LATAM Airlines Group Stock

LATAM Airlines Group S.A. (LATAM) operates as a passenger airline in South America.

The company is one of the largest airline groups in the world in terms of network connections, as of December 31, 2022, provided passenger transport services to 144 destinations in 22 countries and cargo services to approximately 154 destinations in 25 countries, with an operating fleet of 310 aircraft and a set of bilateral alliances.

For the year 2022, LATAM transported approximately 62 million passengers. The company and its affiliates provide domestic services in Brazil, Chile, Peru, Colombia and Ecuador; and also provide intra-regional and long-haul operations. The cargo affiliate carriers of LATAM in Chile, Brazil, and Colombia carry out cargo operations through the use of belly space on the passenger flights and dedicated cargo operations using freighter aircraft. The company also offers other services, such as ground handling, courier, logistics and maintenance.

As of December 31, 2022, the company provided scheduled passenger service to 17 destinations in Chile, 19 destinations in Peru, 8 destinations in Ecuador, 17 destinations in Colombia, 54 destinations in Brazil, 14 destinations in other Latin American countries and the Caribbean, 5 destinations in North America, 8 destinations in Europe, and 2 destinations in Oceania.

In addition, as of December 31, 2022, through various code-sharing agreements, the company offered service to 105 destinations in North America, 32 destinations in South America, 86 destinations in Europe, 17 destinations in Australasia, 38 destinations in Asia and 11 destinations in Africa.

Business Strategy

The key elements of the company’s strategy are to continually strengthen its network; and enhance brand leadership and customer experience.

Passenger Operations

As of December 31, 2022, LATAM passenger operations were performed by airline affiliates in Chile, Brazil, Peru, Colombia and Ecuador, where the company operates both domestic and international services. LATAM collects and reports operating data for its passenger operations in three categories: international (connecting more than one country), Domestic operations in Spanish-speaking countries or SSC (including Chile, Peru, Colombia, and Ecuador), and Domestic Brazil (entirely within Brazil).

International Passenger Operations

The company’s international network includes the international operations of its Chilean, Peruvian, Ecuadorian, Colombian and Brazilian affiliates. The company and its affiliates have operated international services out of Chile and have expanded international services, offering flights out of Peru, Ecuador, Colombia and Brazil. As of December 31, 2022, LATAM offers 46 international destinations in 22 countries, in addition to the domestic destinations and international flights and connections between the domestic destinations.

The company provides long-haul services out of Santiago, Lima, Bogota, São Paulo and Fortaleza. The company also provides regional services from Chile, Peru, Ecuador, Colombia and Brazil. Due to the company’s large network of services, visitors from around the world can experience world-renowned destinations, such as Machu Picchu and Cusco in Peru, the Galapagos Islands, Iguazu Falls in Brazil, and the Atacama Desert and Patagonia in Chile, including the cities of Punta Arenas and Puerto Natales.

Competitors in International Routes

The following shows LATAM’s main competitors during 2022 in each geographic market in which it operates:

Brazil

North America Route: Includes American Airlines Inc., United Airlines, Azul Linhas Aereas, Delta Air Lines, Inc. (Delta Air Lines), Air Canada, Aeromexico and GOL.

Latin America Route: Includes Copa, GOL, Avianca, Aerolineas Argentinas, Aeromexico and Azul Linhas Aereas.

Europe Route: Includes TAP Portugal, Air France-KLM, IAG, Lufthansa, Swiss International Airlines and Turkish Airlines.

Chile

North America Route: Includes American Airlines, Air Canada, Delta Air Lines, United Airlines and Aeromexico.

Latin America Route: Includes Copa, Sky Airline, Avianca, JetSmart, Aeromexico and Aerolineas Argentinas.

Europe Route: Includes IAG and Air France-KLM.

South Pacific Route: Includes Qantas Airways.

Argentina

North America Route: Includes American Airlines, Aerolíneas Argentinas, Aeromexico, United Airlines and Delta Air Lines.

