LATAM Airlines Group S.A. American Depositary Shares (each representing two thousand (2,000) shares of Common Stock)

Ladies and gentlemen, thank you for joining us and welcome to the third quarter 2025 LATAM Airlines Group earnings conference call. After today's prepared remarks, we will host a question and answer session. If you would like to ask a question, please raise your hand. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. Before I turn the call over to management, I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such constitute forward-looking statements. Any matters discussed today that are not historical facts Particularly comments regarding the company's future plans, objectives, and expected performance or guidance are forward-looking statements. These statements are based on a range of assumptions that LATAM believes are reasonable, but are subject to uncertainties and risks that are discussed in detail. in the published 20F, 2025 updated guidance, earnings release, financial statements, and related CMF and SEC filings. The company's actual results may differ significantly from those projected or suggested in any forward-looking statements due to a variety of factors which are discussed in detail in our SEC filings. Ricardo, please go ahead.

Hello, everyone, and good morning. Welcome to our third quarter 2025 conference call, and thank you all for joining us today. My name is Ricardo Bottas, and I am the CFO of Latam Airlines Group. Here with me is Roberto Alvaro, CEO, Andres Del Valle, Corporate Finance Director, and Torrey Crickle, Head of Investor Relations. And we will present our highlights and results for the third quarter. I will hand it over to Roberto to share his opening remarks. Once finished, I will present the key operational and financial figures, as well as provide other updates.

Good morning. Thank you, Ricardo, and thanks to all for being here today. This month, three years ago, LATAM emerged from financial restructuring. This period was one of learning, designing, and executing. LATAM defined a blueprint that has a collection of essential elements we needed to excel. This blueprint was implemented and is working. The group's network is the most expansive in the region and our loyalty program is by far the largest and most valued. No one else can connect South America within the region and to the world, reward loyalty and provide choice to customers as the LATAM group can. However, these results are the product of more than a co-branded credit card and a map of routes. At LATAM, we are obsessed with execution. Every day, in every interaction, we strive to be better, to depart on time, standard zero on every flight, to improve on what we do, seek and find cost-saving opportunities for each of our activities, to make sure we deliver what was promised to the customer at every interaction, and to provide the care and respect that each one of them deserves as they entrust their journey to LATAM. We have made considerable progress, but are not satisfied. I believe we can do better. Looking forward, we must ensure that we remain disciplined, disciplined in execution and disciplined in controlling costs. At the center of all of this is our people, a group of more than 40,000 employees who care about and love what they do every day. people who believe in what they do and what it represents. They are the engine and the spirit that drives LATAM Group forward, and the most important commitment is to them, making sure that they feel that every day it is worth being part of the LATAM family. As we look into the future, I'm confident that we can continue the journey of improvement and deliver on purpose that we have, which is elevating every single journey. Thank you very much. Now back to Ricardo for a description of how we are achieving profitable growth, improving the quality of our traffic, keeping high customer satisfaction, and maintaining our costs under control.

