LATAM Airlines Group SA · BCS:LTM
LATAM Airlines Group SA — Investor Day (October 2024)
76 slides from LATAM Airlines Group SA's investor day presentation, October 2024
Slide 1: Investor Day 2024
/ ~~ Ss LATAM A ” IRLINES INVESTOR DAY we 2024 S
Slide 2: Disclaimer
Disclaimer Neither the United States Securities and Exchange Commission (“SEC”) nor the Chilean Comisión para el Mercado Financiero (the “CMF”) nor any securities commission of any other U.S. or non-U.S. jurisdiction has reviewed, approved or disapproved of this Presentation, or determined that this
Slide 3: Today's presenters
Today's presenters Roberto Alvo Paulo Miranda Hernan Pasman Ramiro Alfonsin Chief Executive Officer Chief Customer and Chief Operating Officer Chief Financial Officer Experience Officer
Slide 4: Agenda
Agenda '1. Leading LATAM towards sustainable and profitable growth. Speaker: Roberto Alvo '2. Elevating the travel experience and delivering a world class product. Speaker: Paulo Miranda '3. Committed to exceptional operational performance Speaker: Hernan Pasman '4. Fleet expansion and financial str
Slide 5: Leading LATAM towards sustainable and profitable growth
Leading LATAM towards sustainable and profitable growth Roberto Alvo Chief Executive Officer
Slide 6: LATAM is the largest airline group in South America and the 10th largest worldwide
LATAM is the largest airline group in South America and the 10th largest worldwide Best-in-class product and Most comprehensive cargo service network in the region Growing base of Premium Travelers • #1 clear market share leader within • Largest air cargo carrier group in • 48mm+ members1 South Amer
Slide 7: LATAM group has an unparalleled and expansive passenger network
LATAM group has an unparalleled and expansive passenger network 149 Destinations Joint 8 26 Europe Venture Agreement Countries 12 North/ Central 38% + Commercial America Joint agreements Capacity Share with 57 airlines + Codeshare 125 Lima +25% agreements South Sao Paulo Average Daily with 27 airlin
Slide 8: LATAM group is more important to the South American region than any other full service carrier
LATAM group is more important to the South American region than any other full service, global carrier in its home market Q2 2024 Regional Market Share1 >2x >4x 42% 18% 17% 10% 9% 3 4 2 (Intra-South America) (Intra-North America) (Intra-Middle East) (Intra-Asia Pacific) (Intra-Europe) Top 3 Carriers
Slide 9: Significant cost reductions have enabled LATAM group to be extremely competitive
Significant cost reductions have enabled LATAM group to be extremely competitive Fleet Cash Cost CASK ex-fuel LTM 2Q-24 (US$ billion) (US$ cents) • Over $1.3 billion in annual durable cost +3% savings initiatives implemented during the restructuring process. Fleet 331 340 count +69% • Substantial pr
Slide 10: A reliable airline group driven by operational excellence and best-in-class product
A reliable airline group driven by operational excellence and best-in-class product LTM Q2 2024 Key Stats Total Revenue Adj. Net Leverage Operational and service excellence $12.7bn 1.9x +17% YoY Growth Profitable growth Adj. EBITDAR Adj. EBITDAR Margin $2.8bn 22.2% +37% YoY Growth Efficient operatio
Slide 11: Operating in an extensive and underpenetrated region with significant growth potential
Operating in an extensive and underpenetrated region with significant growth potential Trips per capita 20231 2.5 2.0 Underdeveloped and 0.6 under-penetrated market South America Western 2 North America Europe Limited connectivity and geographic barriers Trips per 0.45 1.14 0.60 0.86 0.47 capita Pop
Slide 12: South America has seen the recent exit of many airlines across geographies
South America has seen the recent exit of many airlines across geographies LATAM is the leading air carrier group Ongoing industry constraints Country Key Carriers OEM production ramp up challenged Amplified engine durability shortfalls Industry-wide supply chain challenges 12
Slide 13: LATAM affiliates continue to increase their respective market shares throughout the region
LATAM affiliates continue to increase their respective market shares throughout the region Today, almost one in every two passengers in South America flies with LATAM group LATAM is the leading air carrier group International Capacity Shares 38% 42% 1 # 34% 40% # 1 Within South America Airlines Braz
