Latin America’s biggest airline sees net income dive

Latam, formed by the tie up between Chile's LAN and Brazil's TAM, said net income for the quarter to March fell from the same period last year.

Latam Airlines planes at Santiago International Airport, Chile. The company has reported a slight decline in earnings. RIvan Alvarado / Reuters

Latam Airlines, Latin America’s largest airline, had a slightly smaller profit than expected in the first quarter as local currency appreciation and inflation raised costs, it said on Monday.

The airline, which was formed via a 2012 tie-up of Chile’s LAN and Brazil’s TAM, said net income was US$66 million in the three months to end-March, lower than a Reuters forecast for $71.9m. That represented a fall in net income from the first quarter of 2016, when the company reported a profit of $102m.

The company’s ebitdar margin, which is used to measure airlines’ profitability and cash flow, also fell slightly in yearly terms to 22.4 per cent from 25.4 per cent in the first quarter of 2016.

Latam’s operating revenues, however, increased 6.4 per cent in yearly terms to $2.477 billion. The company said currency appreciation that raised costs also helped raise income.

The airline said it was maintaining its previous guidance for a 2017 operating margin of between 6 and 8 per cent, as well as a previously announced reduction in its 2016-2018 fleet commitment by $2.2bn.

In March, the airline posted its first yearly net profit since the company formed four years ago, helped by improving conditions in key market Brazil.

* Reuters

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