LATAM Airlines Group S.A. - ADR

Solid Q3 operating performance despite high fuel (what went well) - Revenues: +$18.4% YoY to ~$4.6B (passenger revenue +$17.8% to ~$4.0B; cargo revenue +$20% to ~$483M). - Pricing/mix: passenger RASK +9.4% and yields +11.7%; premium revenue +23% YoY, supported by customer preference. - Profitability: Adjusted EBITDA ~ $1.1B (24% margin); Adjusted operating income $573M (12.5% margin); Net income $441M (+16% YoY).

Fuel is the dominant headwind; still managed through pass-through + cost control (big challenge) - Fuel cost impact: jet fuel prices stayed elevated, driving ~$594M higher fuel costs YoY in Q3, with ~52% surge in average jet fuel prices and an additional group cost impact described as ~$520M in the results bridge (currency depreciation helps offset part of this). - Non-fuel discipline: Passenger CASK ex-fuel +3.5% YoY (described as “almost completely” driven by rate/currency effects—i.e., core cost discipline held up). - Load factors vs yields (surprising but explained): domestic load factor down 3pp YoY to ~83%, while international load ~84.3% (only -0.8pp YoY)—management framed this as an intentional outcome of optimizing RASK/yields (accepting slightly lower load where demand is more elastic).

Updated FY2026 guidance: fuel worsens in Q4, but cash flow and margin targets still held - Management updated guidance assuming higher jet fuel costs in Q4: - Extra fuel cost: >$900M in Q4 alone vs same period 2025 and >$2B for full year 2026 (driven by jet fuel assumptions). - Earnings outlook: Adjusted EBITDA expected $3.9B–$4.1B (keeping the $4.1B level from last year as the top-end anchor in spite of fuel). - Cash outlook (key investor anchor): At least ~$1.2B adjusted levered free cash flow for 2026. - Expectation/challenge: they do not expect meaningful short-term relief in jet fuel.