LATAM AIRLINES GROUP S.A. 
By Highlights
- LATAM Airlines Group reported operating income of US$234.9 million for fourth quarter 2013, a 166% increase compared to the US$88.3 million operating income in fourth quarter 2012. Operating margin reached 6.9%, an increase of 4.4 points compared to 2.5% in 2012. This strong expansion in margins was driven by significant improvement in the financial results of the domestic Brazil operations and the rationalization of international passenger operations, as well as the continued progress of the integration process, synergy and efficiency initiatives.
- During the fourth quarter of the year, and in line with the capacity cuts we had anticipated, we strongly decreased our total capacity as measured in ASKs by 4.5% as compared to the same period in 2012. This capacity rationalization was mainly a result of a strong decrease in capacity in our international network, which decreased by 6.5% as compared to the same period in 2012; and the continued rationalization of our domestic Brazil operations.
- For full year 2013, LATAM reported operating income of US$643.9 million, a 605% increase compared to the US$91.4 million in full year 2012 (pro forma). Operating margin reached 4.9% an increase of 4.2 points compared to 0.7% in 2012, in line with the guidance provided by the Company.
- After a process of reviewing its post-merger fleet plan and fleet requirements, during the second semester of 2013 LATAM decided to undertake a broad fleet restructuring plan with the aim of reducing the number of models operated, phasing out less efficient models and allocating aircraft best suited to each one of its markets. As a result, beginning in the fourth quarter of 2013 and for approximately the next thirty months, the Company will phase out all of its A330s, A340s, B737s and Q400 and Q200s. During the fourth quarter of 2013 this process has generated non-recurring costs of US17.5 million resulting from penalties related to anticipated redeliveries and other redelivery expenses. For the full year, these costs reached US$ 29 million. Excluding these non-recurring costs, LATAM's operating margin reaches 7.4% for the fourth quarter 2013 and 5.1% for the full year 2013.
- For fourth quarter 2013, LATAM reported a net loss of US$46.1 million, compared to a net loss of US$69.8 million for the same period 2012, mainly due to a foreign exchange loss of US$142.6 million mostly recognized at TAM as a result of the devaluation of the Brazilian real during the quarter. The Company continues working to largely mitigate the exposure to the Brazilian real in TAM's balance sheet by June 2014.
- TAM continues to make significant improvements in the financial results of the domestic Brazil passenger operations, maintaining capacity discipline with a 6.0% reduction in ASKs during the fourth quarter 2013 as compared to the fourth quarter 2012. Improved market segmentation and revenue management practices have resulted in increased yields and healthy load factor of 81.6%. This has led to a significant increase of 11.3% in revenue per ASK ("RASK") as measured in Brazilian reais.
- LATAM continues to see positive results from our strategy of rationalizing international passenger capacity both in Brazil and the Spanish speaking countries, with a significant increase in revenue per ASK. Capacity on international routes decreased 6.5%, while traffic increased by 0.8% resulting in a load factor of 84.3%, a 6.1 percentage points increase as compared to the fourth quarter of 2012. Additionally, we received the approval from Brazilian authorities to better allocate passenger slots at São Paulo Guarulhos airport, which is a key milestone in the development of Guarulhos Airport as our main hub for regional and long haul traffic in South America.
- On January 10, 2014, LATAM Airlines Group successfully concluded its capital increase, raising US$940.5 million. The placement price was US$15.17 per share. With this, the company achieved significant progress in an important and strategic process that seeks to strengthen the balance sheet and financial position of LATAM through reducing leverage and improving liquidity.
- Starting this quarter the company will publish quarterly revenue per ASK figures for its main passenger business units.
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