Santander 20 th Annual Latin America CEO Conference Cancun, January 2016

Transcription

1 Santander 20 th Annual Latin America CEO Conference Cancun, January 2016

2 This presentation may include forward-looking comments regarding the Company s business outlook and anticipated financial and operating results. These expectations are highly dependent on the economy, the airline industry, commodity prices, international markets and external events. Therefore, they are subject to change and we undertake no obligation to publicly update or revise any forward looking statements to reflect events or circumstances that may arise after the date of this presentation. More information on the risk factors that could affect our results are contained on our Form 20-F for the year ended December 31, Information, tables and logos contained in this presentation may not be used without consent from LATAM Airlines Group S.A. 2

3 LATAM Business Model 3

4 LATAM is the largest airline group in Latin America Unique regional platform provides LATAM with an exceptional advantage Dom. Colombia 19% market share #2 Dom. Ecuador 37% market share #1 Dom. Brazil 38% market share #1 Dom. Peru 63% market share #1 6 Home markets (~90% of regional traffic) ~50% Market share intra-regional flights 3x its next competitor in terms of revenues Dom. Chile 78% market share #1 Dom. Argentina 27% market share #2 Company estimates, December

5 Investment Highlights Unique regional network with presence in 6 Home markets World class airline operator LATAM Airlines compares to largest international carriers 3x its next largest South American competitor in terms of revenues Strong market position in countries with high growth potential Number 1 or 2 in all the Home markets where LATAM operates 4 different business units with presence in 6 different countries Compared to developed countries, Latin America has low trips per capita rates Diversified business operations Solid long term hub strategy (Santiago, Lima, Brasilia, Sao Paulo) Strong long term traffic growth expectations for the region Low cost business model in all of LATAM s domestic operations Flexible and comprehensive business strategy Maximize efficiency and cost reductions Capture the preference of customers Best network of destinations One of the most modern fleets in Latin America and in the World Average fleet age of ~7.0 years One of the first airlines in the region to start renewing its fleet Lower unscheduled maintenance costs and lower fuel consumption 5

6 Diversified Business Units International Passenger LTM Rev 41% Domestic Brazil LTM Rev 26% Domestic SSC 1 LTM Rev 17% 24 destinations 13.9 million passengers US$ 4.4bn LTM 40 destinations 33.2 million passengers US$2.8bn LTM LATAM Airlines Group 71 destinations 5 countries 21.4 million passengers US$ 1.8bn LTM Cargo LTM Rev 13% FFP 143 destinations 1.0 million tons US$ 1.5bn LTM Multiplus 2 : 13.8 million members Lanpass: 9.8 million members Total Revenues 3 US$ 10,824 mm Note: Information for LTM September 30 st, 2015 (1) The group of Spanish Speaking Countries SSC is composed of Chile, Argentina, Peru, Colombia and Ecuador (2) Multiplus is 73% owned by LATAM. (3) Revenues include total operating revenues and other operating income. Breakdown of passenger revenues are Company estimates 6

7 Latin America Continues to Offer Significant Growth Potential Passenger traffic growth estimates* (RPKs ) Trips per capita 2014** 6.2% 6.1% 6.0% 5.7% World Average 4.9% Ecuador 0.50 Argentina 0.50 Peru % 3.7% Mexico % Brazil Colombia Chile USA 2.68 UK 3.73 Middle East Asia Pacific Latin America Africa Europe CIS North America (*) RPKs to, from and within the continent, according to Boeing as of December (**) Domestic and international trips by all carriers. Source: Boeing, IATA and LATAM estimates. 7

8 One of the Most Modern Fleets in Latin America and the World LATAM is one of the first airlines in the region to start renewing its fleet The average age of LATAM s fleet is approx. 7.0 years, making it one of the most modern in Latin America and in the world Modern fleet allows for lower unscheduled maintenance costs, lower fuel consumption, and operational and cost efficiencies achieved through operating fewer fleet types Flexible fleet arrangements to respond to market conditions Short Haul Long Haul Seats 3Q Dash Q A A320/N A321/N Total 239 Seats 3Q A B B787-8/ B A B Total 74 98

