yes, we do see and continue to use the callers. In some ways, we could widen the range in terms of protection to capture more protection in terms of that four-way structures under the same hedge policy. We just now need to wait and see the market conditions to understand the way that we should move forward.

[Roberto Alvo, CEO at LATAM Airlines Group]

Okay. Regarding your question on the competitive environment in domestic Brazil, 2025 domestic Brazil, out of the 10 largest domestic market in the world, was the one that grew the most. This year, the trend, despite of the fuel situation, continues. In general, we see a good development of the market. We have taken a leading position on the most important market in Brazil, which is Guarulhos Airport. Today, our relative frequency share in that airport is around 2.5x, versus the second. Also remember that Guarulhos is basically the entry point for international travel to Brazil. 65% of international capacity to Brazil flies into the airport.

[Roberto Alvo, CEO at LATAM Airlines Group]

Today, the combination of the hub we have in Guarulhos together with Brasilia and our hub in the Northeast in Fortaleza and the presence we have in Congonhas are a very solid footprint with respect to how we can serve the corporate business and the leisure business in Brazil. Of course, this is going to be reinforced with the addition of the routes that Ricardo talked about on the E2s. Capacity in the market is in the high single digits if you account for everybody here. What we see in terms of capacity is, I would say, a level consistent with the dynamism of the domestic market in Brazil. In general, we have a good and positive outlook for the remainder of the year for the Brazilian market.

[Jens Spiess, Analyst at Morgan Stanley]

Perfect. Good to hear.

[Operator]

Your next question.

[Jens Spiess, Analyst at Morgan Stanley]

All right. Thank you.

[Operator]

Your next question comes from the line of Filipe Nielsen with Citi. Your line is now open. Please go ahead.

[Filipe Nielsen, Analyst at Citi]

Hey. Hello, everyone. Thanks for taking my question. I do just have one question regarding the E2 strategy. I think it was quite clear about this first phase on how you're deploying the aircraft, what are routes, and et cetera. I just wanted to understand a little bit better the strategy behind choosing the markets and choosing the routes here. Is it a strategy more focused on opening new markets or are you targeting any specific gaps or regions that should enable more feed for your main cabin or international? How's the strategy behind choosing the markets? And a follow-up to this one, just wondering, how are you seeing the profitability regarding CASK and the margin profile compared to the other aircraft and the other routes that you're already serving in the country? Thank you.

[Roberto Alvo, CEO at LATAM Airlines Group]

Thanks. On the Embraer, let me separate for a second existing routes with new routes. On existing routes, the E2 allows us to do two things. One is to right-size the aircraft to the demand on specific times of the day, where probably an A320 is a little bit big for that particular time of the day. We're, in some cases, replacing frequencies of A320s with frequencies of E2s. The second thing we can do on those existing routes is add new times on parts of the day where the demand is a little bit lower. What you're seeing in some routes is more frequencies than the ones that we would have with only an A320 specific fleet. This improves the product on those routes. On new routes, you have two possibilities.

[Roberto Alvo, CEO at LATAM Airlines Group]

One is operate airports where the E2, from an operational perspective, can fly, and the A320 or the A319 cannot fly just because of airport infrastructure, runway, whatever. Two, airports where we do operate today with the A320 fleet, and A319s in particular, because these are less efficient, they're older aircraft and heavier aircraft, the economics of operating E2s is much better than the economics of operating A319s. Those are the drivers on how we deploy E2s across the network, whether it's for current routes or for new routes. We haven't yet flown the E2, so I can't give you a sense of the reality of the operation. We're very confident on it. It looks like a great airplane. We have seen the experience of other operators, all of them very happy.

[Roberto Alvo, CEO at LATAM Airlines Group]

We are actually very excited, anxious for November to arrive and have our first flight with the Embraer planes in Brazil. That was first question. That was the second question?

[Filipe Nielsen, Analyst at Citi]

Thank you.

[Roberto Alvo, CEO at LATAM Airlines Group]

Thank you.

[Filipe Nielsen, Analyst at Citi]

No, the second one was regarding the economics, but I think it was already answered. Thank you.

[Roberto Alvo, CEO at LATAM Airlines Group]

Okay. Thank you.

[Operator]

Your next question comes from the line of Gabriel Rezende with Itaú BBA. Your line is now open. Please go ahead.

[Gabriel Rezende, Analyst at Itaú BBA]

Hi, good morning. Two questions here on our side. Just if you could remind us a little bit more about the company's dividend policy, and also how you're thinking about shareholders remuneration when you're deciding between share buybacks versus dividend announcements. Just trying to understand what's the possibility here for the coming quarters on top of the share buyback you have already announced. Also, on a second point here, it's a little bit tricky for us to calculate what's your actual CASK growth because of all the different effects components into the equation. Just trying to understand how are you seeing operational leverage improving and potentially diluting CASK, as we look into this capacity expansion you are planning for the coming quarters under constant effects.

[Roberto Alvo, CEO at LATAM Airlines Group]

Okay. You want to take the CAP? I take the other. We had the shareholders meeting on the third, approving a buyback for up to 5% of our shares. Remember that in Chile, buybacks need to be first approved by the shareholders, and they have certain limits. You can only buy up to 5%, and you have up to five years eventually to buy the shares. What we actually approved was the program. Now the board has the ability to take the decision on how to execute on this program. I think that the important line here is we first prioritize the growth of the business, and if we see profitable growth that makes sense for what we're doing, that's the first priority. On top of that, we look at the financial policy and that we meet the guidance of the policy that you know well.

