LATAM Airlines Group SA · BCS:LTM

LATAM Airlines Group SA — 9th Annual Andean Conference 2015

24 slides from LATAM Airlines Group SA's conference presentation, March 2015

  1. Slide 1: 9th Annual Andean Conference 2015

    9TH Annual ANDEAN CONFERENCE 2015 Santiago, March 2015

  2. Slide 2: Forward-looking statements disclaimer

    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

  3. Slide 3: LATAM is a leader in the South American airline space

    LATAM is a leader in the South American airline space LAN Colombia Bogota, 2010 TAM Airlines Sao Paulo, 1976 LAN Ecuador Guayaquil, 2003 LAN Peru Lima, 1999 LAN TAM Paraguay Santiago, 1929 Asuncion, 1996 LAN Argentina Buenos Aires, 2005  7 Home markets (~90% of regional traffic)  ~50% Market share

  4. Slide 4: In a region with high airline growth potential

    In a region with high airline growth potential Passenger traffic growth estimates1 Trips per capita 20132 (RPKs 2014–2033) 6.4% 6.3% 6.2% 5.9% Ecuador 0.46 World Average 5.0% Argentina 0.48 4.4% Peru 0.51 3.9% Mexico 0.51 2.9% Brazil 0.55 Colombia 0.61 Chile 0.94 USA 2.60 UK 3.60 Middle Asia Latin A

  5. Slide 5: Highlights 2014

    Highlights 2014 Restructured our balance sheet and reduced BRL exposure from 2.0 billion to 0.6 billion USD Restructured our fleet plan, focusing on modern aircraft with new technology. Fleet commitments reduced by 1.8 bn for the next three years (2016-2018) Arrival of five B787s and first flights t

  6. Slide 6: We want to be one of the three best airline groups in the world

    We want to be one of the three best airline groups in the world We are by far the best and most convenient option for customers because we offer more destinations with a better schedule Network leadership Customer Costs leadership We have the most efficient operations Customers want to choose us bec

  7. Slide 7: Building brand leadership and distinctive customer experience

    Building brand leadership and distinctive customer experience • Design for Narowbody Cabin - A321s and some A320s • Design for Widebody Unification - New cabin inspired on our new B787-9 with colors and textures of the region Unifying our Harmonization • TAM incorporares Premium Business customer’s

  8. Slide 8: Building brand leadership and distinctive customer experience

    Building brand leadership and distinctive customer experience Digital • +500.000 Downloads We value the time of our clients APP LAN and TAM • 20 countries • IOS - Android Flight Status in • More and better website and information. If we know it, you know it • Information in the event telephones of c

  9. Slide 9: US$ 650 million by 2018 cost savings

    Costs: We will focus on efficiency and cost reduction Saving target of the total cost of the item FUEL, FLEET & FEES OPERATIONAL Lean fuel – Supply chain COSTS efficiency Lean – Contact center 2% 7% DISTRIBUTION PROCUREMENT PSS - Channel mix US$ 650 Total Cost of Ownership 8% million 10% by 2018 OVE

  10. Slide 10: We are facing a weaker macroeconomic scenario in Latin America

    We are facing a weaker macroeconomic scenario in Latin America Slower GDP growth rates in Latin America* Strong currency depreciation** 4,3% 19,3% 2,8% 2,7% 15,0% 2,2% 1,3% 8,0% 5,2% 5,5% 2011 2012 2013 2014E 2015E 2011 2012 2013 2014E 2015E Increased competition from international carriers in the l

  11. Slide 11: LATAM's diversified operations

    LATAM’s diversified operations 39% FFP 13% International Passenger Multiplus: 24 destinations 13.8 million members Cargo 125 aircraft in operation 2.0bn market cap 13.6 million passengers 143 destinations US$5.0bn annual revenues Lanpass: 15 aircraft in operation 51% of total ASKs 9.8 million member

  12. Slide 12: Guidance 2015

    Guidance 2015 Guidance 2014A 2015E ASK Growth International (Long Haul & Regional) (2.4%) 4% - 6% Brazil Domestic (1.4%) 0% SSC domestic 3.6% 4% - 6% TOTAL (1.1%) 2% - 4% ATK Growth (5.6%) 1% - 3% Operating Margin 4.1% 6% - 8% Assumptions Average exchange rate (BRL/USD) 2.36 2.70 Jet Fuel Price (US$

  13. Slide 13: International Passenger Business Unit

    International Passenger Business Unit Operations LATAM Capacity (ASK) Traffic (RPK)  Smart growth through larger and more efficient -2.4% +1.2% aircraft 2015 +4-6%  New regional and long haul hub in Guarulhos Airport 55.274 55.951 67.162 65.530  Focus on product enhancement • Retrofit TAM’s Boein