Latin America Route: Includes Aerolineas Argentinas, Copa, GOL, Avianca and Azul Linhas Aereas.

Peru

North America Route: Includes American Airlines, Avianca, United Airlines, Delta Air Lines, JetBlue Airways and Spirit Airlines.

Latin America Route: Includes Avianca, Copa, Viva Airlines, Aerovías de Mexico, Volaris, Aerolíneas Argentinas, JetSmart and Sky Airline.

Europe: Includes Air France-KLM and IAG.

Colombia

North America: Includes Avianca, American Airlines, Spirit Airlines, Aeromexico, JetBlue Airways, United Airlines, Air Canada and Delta Air Lines.

Latin America: Includes Avianca, Aeromexico, JetSmart, Viva Air, Volaris, VivaAerobus and Copa.

Ecuador

North America: Includes American Airlines, JetBlue Airways, Delta Air Lines, United Airlines and Spirit Airlines.

Latin America: Includes Avianca, Copa and Aeromexico.

Europe: Includes Air France-KLM and IAG.

Domestic Passenger Operations

As of December 31, 2022, domestic passenger services within Chile, Brazil, Peru, Ecuador and Colombia were operated by Transporte Aéreo S.A. (LATAM Airlines Chile), TAM Linhas Aéreas S.A. (LATAM Airlines Brazil), LATAM Airlines Perú S.A. (LATAM Airlines Peru), LATAM-Airlines Ecuador S.A. (LATAM Airlines Ecuador) and Aerovías de Integración Regional S.A.(LATAM Airlines Colombia), respectively.

Passenger Alliances and Commercial Agreements

Strategic Alliance with Delta

On September 30, 2022, LATAM and Delta Air Lines obtained the final regulatory approvals from the U.S. Department of Transportation, allowing them to implement their Joint Venture Agreement (JVA). The approval enables Delta and LATAM to work together, coordinating capacity and pricing strategies and sharing corporate accounts in the United States/Canada and South America (Brazil, Chile, Colombia, Paraguay, Peru, and Uruguay) markets within the scope of the JVA.

This agreement allows the airlines to develop an unparalleled network with expanded route offerings and to connect the Americas to the world like never before with access to more than 300 destinations. Also, the airlines will deepen their level of cooperation in these markets strengthening their codeshare routes and the reciprocal loyalty benefits.

It is in this context that, in November 2022, LATAM and Delta made their first operational announcement after the approval of the JVA, launching a new non-stop flight between São Paulo (Brazil) and Los Angeles (United States) starting on July 1, 2023. LATAM will be the only airline in Brazil with a direct flight to Los Angeles, where customers will be able to connect to several popular Delta West Coast destinations in the United States, including San Francisco, Las Vegas and Seattle. Additionally, in January 2023, LATAM and Delta announced the launch of a second route under the JVA, connecting Bogota (Colombia) with Orlando (United States) starting on July 1, 2023, helping Delta and LATAM to further strengthen their presence between North America and South America.

Subscription of New Codeshare Agreements

In January 2022, the company and LATAM Airlines Colombia signed and implemented codeshare agreements with Virgin Atlantic. This new agreement seeks to increase the offerings and connectivity of both networks.

Other Alliances and Material Commercial Agreements

In addition, LATAM and its affiliates have ongoing passenger commercial agreements with several airlines, including Qatar Airways, Air France/KLM, Lufthansa, Ethiopian Airlines, among others. These commercial agreements allow the company to provide additional benefits to its passengers, including access to a wider network, more flight options with better connection times, and increased potential for developing new routes and adding direct flights to new destinations and to destinations already served by LATAM.

Passenger Marketing and Sales

In 2022, LATAM continued transforming the travel experience of its passengers through cabin retrofits. As of December 31, 2022, the company had 10 B777, 9 B767, 2 B787-9, and 177 A319/A320/A321 aircraft with renovated interiors. (during the year 2022, LATAM retrofitted 81 aircraft). Additionally, the company continued equipping aircraft with Wi-Fi connectivity in Brazil, reaching 98 aircraft in total. In addition, 33 B787 are in development to be retrofitted with the new cabin interior between 2023 and 2025.

