LATAM Airlines Group S.A. — FY2023 Form 20-F
Reporting period: Fiscal year ended December 31, 2023; filed February 22, 2024. This is an annual report, not a standalone fourth-quarter report; the filing text does not provide clear Q4-only financial results. Financial statements are audited and prepared under IFRS as issued by the IASB. PwC issued an unqualified opinion and concluded internal control over financial reporting was effective.
Business context and operating performance
LATAM is a South American passenger and cargo airline group operating domestic services in Brazil, Chile, Peru, Colombia and Ecuador, plus regional and long-haul routes. It carried approximately 73.9 million passengers in 2023, up from 62.5 million in 2022. The group emerged from Chapter 11 in November 2022; the bankruptcy court closed the proceedings in June 2023.
- Passenger capacity (ASKs) rose 20.6% and passenger traffic (RPKs) rose 23.1%; the combined passenger load factor improved 1.8 percentage points to 83.1%.
- International capacity and traffic increased 36.2% and 39.4%, respectively; international load factor reached 84.9%.
- Cargo capacity grew 14.6%, while cargo traffic increased 4.8%; cargo load factor fell 4.8 points to 51.6% and cargo yield declined 21.3%.
Financial results and liquidity
| Metric | FY2023 | FY2022 | Change |
|---|---|---|---|
| Revenue | US$11.641bn | US$9.363bn | +24.3% |
| Passenger revenue | US$10.215bn | US$7.636bn | +33.8% |
| Cargo revenue | US$1.425bn | US$1.726bn | -17.4% |
| Gross profit / margin | US$2.824bn / 24.3% | US$1.259bn / 13.4% | Margin +10.9 points |
| Operating income / margin | US$1.078bn / 9.3% | US$1.212bn / 12.9% | -11.0% / -3.6 points |
| Net income / margin | US$581.6m / 5.0% | US$1.337bn / 14.3% | -56.5% / -9.3 points |
| Operating cash flow | US$2.264bn | US$96.8m | +US$2.167bn |
| Cash and cash equivalents at year-end | US$1.715bn | US$1.217bn | +US$497.8m |
Passenger recovery and higher traffic drove revenue growth. Gross margin improved, but operating income declined as distribution, administrative and other operating costs rose. Net income also fell as 2022 included substantial Chapter 11-related restructuring gains and financial income from debt-claim settlements and accrued-interest reversals; neither benefit recurred at comparable scale in 2023. Fuel cost was US$3.947bn, 37.2% of operating expenses, despite a 13.7% decline in average into-wing fuel price. Cost per ASK fell to 7.74 US cents from 8.47 cents; excluding fuel-price variation, it fell to 4.86 cents from 5.06 cents.
Investing cash outflow was US$659.5m and financing cash outflow was US$1.150bn. Cash flow from operations less cash purchases of property, plant and equipment and intangible assets was approximately US$1.40bn, before leased-maintenance payments. The company also reported US$1.1bn of undrawn revolving credit facilities.
Financial debt was approximately US$4.0bn at year-end, excluding lease liabilities; reported lease liabilities were US$2.968bn. Average interest on financial debt was 10.7%, and US$2.027bn of debt carried variable rates. Total current assets of US$4.203bn were below current liabilities of US$5.688bn. Total liabilities were US$14.229bn and equity US$438.3m. The filing reports compliance with minimum-liquidity covenants at year-end.
Material changes, outlook and commentary
- Revenue growth reflected the continuing recovery in air travel, particularly international routes. Passenger load factor and passenger revenue per ASK improved; cargo revenue and yield weakened as capacity growth outpaced traffic.
- FY2023 included no restructuring-activity gain or loss, compared with a US$1.680bn restructuring gain in 2022. The 2023 net profit comparison is also affected by unusually high 2022 financial income.
- For 2024, management expects passenger ASK growth of 12%–14% overall, including 16%–18% international growth, 7%–9% domestic Brazil growth and approximately 12%–14% growth in Spanish-speaking domestic markets. Cargo ATKs are expected to rise 10%–12%.
- Management says it will prioritize cost efficiency, network development, profitability and cash generation. It had hedged approximately 35%, 32%, 30% and 22% of expected fuel consumption for the first through fourth quarters of 2024, respectively.
- Aircraft commitments include 88 Airbus A320-family and five Boeing 787 aircraft, with listed purchase commitments totaling US$15.7bn and deliveries scheduled through 2030. The company expects to finance fleet commitments; the stated amount is not necessarily a direct cash outflow.
- A US$174.5m minimum-dividend amount was recorded for 2023. The filing says the board had not yet approved a payment proposal as of the financial-statement issuance date.
Risks, contingencies and unusual items
- Debt and liquidity: Significant debt and lease obligations, high financing costs, floating-rate exposure, collateral requirements and restrictive covenants may constrain operations or funding. A breach could lead to default, acceleration or enforcement against collateral. The company reported US$750m minimum-liquidity requirements under specified facilities and stated it was compliant at year-end.
- Operations and fleet: Pratt & Whitney disclosed a powder-metal issue affecting PW1100 GTF engines used on Airbus Neo aircraft. LATAM had 31 A320neo-family aircraft at year-end; it said the number grounded was a fraction of that fleet, but the full operational impact was unknown. Aircraft delivery delays, maintenance, airport works, slot availability and supplier concentration are additional risks.
- Costs and markets: Fuel, labor, airport charges, inflation, foreign-exchange movements, competition and economic or political conditions across Latin America could pressure demand and margins. Approximately 45% of employees were union members; labor action, including two short disruptions in 2023, affected operations.
- Legal and tax matters: The balance sheet included US$941.8m of other provisions, including tax, civil and labor contingencies and a US$2.5m European Commission cargo matter. Several consumer, competition and tax proceedings remain pending, some with indeterminate amounts. A February 2024 Brazilian tax assessment of approximately US$52.3m is being disputed. LATAM’s disclosure of individual litigation outcomes is limited.
- Other risks: Currency and interest-rate volatility, climate and emissions regulation, cybersecurity, third-party service-provider disruption and potential ticket refunds could affect results or liquidity. The company disclosed no significant cybersecurity incident in the last three fiscal years.
Most important facts for investors to verify
- Review the audited financial statements and notes for the composition and maturity of approximately US$4.0bn of financial debt and US$2.968bn of lease liabilities, including covenant headroom and collateral.
- Assess whether 2024 capacity growth and the international recovery translate into revenue and operating-margin improvement, particularly given rising operating and labor costs.
- Track the duration and financial impact of the PW1100 engine inspections and related aircraft availability constraints.
- Reconcile the US$174.5m dividend provision with the board’s subsequent decision and shareholder approval, and assess the effect on liquidity.
- Monitor fleet purchase and lease commitments, delivery schedules, expected financing and planned aircraft disposals; distinguish manufacturer list prices from actual cash requirements.
- Follow material litigation and tax developments, including the Brazilian assessment disclosed after year-end, and test key loyalty-program breakage estimates; the auditor identified loyalty-program breakage valuation as a critical audit matter.
- Consider share liquidity and governance: ADSs trade over the counter, the ADR program is not open for new issuances, and the filing provides no timeline for relisting in the U.S.