Slide 14: And LATAM group has the tools to continue its robust growth
And LATAM group has the tools to continue its robust growth Revenue Flexibility of Assets Superior Product Diversification Others Domestic Flexibility: Fleet can be Customer Preference: Delivering Cargo Spanish re-deployed from any geography to any premium quality without compromising Speaking other
Slide 15: Maintaining healthy financial metrics across the board
Maintaining healthy financial metrics across the board Adj. EBITDAR Liquidity Adj. Passenger CASK ex-fuel1 (US$ million) (US$ million) (US$ cents) 19.7% 23.9% 26.9% 3,403 * 2,816 2,815 2,533 2,212 2,059 4.2 4.3 4.2 2019 2023 LTM 2Q-24 2019 2023 2Q-24 2019 2023 LTM 2Q-24 Driving incremental profitabi
Slide 16: In summary, this is where LATAM group stands today
In summary, this is where LATAM group stands today A leader in financial strength within the region coupled with a highly Financial strength competitive cost structure driving shareholder returns. Relative financial and Unlike LATAM, most competitors in the region did not de-lever or operational sta
Slide 17: LATAM group is shaped by its people, driven by customers and powered by technology
LATAM group is shaped by its people, driven by customers and powered by technology A leader in financial strength within the region coupled with a highly Financial strength competitive cost structure driving shareholder returns. Relative financial and Unlike LATAM, most competitors in the region did
Slide 18: LATAM group's people are the cornerstone of its strategy
LATAM group's people are the cornerstone of its strategy Committed to taking care of customers Customer-driven focus on giving the best service Operational excellence to ensure punctuality and safety Always being fair, empathic, transparent and simple Professionals and Total employees Pilots Cabin C
Slide 19: Significantly improving customer metrics, while holding unit costs down
Significantly improving customer metrics, while holding unit costs down Strategic NPS & Adj. Passenger CASK ex-fuel1 (US$ cents) LATAM Premium Travelers LATAM Adj. Passenger CASK ex-Fuel Main competitors 42 31 21 +24pp vs relevant peers 7 4 0 4.1 4.2 2018 2019 2020 2021 2022 2023 2Q24 Source: LATAM
Slide 20: Which has allowed LATAM group to boost its premium revenue mix
Which has allowed LATAM group to boost its premium revenue mix LATAM Brazil's Corporate Revenue % of LATAM passengers flying Premium Share Cabins • LATAM's full service product includes premium cabin options on all flights. +11pp • Premium economy cabins 38% are considered the best in the region wit
Slide 21: Leveraging technology to improve revenue, customer service and costs
Leveraging technology to improve revenue, customer service and costs More passengers are completing their While experiencing a simpler, better- Which together with its relative size purchases with LATAM group served experience makes LATAM group one of the largest e-retailers in Latin America Convers
Slide 22: Which has also boosted the LATAM industry leading Frequent Flyer Program
Which has also boosted the LATAM industry leading Frequent Flyer Program Total LATAM Pass Members Segment flown by Segment flown by (millions) LATAM Pass members Elite members +60% 48 56% 51% 30 19% 13% 2019 Q3-24 2019 2024 2019 2024 Source: LATAM Airlines Group internal information. 22
Slide 23: Working every day to become more sustainable and a meaningful contributor to society
Working every day to become more sustainable and a meaningful contributor to society ENVIRONMENTAL MANAGEMENT CIRCULAR ECONOMY Certification of the Environmental Management System 97%* of single-use plastics under the standard of the voluntary IATA reduced from operations in Environmental Assessment
Slide 24: LATAM group's strategy rests on four solid pillars
LATAM group's strategy rests on four solid pillars A group dedicated and The only airline group in A financially strong and A sustainable group of focused on giving the the world that leads in healthy group of companies that best solution to its market share in its region companies embraces technolo
Slide 25: Elevating the travel experience and delivering a world class product
Elevating the travel experience and delivering a world class product Paulo Miranda Chief Customer and Experience Officer
