LATAM updates its business plan and advances in its exit from Chapter 11

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LATAM updates its business plan and advances in its exit from Chapter 11
Source: Newlink
August 31, 2022

In the document, the group modifies its estimate of cost savings from US$900 million to more than US$1,000 million per year and expects by 2024 to exceed 2019 revenues, reaching US$11.5 billion

In the context of the Chapter 11 process, and in relation to obligations assumed by LATAM Airlines Group under the Restructuring Support Agreement (RSA) to its Reorganization Plan, and certain confidentiality agreements entered into with certain counterparties of the RSA, LATAM has provided such counterparties with certain financial reports and updates that may constitute material non-public information. In accordance with the aforementioned confidentiality agreements, upon the occurrence of certain events established therein, LATAM agreed to publicly disclose the information provided thereunder.

In compliance with the foregoing, through an essential fact sent to the Commission for the Financial Market (CMF), LATAM Airlines Group reported that it updated its business plan presented on September 9, 2021, which contains the 5-year financial projections, that is, to 2027, adjusted to the new global macroeconomic context.

The updated business plan informs that during the last years LATAM has been actively working to improve its cost structure and take advantage of the restructuring opportunity within the framework of its Chapter 11 process. In the new version of the plan, the group updates its estimate of cost savings from US$900 million to more than US$1 billion annually through initiatives already in place.

In parallel, LATAM launched structural transformations: fleet renegotiation, improving its relative cost position, strengthening its network and reducing its total debt by approximately 36% compared to pre-pandemic debt. 

Regarding demand, the group expects a recovery in the domestic markets of the subsidiaries to the levels of 2019 by the end of 2022. However, in the case of Colombia, said recovery was reached in the first quarter of this year and it is expected that Brazil and Ecuador achieve it within the third quarter.

In relation to international traffic, LATAM estimates that the recovery will be slower, reaching 2019 levels by mid-2023. It should be noted that international traffic represented approximately 45% of revenues in 2019. 

By 2024, the group projects a passenger operation measured in available seat kilometers (ASK) similar to that of 2019.

Regarding income, it is expected that by 2024 the group will exceed the levels of 2019, reaching US$11.5 billion.

"This updated business plan reflects how the LATAM group is better prepared to face future challenges, with a more competitive and flexible cost structure, with a more complete offer for customers and moving towards a more sustainable aviation," said the CEO. of LATAM Airlines Group, Roberto Alvo.

On June 18, the Bankruptcy Court for the Southern District of New York confirmed the group's Reorganization and Financing Plan to exit the Chapter 11 process, which is expected to occur in the last quarter of this year. It is worth mentioning that on this same date, a presentation has been made in the Court's file presenting the public disclosure referred to in this communication and in the aforementioned essential fact.


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