9 LATAM defined its strategy and aspiration Be the leading airline group in South America and one of the top airline groups in the world Network leadership Customer experience Cost competitiveness We are the best and most convenient option for customers because we offer more destinations with better schedule and competitive price Customers want to choose us because of our customer experience and of what our brand stands for Competitors can t afford pricing us out of existing markets or keep us away from new markets Strengthening the use of regional hubs Strengthen partnership and alliances Manage our fleet models best suited for each market Focus on increasing NPS Focus on generating one brand Reaffirm cost competitiveness Consolidate cost improvement culture 9

10 Network: Strengthening the use of regional hubs Strengthening the use of regional hubs Map of LATAM s hubs Sao Paulo Lima Barcelona Toronto (Via NYC) Cancun Antofagasta Orlando Montevideo Bogota North East Punta del Este Washington Bogotá (Direct flight) Orlando (A350 XWB) Johannesburg Lima Brasilia Sao Paulo Brasilia Orlando Buenos Aires Punta Cana Santiago Milan (Via GRU) Santiago LATAM hubs Connecting flows 10

11 Customer Experience: Continuous Improvement Airport Digital Check-in unification implemented at our 10 main airports Self bag tag is being tested in two airports (GRU,BSB) VIP Lounge: GRU, BOG, EZE, SCL Contingency and Contact Center Wireless entertainment system for personal devices in 131 aircraft. We expect to complete the implementation in all of our narrow body fleet by 1Q16. New Brand implementation Live Chat now available in flights from SCL, LIM and BOG Flight Status available in LAN.com and LAN APP Visibility starting 2016 Process of implementation over a 3 year period 11

12 Costs: Realistic Cost Reduction Target of ~5% of Total Operating Costs from Work Fronts Fuel, Fees,& Fleet Operational Labor Overhead Procurement Distribution & Commissions TOTAL Other Crews Contact Center Main Cost Saving Drivers Fuel Efficiency Initiatives Supply Chain Efficiency Project Simplification Project Total Cost of Ownership Passenger Service System Channel Mix Financial and Others Cost Saving Target (%) 2% 7% (3-10%) 20% (15%-25%) 7% 8% 18% 5% 12

13 Financial Results 13

14 3Q15 Financial Summary (US$ Millions) 3Q15 3Q14 Change 9M15 9M14 Change Total Operating Revenues ,9% ,6% Passenger ,8% ,1% Cargo ,5% ,8% Total Operating Costs ,8% ,4% Operating Income ,9% ,1% Operating Margin 4,8% 3,8% 1,0pp 4,7% 2,6% 2,1pp Net Income ,1% ,4% EBITDAR ,8% ,6% EBITDAR Margin 19,4% 16,0% 3,4pp 18,9% 14,8% 4,2pp 14

15 Revised fleet commitments Fleet Commitments, January 2015 (20F 2014) Ʃ ( ) =US$7,7bn Current Fleet Commitments¹, November ,022 Ʃ ( ) =US$5,9bn Fleet Commitments Reduction (US$mm) ,845 ¹The plan above may vary as the Company advances with its ongoing negotiations. 15

16 LATAM s revised fleet plan Total aircraft at the end of the year¹² aircraft -20 aircraft +26 aircraft -10 aircraft Fleet Commitments (US$mm) Narrow Body Wide Body Freighters 1,688 2,000 1,849 ¹This fleet plan doesn t include three Fs and one F that LATAM is currently leasing to a third party. ² The plan above may vary as the Company advances with its ongoing negotiations. 16

17 Credit Metrics Adjusted Gross Debt / Adjusted EBITDAR Adjusted Net Debt / Adjusted EBITDAR 7,9x 7,2x 6,1x 6,2x 5,9x 4,9x 5,4x 5,2x 2012* Sep'15 LTM Adjusted EBITDAR / Interest Exp. & Rents 2012* Sep'15 LTM Cash and Cash Equivalents as % of Revenues US$1,5Bn 1,8x 2,4x 2,1x 2,1x 8,5% 19,3% 12,3% 14,2% 2012* Sep'15 LTM 2012* Sep'15 LTM (*) 2012 ratios were calculated with the pro-forma EBITDAR and Revenues published in LATAM Airlines press release as of Dec 13 17

18 Significant Portion of Financial Liabilities was used to Finance Fleet Renewal Total debt by type as of September 30, 2015 Total debt by currency as of September 30, ,9% 5,1% Aircraft loans PDP 14,7% Public obligations 5,7% 67,7% Bank loans Other loans * 100% USD ** Total Debt: US$8,8mm Debt maturity profile (US$MM) as of September 30, 2015 Secured debt Unsecured debt PDPs >2020 Source: Company filings (*) Other loans includes the Guaranteed bond. (**) USD denominated debt includes a cross currency swap from CLP to USD 18

