LATAM Airlines Group S.A. — 2022 Form 20-F Summary
Reporting period: Fiscal year ended December 31, 2022. Filed March 9, 2023. This is an annual report, not a standalone fourth-quarter filing; the text does not provide clear Q4-only financial results. Financial statements are audited and prepared under IFRS as issued by the IASB.
Business context and reporting period
LATAM operates passenger and cargo airlines across South America, with domestic services in Brazil, Chile, Peru, Colombia and Ecuador. The year reflected a substantial recovery in air travel as restrictions eased. December 2022 capacity reached 85.2% of December 2019 levels; full-year passenger capacity was 76.3% of 2019. LATAM transported approximately 62.5 million passengers and operated 310 aircraft at year-end, including 34 classified as held for sale.
The company emerged from Chapter 11 on November 3, 2022, following a restructuring that materially changed its capital structure and ownership. The plan provided approximately US$8.19 billion through new equity, convertible notes and debt. Nearly all convertible notes had converted into shares by year-end, substantially diluting pre-reorganization shareholders.
Financial and operating performance
| Metric | 2022 | 2021 |
|---|---|---|
| Operating revenue | US$9.36 billion | US$4.88 billion |
| Passenger revenue | US$7.64 billion | US$3.34 billion |
| Cargo revenue | US$1.73 billion | US$1.54 billion |
| Gross margin | US$1.26 billion; 13.4% of revenue | Loss of US$79.5 million |
| Operating income (loss) | US$1.21 billion | Loss of US$3.43 billion |
| Net income (loss) | US$1.34 billion | Loss of US$4.65 billion |
| Net cash from operating activities | US$96.8 million | Use of US$174.2 million |
| Net cash used in investing activities | US$749.0 million | US$552.5 million |
| Net cash from financing activities | US$855.0 million | US$109.6 million |
| Cash and cash equivalents at year-end | US$1.22 billion | US$1.05 billion |
Revenue rose 91.7%, led by the recovery in passenger operations. Passenger RPKs grew 84.0% and passenger capacity (ASKs) grew 68.3%; the combined passenger load factor increased 6.9 percentage points to 81.3%. International capacity rose 142.3% and its load factor reached 83.0%. Passenger RASK increased to 6.71 U.S. cents from 4.94 cents.
Cargo revenue increased 12.0%, but cargo capacity grew faster than traffic: ATKs rose 30.7%, RTKs 16.4%, and load factor fell 6.9 points to 56.5%. Cargo yield declined 3.8%, and cargo revenue per ATK declined 14.3%.
Cost of sales increased 63.3% to US$8.10 billion, slower than revenue growth. Fuel costs increased 161% to US$3.88 billion, reflecting a 73.4% increase in average fuel price and higher consumption. Fuel represented 40.3% of operating expenses. Cost per ASK declined to 8.47 cents from 9.21 cents; excluding fuel price variations, it declined to 5.06 cents from 7.01 cents.
Year-end cash and cash equivalents were US$1.22 billion. The company also had US$1.1 billion of fully undrawn revolving facilities. Cash from operations turned positive, but investing outflows exceeded operating cash generation. Capital spending included US$780.5 million for property, plant and equipment and US$50.1 million for intangible assets.
At year-end, total liabilities were US$13.18 billion and total equity was only US$30.7 million, versus negative equity of US$7.07 billion in 2021. Current assets were US$3.54 billion against current liabilities of US$5.09 billion. The balance sheet reports US$4.57 billion of interest-bearing loans and US$2.22 billion of lease liabilities; management separately cites approximately US$4.7 billion of nominal financial debt liabilities, including US$305 million of disputed claims. Debt at emergence was approximately US$6.8 billion. Average interest on outstanding debt was 9.3%; approximately 52% was fixed-rate or capped.
Material changes versus prior comparable period
- The 2022 profit followed a 2021 net loss, but includes material restructuring and financial items: US$1.68 billion of restructuring gains and US$1.05 billion of financial income, principally related to emergence from Chapter 11, claim settlements and reversals of accrued interest. Other gains and losses included a US$347.1 million loss, principally from marking aircraft held for sale to net realizable value.
- Fuel costs, wages, landing fees and passenger-service expenses rose as operations recovered and prices and inflation increased. Fuel costs alone rose by approximately US$2.39 billion.
- Liquidity improved from year-end 2021, with cash rising by US$169.8 million and operating cash flow turning positive. The year also included substantial debt repayments, new financing and equity proceeds associated with the restructuring.
- The restructuring reduced debt by approximately 35% at emergence and converted a large portion of claims into equity. The number of subscribed and paid shares grew to 605.2 billion, from approximately 606.4 million shares before the capital increase.
Outlook, risks and unusual items
For 2023, management expects passenger ASK growth of 20%–24% versus 2022, including international growth of 37%–40%, Brazil domestic growth of 8%–11%, and Spanish-speaking-country domestic growth of approximately 8%–11%. Cargo ATKs are expected to increase 20%–23%. Management says it will prioritize network growth, cost efficiency, profitability and cash generation. These are forward-looking estimates, not assurances.
As of February 28, 2023, the company had hedged approximately 26%, 44%, 28% and 13% of estimated fuel consumption for Q1 through Q4 2023, respectively. The filing identifies fuel prices, foreign exchange, interest rates, inflation, competition, economic conditions, labor relations, airport capacity, aircraft supply and continuing COVID-19 effects as significant risks. Higher SOFR can raise financing costs; 48% of interest-bearing debt was variable-rate at year-end.
Material contingencies include tax, labor, consumer and competition matters. The company reported US$942.5 million of provisions, including US$626.4 million for tax contingencies and US$175.6 million for labor contingencies. Management believes the described proceedings should not materially adversely affect the company, but outcomes remain uncertain. Approximately 64 Chapter 11 claims with an estimated value of US$354.7 million were still being reconciled at year-end.
On November 18, 2022, a LATAM Peru aircraft collided with a fire engine during takeoff in Lima; two firefighters died. No passengers or crew died. The investigation remained ongoing, the aircraft damage was insured, and the ultimate financial impact was not yet clear. LATAM reported that the 2022 net profit was not eligible for dividends because of accumulated losses.
LATAM ADSs were delisted from the NYSE in 2020 and traded over the counter under LTMAY at the filing date. The ADR program was not open for new issuances, and the filing gave no timeline for reopening or relisting. Management and the auditor concluded that disclosure controls and internal control over financial reporting were effective at December 31, 2022; the auditor issued an unqualified opinion on the financial statements and internal controls.
Important facts for investors to verify
- Reconcile reported 2022 profit to recurring operating performance, excluding Chapter 11-related restructuring gains, financial income and asset-sale valuation losses.
- Confirm the appropriate debt measure, including lease obligations, disputed claims, debt maturities, interest rates and the liquidity covenants attached to revolving and exit facilities.
- Assess whether cash generation can support the projected 2023 capacity growth, aircraft commitments and other capital needs; verify actual progress against guidance.
- Review fuel-price and currency exposure, hedge coverage and the impact of variable-rate debt as SOFR and other market rates change.
- Track resolution of remaining Chapter 11 claims, tax and other litigation, and the Lima accident investigation and any resulting costs.
- Verify current share count, ownership and potential dilution, as well as ADS liquidity, depositary status and any progress toward U.S. market relisting.