Upcoming AWS Coverage on Copa Holdings Post-Earnings Results

LONDON, UK / ACCESSWIRE / March 28, 2017 / Active Wall St. announces its post-earnings coverage on LATAM Airlines Group S.A. (NYSE: LFL). The Company reported its fourth quarter and fiscal 2016 financial results on March 15, 2017. The Chile-based, Latin America's largest airline surpassed earnings expectations. Register with us now for your free membership at:

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One of LATAM Airlines' competitors within the Regional Airlines space, Copa Holdings, S.A. (NYSE: CPA), reported on February 15, 2017, its financial results for Q4 2016 and full year 2016. AWS will be initiating a research report on Copa Holdings in the coming days.

Today, AWS is promoting its earnings coverage on LFL; touching on CPA. Get our free coverage by signing up to:

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Earnings Reviewed

LATAM Airlines total revenues in Q4 2016 totaled US$2.57 billion, up 6.7% compared to revenues of US$2.41 billion in Q4 2015. The growth was attributed to a 6.9% increase in passenger revenues, showed an improvement for the first time after nine consecutive quarters of passenger revenue decline. Additionally, revenues were boosted by a 54.2% increase in other revenues, which was partially offset by a decrease of 7.7% in cargo revenues. Total revenues for full year 2016 reached US$9.53 billion compared to US$10.13 billion in 2015.

For Q4 2016, LATAM Airlines' passenger revenues increased 6.9% as a result of a 7.6% increase in consolidated passenger unit revenue (RASK) offsetting the 0.8% capacity decrease when compared to Q4 2015. The RASK increase was driven by a 6.1% increase in yields, while load factors showed an improvement of 1.3 p.p. to 84.5%.

For Q4 2016, LATAM Airline net income increased from a loss of US$16.3 million in Q4 2016 to a gain of US$54.3 million in Q4 2016 mainly explained by an increase of US$46.0 million in the operating result as well as a US$50.0 million lower foreign exchange loss in the reported quarter compared with Q4 2015, partially offset by 42.2% decrease in the positive income taxes as compared to Q4 2015. The Company's earnings numbers surpassed analysts' consensus for net income of $8.5 million.

For FY16, LATAM Airlines reported net income of US$69.2 million compared to a net loss of US$219.3 million for FY15, showing a positive net income for the first time since 2011.

Spanish Speaking Markets

During Q4 2016, demand in the airline group's Spanish speaking country affiliates (SSC, which includes LATAM Airlines Chile, LATAM Airlines Peru, LATAM Airlines Argentina, LATAM Airlines Colombia, and LATAM Airlines Ecuador), which accounts for a 21.2% of total passenger revenues, grew 6.9% in passenger traffic as measured in RPKs. However, despite stable local currencies during the quarter, RASK continued to be under pressure mainly due to a weaker macroeconomic scenario.

Passenger capacity as measured in ASKs grew by 7.4% during Q4 2016, while load factors showed a decrease of 0.4 p.p. to 81.2%. In the domestic Brazil passenger operations, which represents a 28.9% of total passenger revenues, LATAM Airlines Brazil revenues per ASK increased by 34.8% in USD. Domestic capacity was reduced by 10.9%, while the airline group's capacity on international routes, which represents a 49.9% of total passenger revenues, increased by 2.2% during the quarter.

Expense Details

LATAM Airlines total operating expenses in Q4 2016 reached US$2.37 billion, down 5.2% on a y-o-y basis. This increase is explained by US$121.0 million of non-recurring costs associated mainly to fleet sales and redeliveries, severance payments, among others. Cost per ASK equivalent, excluding non-recurring costs, increased by 2.3% on a y-o-y basis.

LATAM Airlines fuel costs decreased by 2.8% in Q4 2016 primarily as a result of a 3.6% decrease in the gallons consumed during the period compared to Q4 2015 as well as a fuel hedge gain recognized during the reported quarter, which totaled US$4.4 million, relative to a US$40.5 million loss in Q4 2015, partially offsetting the 7.3% increase in the average fuel price per gallon (excluding hedge) compared to the prior year's same quarter. Commissions to agents increased by 11.5% mainly due to the negative impact of the 14.3% average appreciation of the Brazilian real in passenger commissions at LATAM Airlines Brazil, and in-line with the 6.9% increase in passenger revenues. Other rental and landing fees had increased by 3.4% as a result of a rise in aeronautical rates. Passenger service expenses increased by 4.6% despite the decrease of 1.0% in the number of passenger transported, attributed to a lower comparison base due to a reversal of US$3.7 million related to catering expenses in Q4 2015. Excluding this effect, passenger services declined 0.5%.

During Q4 2016 LATAM Airlines' Aircraft rentals increased by 11.5% as a result of the incorporation of more modern aircraft under operating leases. The Company had more Airbus A321s, Boeing 787s, and Airbus A350 this year while reducing the number of Airbus A320s, Airbus A330s, and Boeing 767s relative to the year ago comparable period, bringing the total number of leased aircraft to 110 in the reported quarter compared to 107 during Q4 2015.

Liquidity and Financing

At the end of Q4 2016, LATAM reported US$1.49 billion in cash and cash equivalents, including certain highly liquid investments accounted for as other current financial assets, equivalent to 15.6% of net revenue of the last twelve months. Furthermore, the Company´s liquidity position is also enhanced by US$325 million in undrawn revolving credit facility (RCF) line, which was wholly available as of December 31, 2016.

Additionally, on December 28, 2016, LATAM announced the successful conclusion of its capital increase, in which 60.8 million shares were subscribed at a price of US$ 10 per share, generating proceeds of approximately US$608 million with Qatar Airways completing its acquisition of 10% of LATAM.

Fleet commitments for 2017 amounted to US$469 million, all of which are pre-arranged operating leases, being the lowest amount in the recent history of LATAM. For 2018, the Company's fleet commitments have been substantially reduced to US$555 million, a reduction of US$1.04 billion compared with September 2016.

LATAM's financial debt during Q4 2016 totaled US$8.61 billion, down US$457 million compared to same period 2015. For FY17, the Company has debt maturities of approximately US$1.54 billion.

LATAM Fleet Plan

During 2016, LATAM Airlines took delivery of 24 aircrafts and returned 23 aircrafts, ending the year with an operating fleet of 329 aircrafts. By the end of 2017, the Company will operate a total fleet of 311 aircraft, and it will have 7 aircrafts under subleasing contracts.

Stock Performance

On Monday, March 27, 2017, the stock closed the trading session at $12.61, slightly down 0.71% from its previous closing price of $12.70. A total volume of 340.03 thousand shares have exchanged hands. LATAM Airlines' stock price surged 53.97% in the last three months, 53.78% in the past six months, and 86.81% in the previous twelve months. Moreover, the stock gained 54.16% since the start of the year. At Monday's closing price, the stock's net capitalization stands at $7.43 billion.

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