J.P. Morgan 9 th Annual Global Emerging Markets Corporate Conference Miami, February 2018
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, 2016. Information, tables and logos contained in this presentation may not be used without consent from LATAM Airlines Group S.A.
LATAM at a glance: Latin America s leading and largest airline Leading network and platform in Latin America, with hubs in Sao Paulo, Lima and Santiago 137 destinations in 24 countries, 67mm passengers transported during 2017 ~2x the size of our next regional competitor in terms of passengers (1) Unparalleled strategic partnerships (oneworld, AA, BA, IB, Qatar) (2) provide support and expand reach globally Leading frequent flyer and loyalty programs More than 30 million members ~2.5x the size of our next regional competitor in terms of members (1) Almost half of the passengers in South America fly LATAM Source: Public Company filings. (1) Compared to Gol. Gol s Smiles loyalty program has 13 million members. (2) American Airilnes, British Airways, Iberia and Qatar Airways 3
Fleet: One of the most modern in Latin America & the world ~7.9 years average age Our fleet 307 aircrafts 6 9 8 2 5 11 4 1 10 1 2 3 4 Seats 3Q17 Plan 2018 Airbus A319 144 47 46 Airbus A320 156-174 130 119 Airbus A320 neo 174 2 10 Airbus A321 220 47 49 - Airbus A321 neo 220-2 5 6 7 8 9 Short Haul Total 226 226 Long Haul Seats 3Q17 Plan 2018 Airbus A350 348 3 9 Boeing 767 221-238 36 35 Boeing 787-8 247 10 10 Boeing 787-9 313 14 14 Boeing 777 379 10 8 Total 73 76 Cargo 3 7 10 11 Cargo capacity 3Q17 Plan 2018 Boeing 767F 53 tons 7 10 Boeing 777F 103 tons 1 - Total 8 10 4
Unique Leadership Position and Leading Regional Presence as a Key Competitive Advantage 1st 2nd AIRLINES CHILE 71% market share 1 AIRLINES BRAZIL 33% market share 1 AIRLINES COLOMBIA 23% market share 1 Market size 11mm Market size 91mm Market size 27mm AIRLINES PERU 58% market share 2 AIRLINES ARGENTINA 18% market share 3 AIRLINES ECUADOR 28% market share 3 Market size 12mm Market size 11mm Market size 3mm 1 Market Share (RPKs) : Jan-Dec 2017 (JAC Chile, ANAC Brazil) Jan-Nov 2017 (Aeronáutica Civil Colombia) 2 Market Share (Passengers): Jan-Dec 2017 (Ministry of Transport Peru) 3 Market Share (ASK) Jan-Dec 2017 (Diio.net for Argentina and Ecuador) 5
Unique Leadership Position and Leading Regional Presence as a Key Competitive Advantage South America North America & the Caribbean South America - Europe AIRLINES 19% market share 2nd AIRLINES 13% market share 3rd South America Asia Pacific Within South America AIRLINES 45% market share 1st AIRLINES 47% market share 1st Market Share (ASKs) information as of December 31, 2017. Source: Company s estimates 6
One of the largest airline groups in the world Passengers transported 2016 (million) 199 184 143 #1 Latin American airline in terms of passengers 125 120 115 110 102 101 97 80 73 67 63 56 52 51 47 45 43 41 38 35 34 34 33 32 32 29 29 25 24 21 20 19 18 18 15 15 13 Latin American airlines Data as of December 31, 2016 Sources: Bloomberg, company s websites 7
The Company has developed diversified sources of revenue LTM Revenue by Business Unit LTM Revenue by Point of Sale LTM ASK by Country Cargo 11% Domestic SSC 16% Others 5% Domestic Brazil 23% Internatio nal 45% APAC & Other Latin America 8% Colombia Peru 4% 7% Europe 7% U.S.A 9% Argentina 12% Ecuador 2% Chile 16% Brazil 35% Argentina 5% Perú 14% Chile 25% Colombia 3% Ecuador 2% Brazil 51% Total = US$9,966 mm Total = US$9,966 mm Total = 136,171 million ASK Data as of September 30, 2017 Source: LATAM s published Financial statements and public Company filings 8
Latin American airline market offers significant growth potential Latin America will grow in line with other emerging markets, and faster than Europe or the US RPKs growth 2017 2036 6.1% 6.0% 5.9% 5.8% World average 4.7% 3.7% 3.1% Latin America Africa Asia Middle East Europe North America Per-capita penetration of trips in Latin America is still low Trips per capita 2016 4,2 LATAM core markets 2,9 1,1 0,7 0,6 0,6 0,6 0,5 0,5 UK US Chile Colombia Mexico Peru Brazil Argentina Ecuador Data from World Bank, IATA and Boeing, together with the Civil Aeronautics institutions of the respective country. 1 Trips per capita 2015 for Ecuador 9
Consolidating LATAM as the leading airline in the region Network Leadership Domestic Business Model Customer Experience Cost Competitiveness 10
Latin America s Biggest Network 30 New Routes during 2017 and new destinations for 2018 2017 Domestic routes 2017 International routes Brazil Chile Belo Horizonte - Fortaleza Belo Horizonte - Vitoria Fortaleza - Manaus Sao Paulo (GRU) Joinville Sao Paulo (GRU) Londrina Sao Paulo (GRU) Rio de Janeiro (SDU) Sao Paulo (GRU) Uberlândia Sao Paulo (CGH) Bauru Concepción - Antofagasta Concepción Punta Arenas Colombia Cali Cartagena Medellín Santa Marta Medellin- Barranquilla San Andrés - Cartagena LIM GRU Cartagena Mendoza Tucumán Río de Janeiro Bariloche (1) SCL Melbourne Neuquén Orlando (1) Rosario San Juan Santa Cruz Tucumán Río de Janeiro (GIG) - Goiânia Peru Others Río de Janeiro - Orlando Cusco Trujillo (1) Lima - Jauja (1) Seasonal route 11
