Bank of America Merrill Lynch Emerging Markets Corporate

Bank of America
Merrill Lynch
Emerging Markets
Corporate Conference
Miami, June 2016
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, 2015.
Information, tables and logos contained in this presentation may not be used without consent
from LATAM Airlines Group S.A.
LATAM Business Model
LATAM is the largest airline group in Latin America
Unique regional platform provides LATAM with a competitive advantage
Dom. Colombia
22% market share
#2
Dom. Ecuador
33% market share
#2
Dom. Brazil
37% market share
Dom. Peru
62% market share
#1
#1



6 Home markets (~90% of regional traffic)
~50% Market share intra-regional flights
3x its next competitor in terms of
revenues
Dom. Chile
75% market share
#1
Dom. Argentina
25% market share
#2
Data as of December 31, 2015
4
LATAM Airlines Compares to Largest International Carriers
Revenues 2015 (US$ billion)
50
40
30
20
10
0
10
EBITDAR 2015 Margin %
40%
30%
20%
10%
0%
Source: Bloomberg and Company filings.
1Air Berlin as of September 30, 2015
19%
5
LATAM has diversified sources of revenue
LTM Revenue by Business Unit
LTM Revenue by Point of Sale
Ecuador
2%
Colombia
4%
Others
4%
Peru
7%
Cargo
13%
International
43%
Domestic
SSC
18%
APAC &
Other Latin
America
7%
Brazil
33%
Europe
8%
U.S.A
11%
Domestic
Brazil
22%
Total = US$9,662mm
Data as of March 31, 2016
Argentina
11%
Chile
17%
Total = US$9,662mm
6
Latin America continues to offer significant growth potential
Passenger traffic growth estimates
Trips per capita
(RPKs 2015–2034)
2015 Growth
10.0%
8.6%
6.2%
6.1%
6.7%
6.0%
2.9%
5.1%
-
4.3%
World Average
4.9%
5.7%
3.8%
3.7%
Ecuador
0.50
Argentina
0.50
Peru
0.54
Mexico
0.55
Brazil
0.56
Colombia
3.1%
Chile
0.71
1.02
USA
UK
Middle
East
Asia
Latin
Pacific America
Africa
Europe
CIS
2.68
3.73
North
America
Includes domestic and international trips by all carriers (2014). (Boeing, IATA and LATAM estimates); “2015 Growth” represents actual figures published by
IATA
7
LATAM defined its strategy and aspiration
Be the leading airline group in South America and one of the top airline groups in the world
Network leadership
Customer experience
Cost competitiveness
We are the best and most convenient
option for customers because we offer
more destinations with a better
schedule at competitive prices
Customers want to choose us because of
our customer experience and of what
our brand stands for
Competitors can’t afford pricing us
out of existing markets or keep us
away from new markets
 Strengthening the use of regional hubs
 Focus on increasing NPS
 Reaffirm cost competitiveness
 Strengthening partnerships and
alliances
 Focus on generating one brand
 Consolidate cost improvement
culture
 Managing our fleet models best suited
for each market
8
Network: Strengthening the use of hubs
Key trends
Map of LATAM’s hubs
2016 New flights
Bogota
Sao Paulo
 Johannesburg
Lima