Slide 26: LATAM group home markets are comparable to the US in population size
LATAM is a leading carrier group in a market of similar size to that of the United States Population 343 M LATAM group home markets are 26 comparable to the US in population size North America 2.5 335 M Trips per capita1 Brazil, Chile, Colombia, Ecuador, and Peru South America 0.6 Trips per capita1
Slide 27: The region projects an increase in passengers with even greater demand for premium products
The region projects an increase in passengers with even greater demand for premium products Latin America and Caribbean is projected to have a higher growth rate in air traffic growth compared to Europe and North America1. Latin American luxury market, expected to reach US$50 billion by 2032, offers
Slide 28: In a market ready to pay for premium travel, LATAM is the only global full service air carrier group
In a market ready to pay for premium travel, LATAM is the only global full service air carrier group Percentage of customers declaring they The only full service air carrier choose airline for experience group in the region +5pp vs 1H 2019 Global Network +0pp Domestic, regional and long haul vs 1H 2
Slide 29: Design pillars: Global reach with a human touch
Design pillars: Global reach with a human touch Care Choice Dependable PERZONALIZING AND BUILDING A OPERATIONAL RELIABILITY AND HUMANIZING WORLD-CLASS PRODUCT PERFORMANCE TRACKING THE CUSTOMER RELATIONSHIP Designing the next generation Excellence and consistency in our Developing true customer- cent
Slide 30: Customer NPS improved significantly, with greater gains for Premium Travelers
Customer NPS improved significantly, with greater gains for Premium Travelers NPS by year (points) Total NPS Premium traveler NPS Total NPS 1.6x Quality 54 57 vs 2019 Zone 52 50 pts 48 Premium Travelers NPS 33 31 1.8x vs 2019 2019 2023 1H-24 Source: Post flight survey. 30
Slide 31: Intelligently investing in sustainable, competitive in-flight improvements and Premium Cabins
Intelligently investing in sustainable, competitive in-flight improvements and Premium Cabins on all flights Business Class Flexible Premium Economy Wide Body Narrow Body Full Flat recline in all wide-body fleet. The best Domestic and Intra- South America product in New Seat Model “Suite Type” avail
Slide 32: Streamlining cabin configuration of narrow-body aircraft to enhance efficiency and flexibility
Streamlining cabin configuration of narrow-body aircraft to enhance efficiency and increase flexibility Smart capacity - Flexible Premium Economy Premium Economy Economy Increased Legroom Blocked middle seats Flexibility to Increase Premium Economy by Retrofit of the A320 family fleet simplified fro
Slide 33: Creative and innovative continuous process to deliver differentiated experiences
Creative and innovative continuous process to deliver differentiated experiences Audi partnership Personalizing at Scale used for boarding instead of buses* >6pp in NPS for passengers who boarded with the >10pp NPS of customers greeted Audi service by name *Only for Black Signatures (FFP highest tie
Slide 34: Elevating the experience for premium travelers in key hubs and select destinations
Elevating the experience for premium travelers in key hubs and select destinations LATAM group VIP lounges location Santiago, Chile signature lounge Best Lounge for Business Cabin in South America • 6 VIP Lounges owned • Signature lounge: Most premium offering >80pp customer satisfaction. 34
Slide 35: A world class loyalty ecosystem that optimizes customer behavior insights
A world class loyalty ecosystem that optimizes customer behavior insights for enhanced monetization opportunities • 30%+ Active Members (last 24 months). 48 million members1 • 60pp+ Customer Satisfaction (average 2024). • 25k+ Redeemed flights per day using miles >1.5 Million Elite (average 2024) eq
Slide 36: Top-tier partnerships drivers enhanced member engagement
Top-tier partnerships drivers enhanced member engagement 6 100+ Co-branded cards with leading Commercial partners banks in South America for every day opportunities Where: Ranked among the top #3 banks in each country 36
Slide 37: LATAM PASS adds value by increasing profit with any member
LATAM PASS adds value by increasing profit with any member, Elite members amplify this effect Profitability by Tier 4x 1.5x 37
