Latin America Airfinance Conference

Transcription

1 13 th Annual Latin America Airfinance Conference September 2017 Belmond Copacabana Palace, Rio de Janeiro, Brazil Andres Del Valle Senior Vice President Corporate Finance LATAM Airlines Group From Financial Strength to Competitive Excellence Sep 2017

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.

3 One of the largest airline groups in the world Pax transported 2016 (mm) Biggest airline in Latin America, 13 th worldwide Best Airline in South America Skytrax DJSI World category for 4 th consecutive year Latin American airlines Sources: Bloomberg, company s websites (Data as of December 31, 2016) 3

4 Presence in 5 continents, 25 countries, 135 cities 4

5 Unique network and connectivity in Latin America ~50% regional market share, ~96% domestic capacity Hubs: Sao Paulo Lima Santiago Brasilia Partnerships: Oneworld AA IAG Loyalty program: 30 mm members Over 43 thousand employees across 25 countries 5

6 The Company has developed diversified sources of revenue LTM Revenue by Business Unit LTM Revenue by Point of Sale Cargo 11% Others 6% APAC & Other Latin America 8% Colombia 4% Peru 7% Ecuador 2% Domestic SSC 16% Domestic Brazil 23% International 44% Europe 7% U.S.A 10% Argentina 12% Chile 16% Brazil 34% Total = US$9,840 mm Total = US$9,840 mm Data as of June 30, 2017 Source: LATAM s published Financial statements and public Company filings 6

7 LATAM has strengthened its financial position Cash & Cash equivalents (US$ million) June 30, 2017 June 30, 2016 vs. 1H 2016 Cash & cash equivalents 1,706 1, RCF & commited credit lines Liquidity (1) 21.1% 13.4% +7.7pp Net Debt 6,987 7, Leverage Adjusted Net Debt 11,189 11, EBITDAR(LTM) 2,134 1, Leverage (2) 5.2x 5.9x -0.7x Fleet Fleet commitments ,027 2,065-1,038 Fleet by the end of (1): % of last twelve months revenues. Includes RCF. (2): Adjusted for the capitalization of operating leases (7x yearly expense) 7

8 The Company rightsized its fleet plan Fleet plan Fleet commitments (US$ million) US$402 mm reduction (1) US$636 mm reduction (1) US$448 mm reduction (2) 13 aircrafts ,950 4 aircrafts aircrafts 701 1, Freighter Wide Body Narrow Body (1): Since last conference. (2): Compared with fleet plan as of March

9 Fleet Deliveries Plan (US$) 763 mm 3 x A321neo 326 mm 2 x A320neo S&LB B787-9 S&LB B787-9 RENTAL OPERATING LEASE FIN. LEASE mm 3 x A320neo S&LB 2 x A S&LB OPERATING LEASE mm 2 x A321neo 4 x A320neo FINANCIAL LEASE 378 mm 2 x B787-9 S&LB A S&LB OPERATING LEASE 2019 A321ceo 3 x A320neo 3 x A TO BE FINANCED 9

10 Financing Highlights LTM Σ US$2,353 mm Margin Loan MULTIPLUS US$200 mm PDP Financing Facility US$260 mm Mortgage Loan US$50 mm QATAR Capital Increase US$608 mm Junior Loan Financing US$45 mm 7 yrs. Unsecured Bond US$700 mm EETC Tranche C US$140 mm Local Bond Chile US$350 mm First Issuance 2016 sep sep oct nov nov dic jan feb feb mar mar abr apr may jun jun jul jul ago aug 2017 Secured Unsecured PDP Financing Equity Increase 10

11 LATAM s Unsecured Bonds Liability Management US$ % US$ % US$ % Sep 2016 Issued April 6, 2017 TAM 2017 Fully Repaid April 30, 2017 LATAM 2020 Issued August 17, 2017 TAM 2021 Sep 2017 Called September 1st, 2017 Extended Debt Maturity Lowered Cost of Debt Sep 2016 LATAM 2024 US$ % LATAM 2020 US$ % Sep 2017 LATAM 23/ 28 US$350 mm Chile Local Bond Issuance 11

12 The Company has improved its debt repayment profile (US$ million) 1, , , , Aircraft Loans Bank Loans Public Obligations Secured Bonds Debt amortization profiles do not include revolving short term debt nor PDP Financing 12

13 And improved liquidity and leverage during Liquidity (1) and Leverage Position (2) (US$ million) 5,8x 5,3x 5,2x 5,2x 13% 19% 21% 22% 2,081 2,156 1, , ,486 1,706 1, Cash and Cash Equivalents RCF Drawn Commitments RCF Undrawn Commitments 2Q16 4Q16 2Q17 2Q17 Proforma Cash and Cash Equivalents RCF Drawn Commitments RCF Undrawn Commitments (1): Liquidity: Cash plus RCF / Revenues LTM (2): Leverage: Adjusted Net Debt / EBITDAR LTM 13

14 Also seeing improvements on the operational side Operating Revenues (US$ bn) EBIT (US$ mm) Net income (US$ mm) % % 5.1% +0.9 pp EBIT Margin 6.0% 5.0% -0.8 pp 4.2% +US$249 mm in higher fuel prices (72) % H6 1H H16 1H H16 1H17 Source: LATAM s published Financial Statements 14