Thank you, Roberto. Please join me on slide three. This quarter, Latin Group continues to show the strength of its strategy, its unmatched network footprint, focus on discipline, operational, and commercial execution, as well as product improvement. In terms of operations, Latin Group transported over 22.9 million passengers, reinforcing its role as the leading airline group in South America. Capacity grew by 9.3% year-over-year, with healthy load factors of 85.4% on a consolidated basis. The group is seeing consistently high levels of customer satisfaction, increased customer preference, especially in the premium segment, and sustained customer loyalty. LATAM translated these operational performance into financial results, driven by an 8.4% increase in passenger unit revenues, while keeping unit costs broadly stable. Adjusted operating margin expanded to 18.1%, while adjusted EBITDA reached $1.15 billion during the quarter, and that income totaling $379 million. During this quarter, LATAM executed second share repurchase program for a total of $433 million, with companies disciplining approach to capital allocation. During this quarter, LATAM Airlines Group signed a major agreement for an acquisition of up to 74 Embraer E2 aircrafts. Moving to the next slide about the fleet and the succession and the transaction, the E2 will indeed enhance Latin group affiliates regional connectivity in South America. It represents an opportunity for our network to open up to 35 new destinations. They also offer a 30% improvement in full efficiency per seat compared to previous generation aircraft. reinforcing the group's commitments to sustainability and cost discipline. In total, LATAM Group will receive 24 E2s, with 12 deliveries scheduled for the fourth quarter of 2026 and the remaining 12 in 2027. With this addition, LATAM's order group now exceeds 140 aircraft through 2003, supporting the group's long-term growth and fleet modernization strategies. Initial deliveries are set to begin with LATAM Airlines Brazil, which will be the first to deploy these aircraft in its network. In Brazil, these aircraft will enhance capillarity across the country, enabling LATAM Group to expand into under-penetrated regions and destinations that are currently not served by the group. Over time and subject to market conditions and strategic evaluations, other LATAM affiliates may also incorporate the E-2s into their operations. Still on this slide, we expect to receive an additional eight aircrafts on this fourth quarter of 2025, and also we project to receive additional 44 aircrafts next year, including the E-2s. Let's move to the following slides. Slide five, as mentioned earlier, Latam Group delivered another quarter of strong traffic, performance transporting over 20, almost 23 million passengers with a consolidated load factor of 85.4%. Latam has been committed to profitable growth at the consolidated level passenger risk increased by 8.4% year-over-year in U.S. dollars, a result that reflects the strength of Le Pen's group's strategy and execution. A clear example of this is Brazil, where Latam underlined Brazil grill capacity by over 12% year-over-year. With this expansion, customer preference remained strong, and the load factor even increased by 2.2 percentage points. During the quarter, the Brazilian affiliate launched six new domestic routes, further supporting the strategy to deepen its presence and enhance connectivity in this market. In the Spanish-speaking countries, Latam Group's affiliates have also improved performance during this quarter, with passenger risk increasing 18% year over year. In particular, as compared to 2024, Latin Airlines Colombia experienced a stable domestic industry capacity, also seeing healthy demand. Demand is in the other Spanish-speaking affiliates. Domestic markets also remained healthy, except for Chile, where industry traffic figures are stable against last year. However, the focus on delivery execution and a higher premium product offering helped fully offset these effects. Meanwhile, the international segment continued to operate with high load factors, reflecting the relevance of the network and Latin Group's role as the main connector in the region with a diversified network. Altogether, the unit revenues, even in the context of increased capacity, reflect the effectiveness of the Group's commercial and customer strategies. It is the result of offering the right product in the right markets while executing with discipline. Looking ahead, LATAM group continues to focus on maintaining a sustained trajectory of discipline and profitable growth. The group is also focused on reaching the Goal of high single-digit consolidated capacity growth next year compared to 2025, supported by an ongoing focus on efficiency, a relevant fleet delivery schedule, and a margin preservation on top of a healthy demand environment. Moving to the next slide, slide six. Regarding our value proposition and customer experience, Latin Group remains committed to deliver a superior travel experience and increasing customer preference. During the quarter, the group continued advancing initiatives. The new Lima Lounge was inaugurated at the recently opened George Chavez International Airport, one of the group's main hubs. This new space offers a modern and comfortable environment that was previously inaugurated at the same terminal. Both part of a strategy to elevate the end-to-end experience for premium travelers and LATAM Pass members. Looking ahead, LATAM Group also announced the launch of its new premium comfort class, which will begin rolling out in 2027 on long-haul routes. This product reflects a commitment to offering more choices to our passengers for how they want to fly. This new class will be an additional option other than the existing economy and business class cabins for passengers seeking more space and personalized services. Finally, LATAM Group was once again recognized by APEX as a five-star global airline for 2026. This marks the fourth consecutive year the group has received these distinctions, based on independent passenger feedback data from over 1 million