During the second quarter of 2022, LATAM group operations continued progressing on the recovery path as in the last quarters, hand in hand with the ease of travel restrictions in the region and a healthy demand for air travel. Despite the challenges presented by the sharp increase in fuel price during the three-month period, the group’s consolidated capacity (measured in ASKs) during the quarter was 72.6% of 2019 levels, more than doubling the capacity of the same quarter of 2021, growing by 135.2%. These figures are mainly a result of strong domestic markets, especially in Brazil, Colombia and Ecuador, where the domestic affiliates have already surpassed 2019 levels in capacity, in addition to a marked recovery of the international operations during the current year. In terms of capacity, the Spanish-speaking affiliates and the Brazilian affiliate finished the quarter reaching 88.3% and 101.7% of June 2019 levels, respectively, while international operations reached 55.8% of June 2019 levels.
During the quarter, total operating revenues (including other income from operating activities) amounted to US$2,226 million, 6.1% below 2019 levels, but posted a 150.5% year over year increase versus 2Q21. Adjusted operating expenses surpassed 2019 levels by 3.5% to US$2,412 million, following the sharp increase in fuel price during the period, which resulted in the Aircraft Fuel cost line increasing 31.5% compared with 2019. However, in a context of strong demand, the group has been able to pass through this effect into higher yields (+21.3% vs 2019). As a result of the reduced consolidated capacity, interest expense and certain expenses related to the reorganization process, the net loss attributable to the owners of the parent’s company during the three-month period reached US$523.2 million, which compares with a net loss of US$62.8 million in the same period of 2019 and a loss of US$769.6 million during the second quarter of the previous year.
Following an important series of milestones during the quarter, on June 18, 2022, the U.S. Bankruptcy Court for the Southern District of New York confirmed the approval of LATAM’s Plan of Reorganization. Then, at LATAM’s Extraordinary Shareholders’ Meeting held on July 5, 2022, LATAM obtained the necessary approval from its shareholders to move forward with the Company’s new capital structure and the issuance of the financing instruments presented in the Plan. The aforementioned capital structure received support from the broad majority of shareholders, consisting of 99.8% of the shares present or represented at the Meeting, corresponding to 77.5% of total shares with voting rights, thus allowing LATAM to begin the final stage of implementation of the Plan in Chile.
Prior to Plan confirmation, on May 11, 2022, LATAM filed an amended version of its Plan of Reorganization with the US Court and announced that it had obtained the support of certain Chilean bondholders (including those represented by Banco Estado) and the Official Committee of Unsecured Creditors (UCC) to the Plan. This furthered the sufficient support LATAM had already received to approve its Plan through the official voting process, ascending to an overwhelming support of approximately 90% of creditors in the Plan’s impaired classes by dollar amount.
Additionally, on June 11, 2022, LATAM announced that it signed debt commitment letters with various financial entities (JPMorgan Chase, Goldman Sachs, Barclays, BNP Paribas and Natixis) to secure its exit financing, which have granted the group the full amount required for the implementation and financing of the Plan, comprised of US$2,250 million in new debt and a new Revolving Credit Facility («RCF») for US$500 million.
Following these important advances towards ensuring the group’s long-term sustainability, LATAM has already initiated the registration process of the Plan’s instruments in Chile, which started with the submission of the application for the registration of the instruments with the CMF (Comisión para el Mercado Financiero) on July 8, 2022. LATAM expects to emerge from Chapter 11 in the fourth quarter of 2022, however, this remains subject to the timing of the occurrence of the next steps within the process.
MANAGEMENT COMMENTS SECOND QUARTER 2022
Despite the solid recovery path that has led the group to operations of 72.6% (measured in ASKs) of 2019 levels in the second quarter, significant challenges have arisen in the last months, namely related to a considerable increase in and volatility of fuel price and a challenging macroeconomic context driven by inflationary pressures, the depreciation of emerging market currencies and a reduction of worldwide economic activity…
