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LATAM outsources to keep profitable

SANTIAGO, Chile: August 23, 2016. The LATAM Group reported revenue of US$4.44 billion for the first six months of 2016, a drop of 14.7 percent over the same period last year, as cargo revenue declined 21.7 percent to US$536 million. Group net income improved from a loss of US$89.6 million to a profit of US$10.1 million year-on-year.

Second quarter (Q2) revenue declined by 12.5 to US$2.11 billion due to a 13.7 percent fall in passenger and a 22.3 percent drop in cargo revenues. Net losses grew 85 percent in the period to reach US$92 million despite a 12.0 percent reduction in operating expenses compared to 2015.

LATAM  a350The airline group said its financial results continue to reflect a weak macroeconomic environment in South America – especially in Brazil – and the devaluations of Latin American currencies during the period.

Q2 cargo revenues decreased by 22.3 percent to US$260 million as a result of a 13.2 percent fall in traffic and a 10.4 percent drop in yield year-on-year. LATAM cited a strike in Chile, which negatively impacted fresh salmon exports, and continued weakness in imports from North America and Europe – particularly to Brazil.

Second quarter cargo capacity, as measured in ATKs, declined 6.1 percent, which included a 13.4 percent reduction in freighter operations. The group will only operate two B777-200 freighters by first quarter 2017 as it continues to maximize the belly utilization of its passenger fleet that now includes 22 B787s and three A350s.

The reduction in its freighter capacity coincides with outsourcing the management of its 13,000 ULDs to CHEP Aerospace Solutions.

"We chose CHEP's hybrid ULD solution given that the containers are part of a dedicated, co-branded fleet retaining weight savings, and the pallets being supplied from CHEP's pool," said LATAM Cargo senior VP Operations and Services, Carlos Larrain. "Thanks to [its] network synergies and lean business model, LATAM will be able to operate with approximately 30 percent less ULDs. This considerably reduces operational costs and improves efficiencies," he added.

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