http://www.morningstar.com/earnings/50034026-latam-airlines-group-sa-adr-lfl-q4-2012.aspx

LATAM Airlines Group SA ADR LFL
Q4 2012 Earnings Call Transcript

Transcript Call Date 03/20/2013

Operator: Good day, ladies and gentlemen and welcome to the Fourth Quarter 2012 LATAM Airlines Group's Earnings Conference Call. My name is Shaquana and I will be coordinator for today. At this time, all participants are in a listen-only mode. We will facilitate a question-and-answer session towards the end of this conference.

I would now like to turn the presentation over to your host for today's call Mr. Alejandro de la Fuente. Please proceed, sir.

Alejandro de la Fuente Goic - CFO: Thank you very much for joining us today. This is Alejandro de la Fuente and with me on the call are, Claudia Sender from our Domestic Brazil Operations; (indiscernible) from our International Passenger Division; (Alvaro Carril) from our Cargo business; Andres del Valle from our Corporate Finance Department; and Gisela Escobar, our Investor Relations Officer.

We hope that you have all received the press release and have been able to access the webcast presentation on our website for the better understanding of our consolidated results at LATAM Airline Group during the fourth quarter 2012.

Please turn to Slide 3, as you can see total revenues in the fourth quarter 2012 reached $3.5 billion, passenger revenues decreased 0.7% and cargo revenues decreased 3.1% as compared to pro forma 2011 revenues.

Operating revenues this quarter are impacted by the negative effect of the 14% depreciation on the Brazilian reais on passenger and cargo revenues denominated in real. The challenging operating environment in international passenger businesses continued weak market demand in the cargo business and the change in land reservation and inventory systems to a anew system provided by Saber which took place in September 2012 although it is difficult to measure the exact impact. We estimate decreased revenue of approximately $25 million to $40 million during the quarter.

Net income reached $8.5 million in fourth quarter 2012 excluding special items. Special items include, a $21.9 million of merger cost and a one-time charge of $52.7 million related to the sale of LAN A318 and the redelivery cost of LAN Colombia-8. Excluding these items, operating income reached $119 million in fourth quarter 2012, the 61% decrease compared to pro forma operating income of $307 million in the fourth quarter 2011. This resulted in 3.4% operating margin compared to an 8.8$ pro forma margin in the fourth quarter 2011.

Turning to Slide 4 you can see more details the evaluation in our operating margins for the fourth quarter 2012. The main impact during this quarter was a decline in passenger and cargo yields. This impact excludes the negative effect of the depreciation of the Brazilian reais. The yield decline was partially offset by an increase in passenger load factors especially from the domestic passenger operations in Brazil.

Fuel costs increased 8.7% compared to fourth quarter 2011. This increase was in line with a 3.3% increase in consumption and with the 4.8% in the average fuel prices per gallon, excluding fuel and specialized in unit costs per ASK declined 4.1% as compared to fourth quarter 2011.

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