Branding

The company established a three-phase strategy to build its communications that focused first on communicating its commitment to safety, the flexibilization of commercial policies, and its support channels.

As part of the strategy of working to achieve closeness and recover the company’s engagement with its customers, it worked on developing partnerships with important entities for the community. During 2022, for example, LATAM held partnerships with the Chilean, Peruvian, Ecuadorian and Paraguayan National Soccer Teams.

Distribution Channels

The company’s distribution structure is divided into direct and indirect distribution channels, both focused on improving their respective platforms to allow for easy interaction for its client in sales and services alike. Direct channels owned by LATAM are city ticket offices, contact-centers and e-Business (including website, mobile and smart business), and accounted for approximately 45% of total sales in 2022 (including award passengers). These direct channels support sales and service, both before and after the flight.

The company’s city ticket offices include additional services in order to complement the experience of its customers. The company’s contact centers are a multi-service channel providing support in 6 languages (Spanish, English, Portuguese, French, German and Italian).

The company’s digital strategy includes mobile applications that provide trip information to its passengers. Indirect channels include travel agencies, general sales agencies, direct channels from other airlines and online agencies, and accounted for 55% of total sales in 2022. LATAM offers travel agencies different options to connect to the company’s systems and provides their customers its best product offering. These options include Global Distribution Systems, as well as the company’s direct connection ‘eLATAM’, which it is continuously expanding and improving.

LATAM is strongly committed to the digital transformation of distribution in agencies during 2023, through the IATA’s New Distribution Capability (NDC) standard.

Frequent Flyer Program

The company’s frequent flyer program, LATAM Pass, is a key element of its marketing and loyalty strategy. The program rewards customer loyalty, and, as a result, it generates incremental revenue and promotes customer retention.

In 2019, LATAM established a new way to qualify for ‘Elite’ status in its frequent flyer program based on the price paid for the ticket, which is aligned with a simpler methodology for mileage accrual, generating simplicity and efficiency to its frequent flyer program. LATAM Pass members can access superior categories and enjoy better benefits by earning Qualifying Points on all their flights. Qualifying Points are different from LATAM Pass Points, which members can use to redeem for tickets and on-board benefits. The number of Qualifying Points that members earn depends on the dollars spent on purchasing the ticket (discounting charges, taxes and additional services) and the multiplier of the destination (domestic or international).

During 2020 LATAM also introduced another rule to access superior categories, the ‘Segment rule’, under which a passenger can qualify for ‘Elite Status’ by earning Qualifying Points (the existing rule, where they accumulate points depending on the dollars spent on purchasing the ticket), or by reaching a goal of number of segments flown. Introducing this new rule makes it possible for more customers to qualify for the company’s categories, especially for those domestic passengers who fly many segments a year that generally have lower rates.

The acquisition of the Multiplus loyalty program in 2019 and its full integration into LATAM’s network, together with LATAM Pass, created what LATAM estimates to be one of the top frequent flyer and loyalty programs in the world (measured by the number of members). This acquisition was consistent with recent transactions in the industry, and with the strategy of in-house frequent flyer business models of the largest global airlines.

In addition, a new tier category, Gold Plus, was launched in its market with focus on recovering Brazilian’s domestic corporate market share delivering to a specific type of customer a better experience at the airport, and also a better mileage accrual. Improvements to the Gold category include priority check-in in all flights (for Gold category only in international flights) and free same day changes for Brazilian domestic flights. In February 2020, this new category was also launched in all Spanish-speaking countries, improving the value proposition of all the company’s domestic corporate passengers, and also introducing new benefits for all of its high-value customers, such as seat selection, preferred check-in and boarding in all markets.