15 Positive unit revenue trend across all businesses 1H17 vs 1H16 System Capacity Capacity Traffic Load Factor RASK (US cents) International (Long Haul & Regional) Domestic Brazil 26% 56% +3.8% -6.9% +5.6% -7.8% 86.8% (+1.5 p.p.) 81.1% (-0.8 p.p.) 5.9 (+6.9%) 6.3 (+20.5%) BRL 1H17:+3.1% SSC Domestic 18% +0.1% -0.6% 80.9% (-0.6 p.p.) Passenger +0.1% +0.8% 84.3% (+0.6 p.p.) Cargo -9.7% -3.7% 53.4% (+3.3 p.p.) Source: Public Company filings and quarterly financial press release 7.1 (+2.4%) 6.0 (+8.8%) 16.9 (+5.4%) 15

16 Proactive capacity management driving load factors and pricing Latin America real GDP growth (1) LATAM ASK growth LATAM passenger load factor (1.0%) 0.6% 84.2% 1.0% 1% - 3% Guidance 84.3% (2) Capacity (ASK) 3% 1% 0% 0% 0% -1% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Passenger unit revenue growth (YoY) 8% 8% 10% -1% -19% -14% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 (1): IMF as of July 2017 (2): YTD as of June

17 Proactive capacity management Brazil domestic Brazil real GDP growth (1) LATAM Brazil ASK growth LATAM Brazil passenger load factor (3.5%) (11.5%) 82.3% 0.3% -(3% - 1%) Guidance 81.1% (2) Capacity (ASK) -4% -8% -11% -10% -14% -13% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 Passenger unit revenue growth (YoY) 35% 25% 16% 9% -25% -10% 1Q16 2Q16 3Q16 4Q16 1Q17 2Q17 (1): IMF as of July 2017 (2): YTD as of June

18 Better macroeconomic conditions YTD Currency Appreciation (1) BRL/USD 4.9% 8.7% 3.3% CLP/USD COP/USD GDP in Brazil 1.3% 0.1% 0.3% -3.8% -3.6% E 2018E 2017 Estimated GDP in South America PEN/USD 3.8% ARS/USD -7.9% Argentina: 2.2% Chile: 1.5% Colombia: 2.3% Ecuador: -1.6% Peru: 2.7% (1): As of Sources: Bloomberg & IMF (July, 2017) 18

19 Region attracting new competitors Main carriers as of September, 2016 New competitors International front: 19

20 Taking right steps to consolidate leading position in the region Best Network Cost Competitiveness New Domestic Business Model Enhanced Customer Experience 20

21 Network: Strengthening hubs and starting point-to-point routes on domestic markets 2017 Domestic routes Already operating Announced Airlines Colombia Airlines Brazil Brazil Chile Belo Horizonte - Fortaleza Concepción - Antofagasta Airlines Ecuador Belo Horizonte - Vitoria Concepción Punta Arenas Brasilia Foz de Iguaçu Curitiba Foz de Iguaçu Colombia San Andrés - Cartagena Airlines Peru Fortaleza - Manaus Medellín Santa Marta Sao Paulo (GRU) Rio de Janeiro (SDU) Sao Paulo (GRU) Londrina Sao Paulo (GRU) Joinville Río de Janeiro - Goiânia Medellin- Barranquilla Cali Cartagena Peru Lima - Jauja Airlines Chile Airlines Argentina Cusco Trujillo - Point-to-point domestic routes 21

22 Network: Improving international by adding new routes and building strategic alliances 2017 International routes 6 Europe LIM Others Already operating Cartagena Mendoza Tucumán Río de Janeiro San José (Costa Rica) Río de Janeiro - Orlando Brasilia Punta Cana Announced Santa Cruz Rosario SCL Joint Business agreements (1) Tucumán Neuquén San Juan Melbourne 9 North /Central America & Caribbean 3 LIM SCL BSB GRU South America 116 Africa 1 Enero Oceania LATAM Destinations JBAs (1): Subject to regulatory approval Source: Public Company filings and press releases) 22

23 Costs: Focus on increased productivity Employees/Aircraft (1) # Aircraft and Average Seats 52, % 49, # Employees (average) 43, Narrow Body Fleet Avg. # Seats NB Wide Body Fleet Avg. # Seats WB # aircraft Q E 2018E 2019E One-time costs 2016: US$58 mm in aircraft re-deliveries, and US$89 mm in severance payments (1): Average number of employees divided by operating aircrafts 23

24 New domestic business model: Increase competitiveness vs. ULCC More growth Sustainable margins Lower costs More capacity Lower fares More ancillaries More passengers Source:LATAM website ( and press releases 24

25 New domestic business model: Buy-on-Board and New Sales Model implemented in our domestic markets 5 million passengers already tried the Buy-on-Board service 2 million passengers flying under the new sales model 25% of daily passengers in SSCs flying with discounted fares 449 self attendance kiosks for check-in and to check baggage 71 airports with self attendance kiosks 25

26 Customer experience: A culture built around the client Digital Airport FFP Operational excellence 26

27 Summary Strengthened balance sheet position Improving operating results Addressing new competitive landscape Unmatchable network Cost Competitiveness New Domestic Business Model Customer Experience 27

28 13 th Annual Latin America Airfinance Conference September 2017 Belmond Copacabana Palace, Rio de Janeiro, Brazil Thank you Andres Del Valle Senior Vice President Corporate Finance LATAM Airlines Group (56-2) Sep 2017