[Roberto Alvo, CEO at LATAM Airlines Group]

Any excess cash after these two points is for consideration in terms of capital allocation. Now with the buyback, we have another tool. We have dividends, and we have now this. We also look at reprofiling eventually or changing the debt. As the weeks and months progress and we have a better outlook of the next quarters and years, the board will have the ability to eventually execute on the share buyback program. Maybe an important just addition to this is the Chilean stock exchanges, they revamped and, what is the word? Probably made more current their procedures in terms of how to buy shares. It was a little bit cumbersome. We had to wait at least 20 days. I mean, the whole process was a little bit more complicated. Now it's much more streamlined. It looks a little bit more like what the U.S. does.

[Roberto Alvo, CEO at LATAM Airlines Group]

That, I think, increases the ability of companies in general in Chile to execute on those programs because the procedure is simpler than what it was in the past.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Gabriel, it's Ricardo. Regarding your question about CASK, because we are not providing any guidance for next years, I will try to answer a question regarding two different considerations. Yes, we do have an impact from the inflation and escalation over the cost that we have, but we also have the operational leverage that we could dilute part of this increase in terms of cost with the capacity and the way that we manage our business through an efficient agenda. Remember, if you see the way that we updated, actually, the guidance for this year for CASK ex-fuel, passengers, it's almost the same that we updated last time in Q1, was higher than the original guidance that we disclosed to the market late on December, mainly because the change in the FX assumption.

[Ricardo Bottas, CFO at LATAM Airlines Group]

It's also important to bear in mind that you have to also have your forecast for the FX assumption that could have an impact. It still not answered your question for the future, but the way that you could take some driver, not as a guidance. If you see the level of CASK from the Group since 2019, we are having a very intense agenda in efficient way, and also through digitalization and all leverage that we could take to hold in that capacity, to hold the same level of CASK for years, and years mean more than six years. Having said that, I think it's fair to think that we are working hard to hold the cost as a real advantage for the Group.

[Roberto Alvo, CEO at LATAM Airlines Group]

Just one additional clarification, because you asked about the mix of currencies. We have, of course, cost in Chilean pesos, in soles in Peru, in Colombian pesos and so on. The real one that matters is the real, and this is why when we provide guidance, we basically focus there. I think that you can simplify the model by assuming that the real is what matters in terms of FX changes in the cost. The others are relatively small. They are not very significant. As Ricardo said, the most significant portion, almost all of the difference between the guidance we gave in December and the guidance we have today, the change in the CASK ex-fuel, is related to the appreciation of the real. That gives you, I think, one data point in terms of how to model this.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Sorry, just another side comment. Don't forget to also look the impact from this FX situation over the RASK, because we also have an impact from this variation in terms of FX over the RASK, after all, it's important to see the evolution of RASK and the CASK.

[Roberto Alvo, CEO at LATAM Airlines Group]

That's why we provide the two figures in terms of RASK in domestic markets.

[Gabriel Rezende, Analyst at Itaú BBA]

Thank you very much. Very clear.

[Operator]

Reminder. If you would like to ask a question, please press star one to raise your hand. To withdraw your question, press star one again. We ask that you pick up your handset when asking a question to allow for optimum sound quality. If you're muted locally, please remember to unmute your device. Your next question comes from João Frizo with Goldman Sachs. Your line is now open. Please go ahead.

[João Frizo, Analyst at Goldman Sachs]

Yes. Hey. Good morning, everyone. Thanks for taking my question. I have a quick follow-up on the guidance for leverage. You guys mentioned you're expecting leverage to be below 1.6x for the year-end. Just wanted to hear your thoughts on what's the leverage, excluding the planes that are expected to come in towards the end of this year. Leverage comes first, right? Then EBITDA comes afterwards. I just wanted to hear about what's leverage without the planes that are only going to generate EBITDA towards the end of this year, beginning of 2027. Thank you very much.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Okay. Thank you. I think we're not providing any guidance in terms of the breakdown that you are asking, I think it's important to mention that it doesn't matter the way that we decide to finance the fleet, if it's going to be through finance lease or operating lease. After all, it's everything accounted as debt. I think it's also important to note that this updated guidance to be below or equal to 1.6x, it's also including our decisions to finance the fleet and when we will finance the fleet. Also in the earnings release, you can see that we have added some additional facilities in this quarter. Also it's including the net leverage in the way that we are forecasting the leverage.

[Ricardo Bottas, CFO at LATAM Airlines Group]

I think it's complicated to split that level of leverage not including, it's quite easy to make the calculation having a list of that that we have in the attachment of the earnings release. I don't know if I help you, that's the way that I should answer your question.

[João Frizo, Analyst at Goldman Sachs]

Yeah, that's helpful. Thank you very much.

[Operator]

There are no further questions at this time. I will now turn the call back to Ricardo Bottas for closing remarks.

[Ricardo Bottas, CFO at LATAM Airlines Group]

Thank you all again for participating in today's call, and if you have any further questions, please reach out to our investor relations team. Thank you again, and have a nice day.

[Operator]

This concludes today's call. Thank you for attending. You may now disconnect.

Participants

Executives

• Ricardo Bottas, CFO
• Roberto Alvo, CEO

Analysts

• Michael Linenberg, Analyst at Deutsche Bank
• Analyst
• André Ferreira, Analyst at Bradesco BBI
• Jens Spiess, Analyst at Morgan Stanley
• Filipe Nielsen, Analyst at Citi
• Gabriel Rezende, Analyst at Itaú BBA
• João Frizo, Analyst at Goldman Sachs