Washington D.C
Montevideo
Antofagasta
Salta
Rosario
Mendoza (2017)
North East
Lima
Brasilia
Sao Paulo
Santiago
LATAM hubs
Connecting flows
9
Network: Two new joint business agreements
American Airlines
IAG
10
Cost Initiatives: Our strategy is delivering results
CASK-equivalent1 (US cents)
-20.1%
6,2
6,1
2013
2014
-17.4%
4,8
5,1
4,2
2015
Q1 2015
Q1 2016
US$325 million in savings in 2015
CASK-equivalent1 ex –fuel (US cents)
-11.5%
4,1
2013
4,0
2014
-8.0%
3,6
3,6
2015
Q1 2015
Further operational labor
productivity
Efficiencies in overhead and
support functions, procurement and
administrative and selling expenses
New business model for our
domestic operations
3,3
Q1 2016
¹ASK-equivalent is the sum of passenger ASKs and the quotient of cargo ATK and 0.095 (including LAN and TAM cargo operations)
11
Customer experience: continuous improvement
Airport
 Check-in unification implemented at our 10 main
airports
 Self bag tag is being tested in two airports (GRU,BSB)
 VIP Lounge: GRU, BOG, EZE, SCL
Contingency and Contact Center
 Live Chat now available in flights from SCL, LIM and
BOG
 Flight Status available in LATAM.com and APP
Digital
 Wireless entertainment system for personal devices
in our narrow body fleet. New app that allows
passengers to be in charge of their own journey.
New Brand implementation
 Visibility starting in May 2016
 Process of implementation over a 3 year period
12
Financial Overview
LATAM consolidated financial results
Operating Revenues (US$Bn)
EBITDAR (US$mm)
EBITDAR Margin
13,3
-482 -130 -468 -205 +68
25.4%
19.5%
102
21.3%
-40
12,5
10,1
2.127
2,8
2013
FX Loss (US$)
+4.2 pp
+3.5 pp
16.0%
Net income (US$mm)
2014
2015
2.026 1.973
2,3
Mar'15 Mar'16
Source: LATAM Financial Statements
-110
2013
2014
2015
592
593
Mar'15
Mar'16
-219
-281
2013
2014
2015 Mar'15 Mar'16
14
LATAM Operating Statistics Q1 2016
System Capacity
Capacity
Traffic
Load Factor
Unit Revenue
(US Cents)
International
54%
(Long Haul & Regional)
Domestic Brazil
+9.4%
+10.5%
84.8%
(+0.8 p.p.)
5.7
(-21.1%)
+2.9%
in BRL
-8.4%
-8.9%
82.5%
(-0.5 p.p.)
5.0
(-24.6%)
+7.4%
+9.1%
83.7%
(+1.3 p.p.)
7.3
(-16.3%)
Passenger
+3.3%
+4.0%
83.9% (+0.6 p.p.)
Cargo
-3.4%
-9.8%
51.2% (-3.6 p.p.) 16.2 (-18.4%)
SSC Domestic
29%
17%
5.6 (-19.1%)
15
Outlook for 2016
Guidance
ASK Growth
2016
International (Long Haul & Regional)
Brazil Domestic
SSC domestic
TOTAL
ATK Growth
Operating Margin
3% - 5%
(10%) –(12%)
6% - 8%
(1%) - 1%
(2%) - (4%)
4.5% / 6.5%
16
Revised Fleet Plan 2016 - 2018
This Fleet Plan does not include an
expected further reduction of US$2.0$3.0 billion in fleet assets by 2018
(announced 1Q 2016)
11
10
76
76
+24 aircraft
8
8
81
82
+20 aircraft
-22 aircraft
345
336
329
327
+20 aircraft
-11 aircraft
-13 aircraft
240
243
247
255
2015
2016
2017
2018
Fleet Commitments
(US$mm)
1,689
Narrow Body
1,952
Wide Body
Freighters
1,409
1,486
17
LATAM financial ratios
Cash and Equivalents as % of LTM revenues
19,3%
2.532
2013
12,3%
13,4%
13,9%
1.534
1.361
1.340
2014
2015
Q1 2016
Adjusted Net Debt / Adjusted EBITDAR
4,9x
5,4x
5,8x
5,9x
2013
2014
2015
Q1 2016
18
Credit Ratings
B+
BB-
B1
Negative Outlook
Negative Outlook
Stable Outlook
Secured
Maturity
Amount (US$ MM)
LAN Secured (Guanay)
2020
450
BB-
BB
-
EETC Tranche-B
2023
176
-
BB+
Ba1
EECT Tranche-A
2027
845
-
BBB+
Baa1
Unsecured
Maturity
Amount (US$ MM)
TAM Capital 1
2017
300
B+
B+
-
LATAM 2020
2020
500
B+
B+
B2
TAM Capital 3
2021
500
B+
B+
19
LATAM Debt Profile
Debt by type as of March 31, 2016
21%
Debt by currency as of March 31, 2016
Secured Loans
79%
100%
Unsecured Loans
USD
Total Debt: US$9,3mm
Debt maturity profile (US$MM) 1
Secured debt
1The
4.106
Unsecured debt
1.466
1.292
924
800
2016
2017
2018
2019
debt maturity profile does not include PDP.
>2020
20
LATAM Debt Profile
Debt by type as of March 31, 2016
9,120
9,289
1.189
1.300
Public Obligations as of March 31, 2016
2,426
EETC LATAM
676
1.750
1.731
676
949
5.506
5.310
2015
Bank Loans
Q1 2016
Public Obligations
EETC
2,679
949
GUANAY20
450
431
500
500
500
500
300
300
2015
Q1 2016
LATAM20
TAM 21
TAM 20
TAM 17
Aircraft Loans (Ex. EETC)
21
Risk Management
Fuel exposure and hedging strategy
LATAM has hedged 48% of its estimated fuel consumption for 2016
Portfolio 2015
Portfolio 2016
63%
27%
1Q16

27%
37%
2Q16
30%
3Q16
12%
4Q16
The Group’s fuel hedging strategy, consisting of a combination of Jet Fuel options, has allowed us to limit
our potential fuel hedge losses to a maximum amount of US$36 million for the balance of 2016.
23
Reducing our FX exposure
LATAM FX rate composition (%)
Others
100%
100%
13%
12%
29%
23%
BRL
BRL
USD
Others
BRL hedging portfolio (US$ million)
176
58%
Revenue
USD
65%
180
90
Cost
Q2 16
Q3 16
Q4 16
Q1 17
 The Company has a financial hedge of US$446
mm at an average rate of BRL 3.88 per USD.
24
Adequate floating/fixed interest rate mix

In addition, US$1,3 billion in cash provides natural hedge for the floating rate debt portion

Floating / fixed rate debt ratio can be easily adjusted on an annual basis through new debt issuance
Total Interest Rate Exposure
Weighted Average Cost of Debt
(US$ million, March 2016)
(%, March 2016)
650
5.967
2.672
Fixed w/ Hedge
Fixed
Floating
Fixed
71%
Floating
29%
Bonds
7,29%
Banks
2,74%
Fleet
3,47%
WACD
4.1%
25
Thank You
www.latamairlinesgroup.net
Miami, June, 2016
[email protected]
(56-2) 2565 8785