New domestic business model: Increase competitiveness vs. ULCC More growth Sustainable margins More capacity Increased utilization Larger aircraft Higher load factor More ancillaries First and second bag Changes / Flexibility Preferred seating Lower costs Lower sales costs Digital empowerment Buy on board Increased operational productivity Lower overhead costs Lower fares Up to 20% reduction of base fares More passengers 50% more domestic passengers by 2020 Source:LATAM website (www.latamailrlinesgroup.net) and press releases 12
A Culture Built Around the Client Customer-centric decision making. Focus on improving the client experience prior to, during and after the flight, through fast and efficient execution Digital Airport New app gives passengers control over their journey Self-serve kiosks for check-in and to check baggage Customer FFP Important source of differentiation and revenues centric Aircraft New cabins in wide body fleet to improve in-flight experience 13
Efficient cost structure increases LATAM s competitiveness 20% Headcount Reduction Thousands FTE Right-sized Fleet plan US$ million 4Q 2015 Plan 55 53 1,950 1.409 1.486 1,958 50 45 40-20% Dec Mar Jun Sep Dec Mar Jun Sep Dec Mar Jun Sep 2015 2016 2017 43 2016 2017 2018 2019 3Q 2017 Plan 1,950 326 US$2.6bn reduction 716 1,192 2016 2017 2018 2019 Source: Public Company filings. 14
Results reflect the resilience of our business model Operating Revenues (US$Bn) EBIT (US$mm) Net income (US$mm) -12.6% EBIT Margin FX Loss (US$) +1.9 pp +0.6 pp -130-468 +122 +133 +48 69 88 15 12,5 +6.3% 4.1% 6.0% 6.0% 5.4% +19.3% 10,1 9,5 7,0 7,4 513 514 568 373 445-110 -219 2014 2015 2016 9M16 9M17 2014 2015 2016 9M16 9M17 2014 2015 2016 9M16 9M17 Source: LATAM s published Financial Statements 15
Continuous improvement of credit metrics and fleet adjustments Cash & Cash equivalents (US$ Million) September 30, 2017 September 30, 2016 Changes Cash & cash equivalents 1,499 1,359 +140 RCF & commited credit lines 450 12 +438 Liquidity (1) 19.6% 14.6% +5.0pp Net Debt 6,671 7,729-1,058 Leverage Adjusted Net Debt 10,818 11,604-786 EBITDAR(LTM) 2,018 1,962 +56 Leverage (2) 4.9x 5.8x -0.9x Fleet Fleet commitments 17-18 1,042 2,076-1,034 Fleet by the end of 2018 312 321-9 (1) % of last twelve months revenues. Includes RCF. (2) Adjusted for the capitalization of operating leases (7x yearly expense) 16
Significant improvements on operating cash flow generation Free cash flow (1) (USD million) 902 643 614 335 LTM Dec '16 LTM Mar '17 LTM Jun '17 LTM Sep '17 Better operational results providing higher cash flows Positive impact from the negotiations related to our fleet plan (1) EBITDA + WK + Paid Taxes + Interest Income + Other Operating Activities Capital expenditures (including Pre-delivery payments) Intangible assets + Asset Sales 17
Improvement in liquidity and leverage Adjusted Net Debt (1) /EBITDAR LTM 5,8x 5,3x 4,9x 9.061 8.605 8.170 Dec 15 Dec 16 Sep 17 Total Gross Debt Adjusted Net Debt / EBITDAR Cash and Equivalents as % of LTM revenues 19,0% 19,6% 14,5% 1.811 1.949 1.466 325 450 105 1.361 1.486 1.499 Dec 15 Dec 16 Sep 17 Cash Committed Lines & RCF Debt by type as of September 30, 2017 Cost of debt as of September 30 th, 2017 6% 23% 13% 2% 57% Aircraft Loans Public Obligations Bank Loans EETC PDP Banks 3.4% PDP 4.0% Bonds 6.6% Fleet 3.3% WACD 4.1% (1) Adjusted for the capitalization of operating leases (7x yearly expense) 18
Debt Profile Comparative (1) Debt maturity (1) by September 30, 2016 1.544 906 1.120 1.440 1.105 573 501 370 207 141 331 33 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Secured Unsecured Debt maturity (1) by September 30, 2017 1.544 939 1.139 1.472 634 779 541 1.070 207 141 331 215 2017 2018 2019 2020 2021 2022 2023 2024 2025 2026 2027 2028 Secured Unsecured (1) Does not include PDPs nor Short Term Debt 19
Financial hedging strategy to protect medium term operational margin Fuel Hedge (% consumption) BRL Hedge (US$MM) Reduced exposure to floating rates U$3.0bn U$5.1bn 37% 20% 40% 44% 20% 100 100 100 60 2% U$0.1bn 62% 1Q18 2Q18 3Q18 4Q18 1Q18 2Q18 3Q18 4Q18 Fixed Floating w/ Hedge Floating 20
Guidance 2018 2017 2018 Guidance Passenger (ASK) International 4% 6% - 8% Domestic Brazil (4%) 2% - 4% Domestic Spanish Speaking Countries 0% 6% - 8% Total 1% 5% - 7% Cargo (ATK) (7%) 1% 3% Operating Margin (%) 6% - 8% 7.5% - 9.5% Source: Public Company filings 21
J.P. Morgan 9 th Annual Global Emerging Markets Corporate Conference Miami, February 2018