flights worldwide. It's a testament to the team's dedication and to the impact of the investment being made across the network. In addition, LATAM Cargo Group was named Air Cargo Airline of the Year by Air Cargo News, becoming the only South American carrier to win in any category, further underscoring the group's excellence across all segments of the business. Together, these efforts underscore LATAM Group's dedication to continuous improvement and reinforce its and the passenger experience, a focus that continues to support more passengers choosing to fly with LATAM and the group's ability to capture premium revenues. Next, let's move to the slide seven. I will now walk you through the financial results for the third quarter, a period in which LATAM once again reflects a solid execution. Total revenues reached $3.9 billion, an increase of 17.3% year over year, supported by growth across both passenger and cargo segments. Passenger revenues rose by 18.5%, with revenues from premium travelers also showing relevant growth, increasing by more than 15% compared to the same period last year, while car revenues grew by 6.3%. On the cost side, total adjusted expenses ex-fuel increased by 21% year-over-year. driven mainly by increased operations, especially international, and also a lower base of comparison due to the one-offs impact in the same period of last year. This increase was partially offset by 4.7% year-over-year decrease in jet fuel costs. That said, On the unit cost front, LATAM upheld its firm commitment to cost efficiency, a key pillar of its strategy. As a result, LATAM delivered an adjusted operating margin of 18.1%, testament to LATAM's operational excellence through profitable growth while also holding its cost control performance and advantage. Again, a non-negotiable and relevant part of LATAM's strategy. Lastly, net income for the quarter, totally $379 million, up 26% year-over-year. Even after 105 million negative non-operational income state impact related to the liability management exercise completed in last July, as disclosed to the market before. Net income for the nine months was $976 million. 38% higher than the same period of last year. Now moving to the slide eight. As you can see on this slide, Latam operational performance this quarter is a result of consistent group's strategy over the past several years. Since 2019, LATAM has steadily expanded its adjusted operating margin, rising from 7.1% to 18.1% in the third quarter of 2025. At the same time, LATAM has maintained tight control of its cost base. Adjusted passenger cask ex-fuel has been stable between 4.2 and 4.3 cents on the last 12 months basis, despite inflationary pressures and higher activity. This disciplined approach to cost has enabled LATAM to consistently grow margins while preserving efficiency in order to continue delivering sustainable and profitable growth going forward. With regard to cash generation, as shown on slide 9, in the third quarter, LATAM delivered strong adjusted operating cash flow generation, reaching $859 million, interest payments remaining contained at $52 million, mainly as a result of the debt refinancing executed in 2024. which enabled Latin's significant reduction of the cost of its non-fleet financial liabilities, which continued to translate into meaningful interest savings and overall cost of capital reduction. After both 2024 and 2025, interest payment savings expected for next year amount to $151 million compared to last year. And finally, during the quarter, LATAM executed its second share repurchase program for a total of $433 million. This reflects the group's capital allocation strategy and discipline. Let's move to the slide 10 to discuss LATAM's capital structure. LATAM ended the third quarter with a liquidity level of 25.8%. While likely above the upper end of the financial policy range, the execution of the share repurchase problem this quarter brought liquidity more in line with the target levels. LATAM ended the quarter with an adjusted net leverage ratio of 1.5 times, aligned with the full year guidance and well below the cap from the financial policy. A strong capital structure is not just a financial metric for LATAM. It's a strategic asset. It gives the group the flexibility to pursue growth where it's most profitable. Return capital to shareholders when appropriate and manage the most accretive capital structure. This financial strength, combined with assets and cost advantage, set LATAM apart from its peers and remains central to its ability to compete, adapt, and lead into regional region over the long term. Please join me on slide 11. Given this solid year-to-date performance, supported by continued customer preference in the discipline execution of a strategy centered on profitable growth, cost efficiency, and financial strength, LATAM has updated its full year 2025 guidance. Consolidated capacity is projected to remain broadly in line with previous estimates, while revenues are expected to be higher within a tighter range. In terms of margins, adjusted EBITDA guidance has also been refined to be between $4 and $4.1 billion, close to 9% higher than the previous guidance. The updated range reflects a more constructive outlook, now positioned higher than the previous estimate. to be between 4.35 cents and 4.40 cents, mainly due to FX valuation in this period. Liquidity was also updated after the execution of the share repurchase program, and we are maintaining the same estimate to be above $4 billion by the end of this year. mainly consider the adjusted EBITDA improvement in the cash generation, the forecasted leverage for year, and is now at 1.4 times. And for next year, as I mentioned before, the group is focused on reaching the goal of high signal digital capacity growth compared to 2025, supported by an ongoing dedication to efficiency and margin preservation. Finally, and before we move to the Q&A, I'd like to take a moment to remind you that LATAM will be hosting an Investor Day in New York on December 9th, 2025. We invite you also to tune into the live webcast on this event. With that, we now open the line for your questions.