Slide 38: Travelers recommending LATAM group over regional competitors
Travelers recommending LATAM group over regional competitors and a surge in premium and repeat customers Repeating customers in 6 months Comparative NPS LATAM vs South American Carriers1 (1H-24 vs 1H-19) All Customers 1.3x NPS Premium Travelers South American Carriers 2x 2018 2020 2022 2024 1) Anony
Slide 39: Focus on taking advantage of the latest digital advancements
Focus on taking advantage of the latest digital advancements to enhance efficiency and customer experience Voice Bot Results for pilot programs in Spanish-Speaking Countries In partnership with 30%+ retention, 85% response accuracy 50% more accurate transfer to agents Generative AI +20pp in customer
Slide 40: LATAM will continue focusing on smart investments to elevate customer experience
LATAM will continue focusing on smart investments to elevate customer experience Cabins VIP Lounges Check in New Business Class Suite Lima 2025 Signature Check In B787 Retrofits Guarulhos (São Paulo, Brazil) Santiago Airport 100% WIFI in Narrow Bodies Miami International (Miami, USA) Lima Airport Gu
Slide 41: Investing intelligently, customer driven: world class recognition
World Class Fundations • #2 On time performance Largest Global Carriers 2023/ Top 3 last 5 years • Mishandled baggage rate per 1.000 pax 3,4/ World 6,9 World Class • Best Airline in South America (3x) Investing • 5 Stars Global (2x) intelligently Premium Cabins in all Flights • Best Economy Class Ai
Slide 42: Committed to exceptional operational performance
Committed to exceptional operational performance Hernán Pasman Chief Operating Officer
Slide 43: A seamless & sustainable operation based on three core values
A seamless & sustainable operation based on three core values Safe Cost-effective Dependable Drives LATAM group toward a flawless execution 43
Slide 44: Every 54 seconds a LATAM group flight takes off
Every 54 seconds a LATAM group flight takes off 220,000+ ~1,600 Passengers Departures Every transported per day per day 54 sec. a LATAM group flight takes off 31 164 & Destinations Countries (5 cargo only) (15 cargo only) Connected per year Last twelve months as of September 2024. Network data as of
Slide 45: Arrival On-Time Performance consistently above 80%
Arrival On-Time Performance (OTP) consistently above 80% and ranked among the top 3 most punctual global airline groups1 % of flights arriving on-time2 Consistent delivery 89% 91% 87% 86% 82% 84% 80% 2018 2019 2020 2021 2022 2023 US Peers 2023 Average 1) Source: OAG, the ranking is done among the 20
Slide 46: Elevating execution standards to further improve customer experience
Elevating execution standards to further improve experience for LATAM group’s customers % of flights departing exactly on-time1 + 15 p.p 62% 47% 2018 2023 1) LATAM’s zero-delay tolerance OTP metric applied to departures by the exact minute of the departure time. 46
Slide 47: Operational excellence is part of LATAM group's culture
Operational excellence is part of LATAM group’s culture and a hard-to- replicate competitive advantage Ambitious goals: Leaders close to Building a every minute the operation machine of counts continuous improvement 47
Slide 48: LATAM group's lean culture: delivering cost-effective results
LATAM group’s lean culture: delivering cost-effective results Operational savings per year (US$ million) 1 2020 $180 1 More than 2021 $152 US$130 million 2022 $132 in incremental savings each year coming from operations 2023 $162 1) Between 2020 and 2021 LATAM group generated US$332 million in total
Slide 49: Implementing initiatives to continue enhancing efficiency and cost flexibility
Implementing initiatives to continue enhancing efficiency and cost flexibility Flexible asset management Incorporation of technology 49
Slide 50: Affiliates' flexible asset management
Affiliates’ flexible asset management: full commonality within the narrow-body and wide-body fleet in all markets 33 aircraft ~270 pilots ~250 mechanics Flexibility to re- allocate assets 8 aircraft ~90 pilots Interchange planes ~60 mechanics between affiliates 59 aircraft ~700 pilots Allows for the
Slide 51: Strength of in-house maintenance capabilities provides flexibility and independence