As of December 31, 2022, LATAM Pass had approximately 42 million members. Members of the LATAM Pass program receive benefits and accrue miles for ticket purchases in accordance with their elite level status, as well as by purchasing the services of other partners in the LATAM Pass program. Customers of the program can redeem miles or points for free tickets, as well as for other products. LATAM Pass members are classified in five elite levels: Gold, Gold Plus, Platinum, Black and Black Signature. These different groups determine which benefits customers are eligible to receive, including mile earning bonuses, free upgrades, VIP lounge access and preferred boarding and check-in privileges. Also, this year LATAM Pass announced new benefits: priority contact center for all elite members, eliminate redemption fee, roll over for 2023 and improvement in upgrade priority for elite members that have the cobrand credit card.

Cargo Operations

The Cargo business is operated internationally and domestically by affiliate airlines under the unified LATAM Cargo brand, which has acquired significant market recognition. The Cargo operations are made under four of the company’s affiliates: Línea Aérea Carguera de Colombia S.A. (LATAM Cargo Colombia), LAN Cargo S.A. (LATAM Cargo) and LATAM Cargo Brazil, dedicated exclusively to cargo transport, and LATAM Airlines Ecuador, which, in addition to its passenger operations, as of 2022 was certified as a cargo operator and incorporated dedicated cargo freighters to its operations.

The cargo business generally operates on the same route network used by the passenger airline business. It includes 154 destinations, of which 144 are served by passenger and/or freighter aircraft and 10 are served only by freighter aircraft.

As of December 31, 2022, the cargo affiliates’ freighter fleet consisted of 9 Boeing 767-300 freighters and 7 Boeing 767-300BCF, each with a capacity for 58 structural chargeable tons of freight. The company expects to continue to grow its freighter fleet to a total of 20 aircraft by 2024 through the conversion of passenger Boeing 767-300 aircraft to freighters. The freighter fleet program has two main focus areas: first, to support the company’s belly business, improving its load factor by feeding cargo into passenger routes, and second, to enhance the company’s product offering by providing its customers flexibility in scheduling, origins, destinations and types of cargo.

The company has headquartered its international cargo operations in Miami. The company also utilizes passenger flights to and from New York, Los Angeles and Orlando and its seasonal dedicated freighter service to Chicago. Additionally, using different trucking companies LATAM offers a road-feeder network, connecting the company’s hub in Miami and other online destinations with the main gateways in the United States (Los Angeles, New York, Chicago, Houston and Atlanta), in between the cities in which it operates and to secondary origins and destinations. The company also transports cargo to and from 10 destinations in Europe: Barcelona, Lisbon, London, Milan, Paris, Rome, Frankfurt, Madrid, Amsterdam and Zaragoza. The first six points are served only via passenger aircraft. Frankfurt and Madrid are served by both passenger and freighter aircraft, while Amsterdam and Zaragoza are only served through freighter operations. The company offers a road-feeder service within Europe to expand its footprint and balance traffic between its different origins.

Fleet

As of December 31, 2022, LATAM had a total fleet of 310 aircraft, consisted of 294 passenger aircraft and 16 cargo aircraft, (this includes 34 aircraft that are classified as non-current assets available for sale).

The company and its affiliates operate various different aircraft types that are suited for its different services, which include short-haul domestic and intracontinental trips, as well as long-haul intercontinental flights.

For short-haul domestic and continental flights, the company and its affiliates operate Airbus A320-Family aircraft. The Airbus A320-Family has been incorporated into the company’s fleet pursuant to leases and has been acquired directly from Airbus pursuant to various purchase agreements since 1999. For long-haul passengers the company and its affiliates operate Boeing 767-300ER, Boeing 787-8 and 787-9, Boeing 777-200ER and 777-300ER.For cargo flights, the company operates Boeing 767-300F aircraft.

Fleet Leasing and Financing Arrangements

LATAM’s fleet financing and leasing structures include borrowing from financial institutions and leasing under financial leases, tax leases, sale-leaseback transactions and pure leases. As of December 31, 2022, LATAM had a total fleet of 310 aircraft, of which 1 B767 aircraft, 2 B767 Freighter aircraft, 28 Airbus A319 aircraft, and 3 A320 aircraft are classified as non-current assets available for sale, resulting in 276 aircraft in operation.