  14. Slide 14: Domestic Brazil Passenger Business

    Domestic Brazil Passenger Business Operations TAM Capacity (ASK) Traffic (RPK)  Brazil is the third largest domestic market with low trips per capita -1.4% +1.1% 2015 0%  TAM is the leader in the market with 40%* market share and 33%** market share in the corporate 44.164 43.561 35.193 35.590 segm

  15. Slide 15: Strengthening TAM's domestic network by consolidating its hubs

    Strengthening TAM’s domestic network by consolidating its hubs BVB Brasilia is an attractive hub MCP BEL SLZ FOR MAO STM NAT  Strong local demand: 3rd largest market in MAB THE IMP JPA REC Brazil and highest GDP/capita in South America PMW MCZ RBR PVH AJU  Attractive geography for capturing flows

  16. Slide 16: TAM expects to add 4-6 regional airports per year

    TAM expects to add 4 -6 regional airports per year Brazil regional vs. non-regional airports TAM’s Regional strategy  Connect regional cities with hubs  Focus on better geographical competitiveness  Target cities with high GDP per capita, population and low air transport alternatives  Use effici

  17. Slide 17: Spanish Speaking countries Passenger Business Unit

    Spanish Speaking countries Passenger Business Unit Operations LATAM Capacity (ASK) Traffic (RPK)  Strong market shares* Chile 78% +3.7% +6.2% 2015 Peru 69% +4-6% Argentina 27% Colombia 19% 20.365 21.110 15.999 16.993 Ecuador 37%  Capacity allocation Colombia Chile 2013 2014 2013 2014 Ecuador 13% 3

  18. Slide 18: Cargo Business Unit

    Cargo Business Unit Operations LATAM Capacity (ATK) Traffic (RTK)  Focus on optimizing belly capacity (ATK) -5.6% +3.5% 2015 LAN LATAM +1-3% 30% 45% 4.317 4.467 7.652 7.220 70% 55% Belly Freighter 2013 2014 2013 2014  Rational and disciplined approach towards Load factor Unit Revenue (RATK US$) fr

  19. Slide 19: Financial results evolution

    Financial results evolution Operating Revenues (US$mm) EBITDAR (US$mm) Net income (US$mm) +0.3 % -6.0% EBITDAR Margin FX Loss (US$mm) +3.9 pp +0.2 pp +67 -482 -90 16.0% (110) 16.2% (281) 12.1% 13,222 13,266 (523) 12,471 2,127 2,026 1,600 2012 2013 2014 2012 2013 2014 2012 2013 2014 Source: Company f

  20. Slide 20: We have taken steps to reduce our currency exposure

    We have taken steps to reduce our currency exposure Operating exposure Balance sheet exposure  Gap between revenues and cost in BRL of 6pp  Balance sheet exposure reduced by:  Moving aircraft and related debt from TAM to  Financial hedge of US$325mm covering 1H15 BRL LATAM balance sheet exposure

  21. Slide 21: Fleet plan: Renewal, growth and efficiency

    Fleet plan: Renewal, growth and efficiency Short Haul Long Haul Seats 2014 2018 Seats 2014 2018 Dash Q200 37 7  A330 223 13  A319 144 52 - A340 260 3  A320/N 168-174 158 + B767 221-238 38 - A321/N 220 21 + B787-8/9 247-303 10 + Total 238 A350 348 0 + B777 363 10 -  A320 neo Cost per ASK is 6% lo

  22. Slide 22: Fleet plan: Renewal, growth and efficiency

    Fleet plan: Renewal, growth and efficiency Total aircraft at the end of the year 327 327 334 15 15 13 74 73 74 +23 aircraft +29 aircraft -23 aircraft -22 aircraft 238 239 247 2014 2015 2016 Narrow Body Wide Body Freighters Lower CASK Upgraded product 21 A321 36 A321 50 A321 10 B787 17 B787 + 1 A350

  23. Slide 23: Adequate liquidity level allowed debt reduction

    Adequate liquidity level allowed debt reduction Cash & equivalents Adjusted net debt / LTM EBITDAR 2,562 7.2x 173 1,534 5.4x 1,120 160 4.9x 121 2,389 1,374 999 4Q 2012 4Q 2013 4Q 2014 Dec 12 Dec 13 Dec 14 Available Cash Restrictive Countries Ending debt Total debt by type Bank TAM Loans Bond 5% 13%

  24. Slide 24: Conclusions

    Conclusions 1 LATAM is the South American airline best positioned to face volatility in the region 2 Disciplined approach to capacity 3 Leverage network as competitive advantage 4 Focus on cost efficiencies 5 Develop distinctive customer experience and value proposition 6 Maintain a new and efficien

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