LATAM Airlines Group Q2 Earnings Call Highlights

Key Points

• LATAM remained profitable despite a severe fuel-cost shock: Fuel prices rose more than 80% year over year and fuel expense increased 93%, but revenue grew nearly 28% to about $4.2 billion and the adjusted operating margin reached 5.4%.
• The airline is expanding its Brazilian network and regional capacity: LATAM Brasil will receive its first 12 Embraer E-Jet E2 aircraft in late 2026, supporting 42 domestic routes and potentially up to 18 new bases from 2027.
• LATAM raised its 2026 outlook and authorized a buyback: The company now expects $4.1 billion-$4.4 billion in adjusted EBITDA, $17.3 billion-$17.7 billion in revenue and 9%-10% capacity growth, while its board approved repurchases of up to 5% of shares.

LATAM Airlines Group NYSE: LTM reported second-quarter 2026 results that remained profitable despite what management described as one of the airline industry’s sharpest recent increases in jet fuel prices.

Chief Executive Officer Roberto Alvo said the all-in impact of higher fuel prices exceeded $700 million during the quarter. Even so, the company posted an adjusted operating margin of 5.4%, at the higher end of management’s prior expectation for a mid- to low-single-digit margin in the period.

“The second quarter of 2026 was an important demonstration of the resilience of LATAM Airlines Group’s business model,” Alvo said, citing the company’s passenger, cargo and loyalty businesses, commercial initiatives, cost structure and balance sheet.

Revenue Growth Offsets Part of Fuel Shock

Chief Financial Officer Ricardo Bottas said LATAM’s average fuel price, including hedges, rose more than 80% year over year in the second quarter. Total fuel expense increased 93%, creating a substantial cost headwind.

LATAM responded with revenue-management actions and targeted capacity adjustments. Total revenue rose nearly 28% from a year earlier to almost $4.2 billion, led by a 28% increase in passenger revenue. Cargo revenue increased nearly 22%, supported by higher yields and growth in transported tons.

The company increased consolidated capacity 8.9% year over year while maintaining an 81.8% load factor, down from 83.5% in the prior-year period. Consolidated passenger revenue per available seat kilometer, or RASK, increased 17.5%.

Adjusted costs excluding fuel increased 14%, which Bottas said was broadly consistent with the expansion of the operation. Passenger cost per available seat kilometer excluding fuel remained sequentially stable at $0.045.

LATAM generated net income of $125 million and adjusted operating cash flow of $476 million. The company said it produced a positive cash change of nearly $150 million before dividend payments and ended the quarter with a positive net cash variation of $110 million.

Premium, Loyalty and Regional Demand

Management said premium traffic and the LATAM Pass loyalty ecosystem helped preserve revenue quality during the period of higher fares. Premium revenue represented 29% of passenger revenue and grew faster than main-cabin revenue, according to the company.

More than 67% of passenger revenue was generated by LATAM Pass members, up from 60% previously. The number of elite members increased 26% year over year, while third-party sales generated by those members rose 48%.

During the question-and-answer session, Alvo said international demand was solid broadly, with some improvement on South America-to-U.S. routes after prior weakness tied to potential visa restrictions and U.S. government policy announcements. He said Europe remained “very solid,” while Argentina was slower amid its economic environment. Demand in northern South America was in a good position, he added.

Alvo also noted a temporary impact on travel patterns from the FIFA World Cup, particularly in June, which management said weighed on demand more than expected.

Brazil Network Expansion and E-Jet Plans

LATAM Airlines Brasil expects to receive its first 12 Embraer E-Jet E2 aircraft between October and December, with commercial operations scheduled to begin Nov. 3. The initial deployment is planned to cover 42 domestic Brazilian routes, including eight new routes.

The new routes include four connections from Guarulhos to Cabo Frio, Ji-Paraná, Rondonópolis and Macaé, as well as four additional routes between existing bases. LATAM said the expansion will bring its Brazilian domestic network to 67 destinations, compared with 44 in 2019.

Alvo said the aircraft will enable the company to right-size capacity on existing routes, add frequencies at times with lower demand and serve airports where Airbus A320-family aircraft may be less suitable because of infrastructure limitations. The airline is evaluating as many as 18 potential new bases for the next stage of E-Jet expansion beginning in early 2027.

In Brazil, management said it sees healthy domestic demand and a favorable competitive environment. Alvo pointed to LATAM’s position at Guarulhos, where he said the company’s relative frequency share is about 2.5 times that of the second-largest operator.

Liquidity, Buyback Authorization and Updated Outlook

LATAM ended the quarter with more than $4.2 billion in liquidity, equal to 26.2% of last-12-month revenue, and adjusted net leverage of 1.5 times. Management said the balance-sheet position supported a newly approved share-repurchase program authorizing purchases of up to 5% of the company’s subscribed and paid shares over no more than five years.

Alvo said the board will determine the timing, price and other terms of any repurchases. He said capital allocation priorities remain profitable growth and adherence to the company’s financial policy before any excess cash is considered for dividends, buybacks or debt-related actions.

The company reinstated its full-year 2026 guidance and improved its outlook. LATAM now expects capacity growth of 9% to 10% and revenue of $17.3 billion to $17.7 billion. It forecast adjusted EBITDA of $4.1 billion to $4.4 billion, raising the midpoint of its prior guidance by $250 million.

• Third-quarter average fuel price assumption: $147 per barrel.
• Fourth-quarter average fuel price assumption: $130 per barrel.
• Passenger CASK excluding fuel: $0.045 to $0.047.
• Year-end liquidity: at least $4.7 billion.
• Year-end adjusted net leverage: at or below 1.6 times.

Management said the outlook assumes a more constructive fuel-price backdrop in the second half, while emphasizing that fuel-price volatility remains elevated. Alvo said the company expects the second quarter to have been the year’s most challenging operating environment and is entering the seasonally stronger second half with continued focus on execution, capacity discipline and revenue management.

About LATAM Airlines Group (NYSE:LTM)

LATAM Airlines Group SA 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.

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