As of December 31, 2022, LATAM’s fleet comprised 74 financial leases, 3 tax leases, 134 operational leases, 31 aircraft provided as loan collateral, 27 aircraft reserved as collateral for the revolving credit facility (RCF) and 41 unencumbered aircraft. Most of LATAM’s financial and tax leases are structured with a 12-year initial term. LATAM has 24 financial aircraft leases supported by the U.S. Export-Import Bank (EXIM Bank) and 37 supported by the European Export Credit Agencies (the ECAs). LATAM’s lease maturities initially range from seven to twelve years. Moreover, as of December 31, 2022, LATAM had a total of 153 spare engines, comprising 36 operational leases, 44 engines provided as loan collateral, 18 engines reserved as collateral for the RCF and 55 unencumbered engines.

As of December 31, 2022, only 1 aircraft was subject to financial lease by TAM Linhas Aéreas S.A. (LATAM Airlines Brazil).

Maintenance

LATAM Maintenance

The heavy maintenance, line maintenance and component shops are equipped and certified to service the company’s fleet of Airbus and Boeing aircraft. LATAM’s maintenance capabilities allow the company flexibility in scheduling airframe maintenance, offering an alternative to third-party maintenance providers. More than 3,900 LATAM Maintenance professionals ensure the fleet operates safely and in compliance with all local and international regulations.

The heavy maintenance and component repair shop facilities are located in São Carlos (Brazil) and Santiago (Chile), adding up to a total of eleven heavy maintenance production lines, including painting capabilities, and component repair shops, including landing gear, hydraulics, pneumatics, avionics, electroplating, composites, wheels and brakes, emergency equipment, galleys and structures.

LATAM Line Maintenance

The Line Maintenance Network serves over 160 locations and carried out over 2.2 million man hours of preventive and corrective maintenance tasks on the LATAM fleet during 2022. The company also relies on certified third party services in many of its international destinations where it is economically convenient, such as in Frankfurt, (where the company is served by Nayak), and London (served by KLM) among others.

LATAM Line Maintenance Network has hangar facilities in Santiago, São Paulo (CGH and GRU), Lima, Miami and Bogota, among others. These multiple locations improve the flexibility of the Line Maintenance Network by allowing the execution of tasks that might be restricted because of adverse weather conditions and environmental authority restrictions.

In 2022, the GRU station further expanded its capabilities to perform heavy maintenance in its hangar. These capabilities included the landing gear’s replacement for the B777 fleet, in addition to the B777’s C Checks and A320´s landing gear’s replacement performed in 2021. Given the success of this initiative, an additional line was developed at LIM to carry out special 24MO stops for the A320 fleet, taking advantage of the experience and available infrastructure at this hangar.

In order to strictly comply with applicable regulations, all of the company’s maintenance operations are supervised and audited by the local authorities and international entities around the Network, such as Dirección General de Aeronáutica Civil in Chile (DGAC), Agência Nacional de Aviação Civil in Brazil (ANAC), the Federal Aviation Administration in the United States (FAA), the International Air Transport Association Operational Safety Audit (IOSA) (by the International Air Transport Association or ‘IATA’) and the International Civil Aviation Organization (ICAO), among others. The audits are conducted in connection with each country’s certification procedures and enable it to perform maintenance for the aircraft types registered in the certificating jurisdictions. The company’s repair stations hold FAA Part-145 certifications under these approvals.

In addition, to ensure the most qualified personnel as needed for safe, accurate and on-time Line Maintenance, the company seeks to improve technicians’ skills through extensive training programs at the company’s LATAM Technical Training Centers in Chile and Brazil, and through specific training programs designed and conducted by its partnerships.

LATAM MRO

The two main MRO (Maintenance, Repair and Overhaul) facilities, one in São Carlos (Brazil) and one in Santiago (Chile), are equipped and certified to service the company’s fleet of Airbus and Boeing aircraft and provided 88.8% of all heavy maintenance services that LATAM demanded in 2022, effectively executed 1.60 million man-hours. LATAM MRO is also responsible for the planning and execution of aircraft redeliveries. The services not executed internally are contracted to the company’s extensive network of MRO partners around the globe. LATAM occasionally performs certain heavy maintenance and component services for other airlines or OEMs.