We will now begin the question and answer session. Please limit yourself to one question and one follow-up. If you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute. Please stand by while we compile the Q&A roster. Your first question comes from the line of Guillerm Mendez with J.P. Morgan. Your line is open. Please go ahead.

Hey, good morning, Roberto, Ricardo, Andrea, Story. Thanks for taking my question and congrats on other pretty strong results. My question is on the international front. When compared to Brazil domestic and Spanish-speaking countries, it looks like the press performance was relatively weaker, although it's still growing on a year-over-year basis. Can you share more details on how international it's tracking, maybe on a per region basis, which other routes have been pressuring the overall results and which are doing relatively better? Thank you.

Yes. Hi, Guillermo. Good morning and thanks. So we have seen in general stable and healthy demand in most regions. of the international segments, I would say that South America to the US is a little bit softer than what we used to see in the last few months. And this is, in our view, linked to people probably avoiding going to the US and moving themselves a little bit into other regions. Also, the northern part of South America, the regional traffic, which is international flights on the northern part, it's a little bit softer as well. But in general, nothing that we have seen that is worrisome and concerning with respect to the level and the quality of the demand. So in that sense, we remain confident on the prospects for the remainder of the year.

Very clear, Roberto. Thank you. When you say softer into the U.S., is it more leisure-related or even corporate-related? No, this is more issue related. Okay, very clear. Thank you.

Your next question comes from the line of Mike Lindenberg with Deutsche Bank. Your line is open. Please go ahead.

Oh, yeah. Hey, good morning, everyone. I have a couple here. I guess, Roberto, can you just update us on this measure in Brazil to potentially – force airlines to offer up a free bag? Is that just domestic? Is that domestic and international? And where is that in the legislative process right now?

Yes. Hi, Michael. How are you? Good morning. So a couple of weeks ago, the lower chamber in Brazil passed a law to allow basically passengers to carry a bag without being charged and also select seat without charge on seat that have no distinction in terms of space. This, as the law was passed, was for both domestic and international flights. It affects eventually, therefore, domestic and international carriers into Brazil. The law needs to go to the Senate. It has not been presented at the Senate floor at this point in time, and we have no clarity if that will happen and when it will happen. So for the time being, that still has that second step. Ultimately, presidential veto is also something that the Brazilian Constitution allows for laws like this. So we will see.

You know, the reason I ask is, and you mentioned international, is that, all right, domestic is one thing, but international, from the perspective, I know at least from the U.S., They may view it as a potential tax or additional cost that's unilateral and therefore in violation of the bilateral. So I just wonder how they implement it internationally when international carriers have different ways in how they price their product and obviously are protected by the bilateral arrangements between Brazil and those countries.

Yes, I completely agree with you, Michael. And of course, LATAM does not support the passing of the law. And we have, together with the IATA and ABEAR in Brazil, been making very clear and explaining the impact of this potential measure. This is not good. clearly for the airline industry in Brazil. And I believe it has the potential of ending up with higher fares for passengers that fly, whether into Brazil or outside or coming to Brazil. So I think that at an industry level, we are making a lot of effort in making sure that everybody understands the impact that this has on traffic and on the industry. And we're completely sure that this would not be a positive measure for us all.