Strength of in-house maintenance capabilities provides flexibility and independence Sao Carlos Maintenance Base, Brazil Santiago Maintenance Base, Chile • Largest MRO in South America • 4 lines of production and 11 shops • 9 lines of production and 23 shops • 22 C-Checks annually2 • 122 C-Checks ann
Slide 52: Fleet modernization strategy based on commitment to sustainability
Enabling LATAM group to continue its fleet modernization strategy based on its commitment to sustainability OVH Screens Removal Project Aeroshark Project Annual impact: Annual impact: 506,000 gallons of fuel Reduction of more than 1% in fuel consumption Savings of US$1.8 million in fuel Savings of U
Slide 53: Transforming the way LATAM group performs maintenance
Transforming the way LATAM group performs maintenance Aircraft systems Strategic Supply monitoring Planning Chain • Predictive • Digitalization of the • Optimization of maintenance heavy maintenance inventory, avoiding avoiding AOG plan to reduce unnecessary (aircraft on ground) aircraft downtime pu
Slide 54: E-Mantto will contribute additional cost savings
E-Mantto will contribute additional cost savings Projected Savings (US$ million) 4 Supply chain optimization $102 Components $180 Strategic planning $78 Engines Health monitoring Original business Additional Total savings case savings More than $100 million in additional cost savings are projected i
Slide 55: Significant safety indicator improvement, maintaining safety as a core value
Significant safety indicator improvement, maintaining safety as a core value Reducing In-Flight Safety Risks Reducing Maintenance Safety Risks -76% -33% 2023 vs 2018 2023 vs 2018 Note: Measured by Safety Performance Index as the weighted count of recorded and validated operational safety events in t
Slide 56: Evolving from a reactive to a predictive safety management model
Evolving from a reactive to a predictive safety management model through technology 1 Aircraft systems Instruction process data data Weather forecast Crew report data data 2 Find patterns that can predict risks 3 Implementation of new policies and procedures that anticipate events before they occur
Slide 57: Fleet expansion and financial strength drive LATAM group toward sustainable growth
Fleet expansion and financial strength drive LATAM group toward sustainable growth Ramiro Alfonsín Chief Financial Officer
Slide 58: LATAM group has continuously strengthened its standing
LATAM group has continuously strengthened its standing Re-listed ADR's in the New York Stock Passengers transported Exchange +7% LTM 2Q-24 vs 2019 Increase in Sell Side coverage Adj. EBITDAR +27% Higher share trading liquidity than pre- LTM 2Q-24 vs 2019 pandemic Liquidity 1 Leaner cost of debt thro
Slide 59: Modern fleet with a significant portion of unencumbered aircraft
LATAM group has a modern fleet with a significant portion of unencumbered aircraft, serving as strategic assets Consolidated fleet overview Average age of fleet Approx. 11.5 22 Cargo 1/3 12.8 56 Wide Body 14.8 of our fleet is 16.0 341 unencumbered aircraft 263 Narrow Body Over ~50% US$1.2 billion of
Slide 60: The industry is experiencing less availability of aircraft and engines
The industry is experiencing less availability of aircraft and engines The pandemic Retirement of older fleet and lack of production during resulted in lasting pandemic issues for the industry Supply Chain affecting new aircraft deliveries OEM's new positions towards end of decade Long-term Lessors
Slide 61: Order book of more than 120 aircraft through 2030
LATAM group has secured an order book of more than 120 aircraft through 2030, supporting its future growth Order book from 2024-2030 85 • Over 80% of aircraft deliveries from 15 OEMs. 364 • All deliveries of new generation 354 339 aircraft. 22 • Supports up-gauging strategy 2 through incorporation o
Slide 62: LATAM's efficient fleet cash cost will remain a key strength
LATAM's efficient fleet cash cost will remain a key strength moving forward Fleet cash cost below market price Sustained fleet cash cost savings (US$ billion) (US$ billion) • Until 2029, 90% of the current fleet has pricing locked- • LATAM's current fleet cash cost is 40% lower than in. current mark
Slide 63: LATAM group is improving its guidance for 2024