The MRO São Carlos (LATAM Airlines Brazil MRO), is prepared to service up to nine aircraft (narrow and wide body) simultaneously with a dedicated hangar for stripping and painting. In this facility the company also has 23 technical component shops, including a full landing gear repair & overhaul shop, hydraulics, pneumatics, electronics, electrical components, electroplating, composites, wheels & brakes, interiors and emergency equipment shops. MRO São Carlos is certified and audited by major international aeronautical authorities, such as the FAA, the European Aviation Safety Agency (EASA), ANAC Brazil (Agência Nacional de Aviação Civil in Brazil), the Chilean DGAC, the Argentinean Administración Nacional de Aviación Civil (ANAC Argentina), the Ecuadorian Dirección General de Aviación Civil (DGAC), the Paraguayan Dirección Nacional de Aeronautica Civil (DINAC), and Transport Canada (TC), among others, for Heavy Maintenance and Components Repair and Overhaul for the Airbus A-320 family and Boeing 767. The MRO also has some minor capabilities for the repair and overhaul of Boeing 777 components. MRO São Carlos includes its own support engineering capabilities and a full technical training center.

In MRO Santiago, located near Comodoro Arturo Merino Benítez International Airport in Santiago, the company has two hangars capable of servicing one wide body aircraft and two narrow body aircraft simultaneously. MRO Santiago is certified and audited by FAA, ANAC Brazil, DGAC, ANAC Argentina and DGAC Ecuador, among others, for Heavy Maintenance for the Airbus A320-Family (A318, A319, A320 and A321) and Boeing B767 - B787. MRO Santiago has 11 shops prepared to support hangar activities, such as cabin shops, galleys, structures, composite materials, avionic, wheels & brakes.

During 2022, LATAM MRO executed 479 services, including C checks (105) and Special Checks (374) for the LATAM fleet.

Ancillary Airline Activities

LATAM’s customers are able to purchase additional services, such as extra luggage, preferred seating options, upgrades to its Premium cabins, among others.

In addition to airline operations, LATAM generates revenues from a variety of other activities, including aircraft leases (including subleases, dry-leases, wet-leases and capacity sales to certain alliance partners) and charter flights, tours, maintenance services for third parties, handling, storage, customs services, income from other non-airline products (LATAM Pass) and other miscellaneous income.

Regulation

The countries where the company carries out most of its operations are contracting states and permanent members of the International Civil Aviation Organization (ICAO), an agency of the United Nations established in 1947 to assist in the planning and development of international air transportation.

The company has obtained and maintains the necessary authority from the Chilean government to conduct flight operations, including authorization certificates from the Junta de Aeronáutica Civil (JAC) and technical operative certificates from the DGAC, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

The Peruvian Dirección General de Aeronáutica Civil (the PDGAC) oversees and regulates the Peruvian aviation industry. The PDGAC reports directly to the Ministry of Transportation and Communications and is responsible for supervising compliance with Peruvian laws and regulations relating to air navigation. The company has obtained and maintain the necessary authorizations from the Peruvian government to conduct flight operations, including authorization and technical operative certificates, the continuation of which is subject to the ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

The company has obtained and maintains the necessary authority from the Brazilian government to conduct flight operations, including authorization and technical operative certificates from ANAC, the continuation of which is subject to ongoing compliance with applicable statutes, rules and regulations pertaining to the airline industry, including any rules and regulations that may be adopted in the future.

In the case of Colombian airlines, in order to obtain the operational permit, the company must comply with the Colombian Aeronautical Regulations (RAC) and fulfill legal, economic and technical requirements, in order to later be subject to public hearings where the public convenience and necessity of the service is considered.

History

The company was founded in 1929. It was formerly known as LAN Airlines S.A. and changed its name to LATAM Airlines Group S.A. in 2012.