What LATAM Airlines Group (LTM) Said on Its Q3 Earnings Call

Key Points

• LATAM’s third-quarter results strengthened: Revenue rose 18.4% to $4.6 billion and net income increased 16% to $441 million, as higher fares and cargo revenue helped offset rising fuel costs.
• Higher fuel prices weigh on 2026 expectations: LATAM expects fuel costs to be more than $2 billion higher than in 2025 and forecasts adjusted EBITDA of $3.9 billion to $4.1 billion, below last year’s $4.1 billion.
• The airline generated nearly $900 million in third-quarter operating cash flow and expects at least $1.2 billion in adjusted levered free cash flow for 2026. It also trimmed its 2026 capacity-growth outlook by about half a percentage point as it weighs fuel costs against profitable expansion.

LATAM Airlines Group NYSE: LTM reported an 18.4% increase in third-quarter revenue as higher passenger fares and cargo revenue helped offset a sharp rise in fuel costs. The airline also updated its 2026 outlook to reflect higher anticipated jet fuel prices.

Revenue reached $4.6 billion, while net income rose 16% from a year earlier to $441 million, Chief Financial Officer Ricardo Bottas said on the company’s earnings call. Adjusted operating income was $573 million, representing a 12.5% margin, and adjusted EBITDA was close to $1.1 billion, with a 24% margin.

Chief Executive Officer Roberto Alvo said demand remained strong and the company had been able to pass through a substantial portion of higher fuel costs. However, he said jet fuel prices had continued to rise and LATAM did not expect meaningful relief in the short term.

Pricing Helps Offset Higher Fuel Costs

Passenger revenue increased 17.8% to $4 billion as capacity expanded 7.7%. Passenger revenue per available seat kilometer, or RASK, rose 9.4% to $0.083, while yield increased 11.7%. The passenger load factor was 83.7%.

International passenger RASK grew 10.2%, while the Brazil domestic and Spanish-speaking domestic markets each posted increases of close to 9%, Bottas said. Domestic load factors fell by 3 percentage points but remained around 83%; the international load factor was 84.3%, down 0.8 percentage points.

Asked whether higher prices were beginning to constrain demand, Alvo said the lower load factors were a normal consequence of some price-sensitive demand falling away. He said the airline was comfortable accepting a slightly lower load factor while optimizing unit revenue.

Premium cabin revenue grew 23%, outpacing main cabin revenue. Cargo revenue rose 20% to $483 million, aided by shorter sales cycles that allow for quicker fuel cost pass-through, Bottas said. LATAM Pass membership increased 9% to 57 million, with members generating two-thirds of passenger revenue.

Total fuel costs increased $594 million year over year, primarily because average jet fuel prices rose 52%, Bottas said. Passenger unit costs excluding fuel increased 3.5%; excluding the effect of local currency appreciation, he said, they would have been virtually flat.

Updated Outlook and Cash Flow

LATAM expects higher jet fuel prices alone to add more than $2 billion in costs for 2026 compared with 2025, including more than $900 million in the fourth quarter, Alvo said. Under its updated outlook, the company expects full-year adjusted EBITDA of $3.9 billion to $4.1 billion, compared with $4.1 billion last year.

The airline also expects at least $1.2 billion in adjusted levered free cash flow and a double-digit adjusted operating margin for the year. Bottas said the outlook assumes an average Brazilian real exchange rate of 5.3 per U.S. dollar in the fourth quarter and 5.2 for the full year.

LATAM generated close to $900 million in operating cash flow in the third quarter and spent $432 million on capital expenditures. Bottas said the company generated more than $300 million in cash before capital allocation initiatives and repurchased 0.65% of its share capital during the period.

Both S&P Global Ratings and Fitch Ratings upgraded LATAM to BB+, one notch below investment grade, while its bonds are rated BBB- by both agencies, Bottas said.

Capacity and Fleet Plans

Alvo said LATAM had not yet issued 2027 guidance. The airline has enough fleet capacity to grow by as much as the high single digits next year, but actual growth will depend on fuel prices and whether expansion is profitable, he said.

Bottas said LATAM expects to finish 2026 with 409 aircraft and receive 30 more in 2027, ending that year with 426. Alvo said the plan implies the retirement of 13 older aircraft, principally A319s.

The company received its first two Embraer E195-E2 aircraft in October, with Brazilian domestic operations scheduled to begin Nov. 30. Bottas said the fleet plan includes 12 remaining Embraer deliveries in 2027.

Alvo also said LATAM had reduced its full-year 2026 capacity growth guidance by approximately half a percentage point in response to higher fuel prices. The airline can manage capacity by reducing frequencies across its network, he said, rather than necessarily eliminating routes.

On fuel hedging, Bottas said LATAM was not changing its policy but was assessing market conditions and the cost of protection daily. The company wants to return to its normal hedging range when pricing makes sense, he said.

About LATAM Airlines Group (NYSE:LTM)

LATAM Airlines Group is a Chile-based airline group that provides passenger and air cargo transportation in Latin America and other international markets. Its passenger operations connect major cities across the region with destinations in North America, Europe and Oceania.

The group operates airlines in several Latin American countries, including Brazil, Chile, Colombia, Ecuador and Peru. Its services include domestic and international passenger flights, along with cargo transportation through its cargo businesses.

LATAM Airlines Group was formed in 2012 through the merger of Chilean airline LAN and Brazilian airline TAM.

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