LATAM group is improving its guidance for 2024 Full Year 2024 Current 2024 Guidance Updated 2024 Guidance Capacity % ASKs year over year 14% - 16% 15% - 16% Adj. Passenger CASK Ex-Fuel1 4.3 - 4.5 4.2 - 4.3 US$ cents Adj. EBITDAR US$ billion 2.75 - 3.05 3.00 - 3.15 Adj. Net Leverage2 1.6x - 1.8x 1.6x
Slide 64: Record capacity in 2024, with continued growth ahead
LATAM group achieves record capacity in 2024, with continued growth ahead Capacity (ASK) Mid-to-high single digits High-single digits 15%-16% 158 bn 2019 ASKs 137 bn 2023 2024E 2025E 2026E 64
Slide 65: LATAM has widened its cost advantages vs global full service carriers
LATAM has widened its cost advantages vs global full service carriers given its strong cost containment CASK ex-fuel vs global full service carriers (US$ cents) 8.1 7.0 +69% +56% 4.8 4.5 4.2 4.2 2019 LTM 2Q-24 LATAM Adj. Passenger CASK ex-fuel LATAM Cargo and others Adj. CASK ex-fuel Average Global
Slide 66: Dedicated to ensuring Passenger CASK-Ex Fuel is contained
Dedicated to ensuring Passenger CASK-Ex Fuel1 (US$cents) is contained Digital, Data and Business Fleet Technology simplification • Increased direct digital • Re-designed benefits for • Components and sale penetration employees Airframe in-sourced • Increased airport • Outsourced non-core • Narrowbod
Slide 67: Strong Adj. EBITDAR generation on the back of value proposition
Strong Adj. EBITDAR generation on the back of LATAM group’s value proposition Adj. EBITDAR (US$ Bn) Increase in customer preference for Passenger LATAM, supported by key 23% preference investments and evidenced in improving NPS 3.4 19% 3.0 Stronger revenues supported by Value higher proportion of Pr
Slide 68: Industry leading capital structure: powering LATAM's competitiveness
Industry leading capital structure: powering LATAM’s competitiveness Lowest net leverage for a widebody operator in the Improved liquidity Americas Adj. Net Leverage Liquidity 1.9x 27% of LTM revenues -2.1x vs 2022 +7pp vs 2022 Note: Adj. Net Leverage as of 2Q-24 and calculated as net debt divided b
Slide 69: Reduced Chapter 11 exit financing interest payments
LATAM has significantly reduced its Chapter 11 exit financing interest payments and has additional opportunities to do so in the near-term Interest payments on exit financing debt1 (US$ million) WACD ~11% ~8% ~7% (Total) ~118 ~38 ~320 ~205 ~165 2024E 2025E 2026E Pro forma 2 Chapter 11 exit financing
Slide 70: Recent refinancing leaves almost no medium-term maturities
The recent refinancing leaves LATAM with almost no medium-term maturities Financial debt1 amortization profile (US$ million) 270 2024 2025 2026 2027 2028 (1) Excluding fleet debt. 70
Slide 71: 2029 and 2030 maturities are callable in Q4 2025 and Q4 2026
2029 and 2030 maturities are callable in Q4 2025 and Q4 2026 respectively Financial debt1 amortization profile (US$ million) Callable as of October 2026 1,400 Callable as of October 2025 700 270 2024 2025 2026 2027 2028 2029 2030 (1) Excluding fleet debt. 71
Slide 72: Strong cash generation of more than US$1 billion in levered free cash flow expected
Strong Cash Generation of more than US$1 billion in Levered Free Cash Flow expected in 2025 Levered free cash flow (US$ billion) >$1.0 Improving margins $0.8 $0.7 Profitable growth Lowering interest expense 2023 LTM 2Q-24 2025E Note: Adj. Levered FCF calculated as the sum of net cash (outflow) inflo
Slide 73: Capital allocation: LATAM's strategic priorities
Capital allocation: LATAM's strategic priorities • Improving cost of debt through refinancing, enhancing balance sheet, in line with target of achieving a BB+ credit rating. • Adjusted net leverage below 2x, with a target of 1.7x. • Liquidity above 20%. Fu Gr Sh ng nd ow t ce tro ee Pr th lan n S of
Slide 74: Outlook for sustainable growth
Outlook for sustainable growth Given the current context, LATAM expects in 2025: Continue increasing capacity high single digits. Maintain its passenger unit cost ex-fuel1 in line (4.2 - 4.4 cents). Continue to grow adjusted EBITDAR above capacity growth. Adjusted net leverage2 at or below 1.7x. 1)
Slide 75: Takeaways
Takeaways 1 LATAM Today Tenth1 largest airline group in the world and the leading airline group in South America. Opportunities in A region poised for structural growth through expanding trips and GDP per capita. 2 the Region 3 Value Proposition Enhancing client experience and uniquely set up to cap
Slide 76: Investor Day 2024
/ ~~ Ss LATAM A ” IRLINES INVESTOR DAY we 2024 S