19 LATAM s FX and Fuel Risk Exposure LATAM has hedged 36% of its estimated fuel consumption for the next twelve months 63% Portfolio 2015 Portfolio % 27% 16% 11% 1Q16 2Q16 3Q16 4Q16 LATAM FX rate composition (%) Operating exposure 1 Others BRL USD 100% 100% 13% Others 12% 29% BRL 23% 58% USD 65% Gap between revenues and costs in BRL of 6 p.p., approximately US$800 mm. The Company has a financial hedge of US$270 mm at an average rate of BRL 3,95 per USD. Revenue Cost 1. Company estimates as of December,

20 Guidance 2015 and 2016 Guidance ASK Growth International (Long Haul & Regional) 4% - 6% 4% - 6% Brazil Domestic (4%)-(2%) (9%) (6%) SSC domestic 4% - 6% 6% - 8% TOTAL 2% - 4% 0% - 3% ATK Growth (2%) - 0% (2%) - 0% Operating Margin ~3.5% / 5.0% ~4.5% / 6.5% Assumptions Average exchange rate BRL/USD 4.25 Jet Fuel Price (US$/bl) 52 LATAM will review its guidance on a quarterly basis to incorporate any important changes in macroeconomic variables or operating performance. 20

21 Annex:Business Units 21

22 International Passenger Business Unit Market Facts Operations 4.4 $ LTM revenues (US$ Bn) % of Total revenues 41% Weak demand in Brazil is offset by adjusting points of sale mix within the region in order to focus on the markets with stronger demand. Passengers (MM) Change (%) % of Total ASKs % 52% Focus on strengthening the use of our regional hubs and our routes to the Caribbean. Highly competitive markets. Strengthen our network through alliances with key partners. Capacity (ASK millions) Unit Revenue (RASK US$ cents) Market Share (%) US S. America 21% Europe-S. America 11% CAGR +0.1% % y-o-y 5.7% y-o-y (13.2%) ,9 7,9 7,6 6, Nov' Sep'15 22

23 Domestic Brazil Passenger Business Unit Market Facts Operations $ % of Total revenues 26% Weak corporate demand and weak GDP growth expectations in Brazil. LTM revenues (US$ Bn) 2.8 Depreciation of the Brazilian real. Passengers (MM) Change (%) % of Total ASKs % 32% Adjusting the domestic network and reducing domestic capacity by approximately 8% to 10% by year-end. Continuous strengthening our hubs in Brasilia and São Paulo/Guarulhos. Capacity (ASK millions) /-4% Unit Revenue (RASK US$ cents) Market Share (%) 37% y-o-y -1.7% y-o-y ((30.3%) ,8 9,2 8,6 6, Nov' Sep'15 23

24 Spanish Speaking Countries ( SSC ) Passenger Business Unit Market Facts Operations $ % of Total revenues 17% Demand growing at a moderate pace. LTM revenues (US$ Bn) 1.8 Depreciation and volatility of local currencies. Passengers (MM) Change (%) % Yields showing improvements when measured in local currencies as compared to % of Total ASKs 16% Capacity (ASK millions) Unit Revenue (RASK US$ cents) CAGR 7.2% % Market Share (%) Argentina Chile Colombia Ecuador Peru 27% 78% 19% 37% 63% y-o-y 4.9% Nov'15 10,2 9,6 9,1 y-o-y (7.5%) 8, Sep'15 24

25 Cargo Business Unit Market Facts Operations 1.5 $ LTM revenues (US$ Bn) % of Total revenues 13% Tons (MM) Change (%) % Weak cargo markets, especially in the Brazilian domestic and international market. Pressure on yields as a result of the competitive scenario and currency depreciation, mainly Brazilian real and the Euro. Focus on maximizing the belly utilization of the passenger fleet. Market Share (%) US Latin America 39% Capacity (ATK millions) Unit Revenue (RATK US$ cents) Europe-Latin America Domestic Brazil 24% 54% /0% y-o-y (-2,0%) y-o-y (19.4%) ,4 24,3 23,7 18, Nov' Jun'15 25

26 Thank you LATAM Airlines Group Investor Relations Santiago, Chile (56-2)