Great. And then just my second on, on capital allocation. Um, and this is Roberto to you or Ricardo, how you think about it longer term, you've, you've had a nice balance. Um, obviously the dividend is, you know, statutory, but you know, you pay the dividend, you've been paying down debt. You've also been buying back stock is as we think about, you know, those sort of various levers going forward. Should we expect to see, say, regular reductions in shares outstanding, or was that more of just an opportunistic initiative on your part? Thanks for taking my question.

Thanks, Mike. So first of all, I mean, as we think about capitalization, do remember that the development of the business and how we see and foresee opportunities for growth is the priority. So that will always take over other potential decisions. At this point in time, we believe we have done a balanced mix of initiatives and we remain very close. to the target that we have in terms of financial policy. So we're content with what we have done during 2025. Going forward, looking forward, I think we will see. I mean, this is a board decision. Ultimately, the dividend payout in Chile per law is a shareholders meeting, a shareholder decision, which will happen in April. But all options for... for capital allocation and growth investment remain open. And as we progress in the next few months, the company will for sure explain to the market how do we continue depending on our results and, of course, the situation in the region and the opportunities we may see.

Great. Thank you.

Thank you. Your next question comes from the line of Gabriel Rezend with Itao BBA. Your line is open. Please go ahead.

Hi, Roberto, Ricardo. Thanks for opening up for questions and congrats on these very strong results. I would like to follow up on your comments regarding the investments and the efforts you have been putting into bringing a more premium experience to the customers and just trying to understand how relevant it has been so far in terms of the revenue growth as well as your profitability. So if you could maybe provide some color on how relevant these premium revenue are at this point, you mentioned that it has grown by 15% year on year. So just trying to understand how much it represents out of total passenger revenue at this point and how much could it represent in the future as you bring more efforts into this. Thank you.

Yes, thanks for the question. So first, I think it's important to remark what is it what we're experiencing. First, yes, premium revenue is growing faster than capacity and a relevant portion of the improvement that we see in the RASC for Spanish-speaking companies. domestic Brazil and to an extent international, is due to a change of mix where we have a larger proportion and portion of premium revenue coming from there. And that's both corporate and as well, let me call it highly sure, I don't know if that's a context or the concept in English, revenue that we're seeing. Now, this is a function of, in my mind, two things. Most importantly is impeccable execution and care in every interaction that we made for the customer. Secondly, it's improvements in products, as you probably saw in the presentation, the Lima Lounge, Premium Economy International and other things. But as we have, in a way, de-commonitized, if you want, our product, we have focused very much on experience. And that, I think, has brought a willingness to pay that customers probably had. that we were simply not exploiting because our product probably was not as good as they were expecting. And now we are, I think, very clearly seeing the impact that this has in our research.

Thank you. That's clear.

As a reminder, if you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press star nine to raise your hand and star six to unmute. Our next question comes from the line of Felipe Balavona with Santander. Your line is open. Please go ahead.

Hi, everyone. Can you hear me? Yes, we can. Great. Awesome. So, well, first of all, congrats on the strong results. I have a couple of questions here. First, following actually on the first question of the Q&A, what was the reason behind the growth slowdown in international traffic recorded in October? Is international traffic being dragged down by Colombia? The last couple of data points of the IDOCV have shown that showed a slowdown in your international, not only in the domestic has been the case for the previous months, but also in the international front. And also my second question, if you have any news regarding a potential buyback. Thank you, everyone.

Yes. Hi, Felipe. So first of all, our international Colombia operation is very small as compared to the total international traffic. We have not seen in particular an impact on international traveling in and out of Colombia, and it's very unsubstantial to the size of our traffic, particularly out of Brazil and secondly Chile and then Peru. No, I guess this is a function, as I explained in the beginning, softer demand into the US, particularly on leisure traffic. We believe that this is linked to people probably deciding to go elsewhere and probably spending more time within their countries and to the region. But we don't see this as a fundamental slowdown in demand. It's probably assigned to more external factors. So that's the main reason. Having said that, do remember that you'll expect that our ASK growth for the whole of 2025 is going to be around 10 to 10.5% increase in capacity, which is a significant increase in capacity. And that's a reflection of a good level of demand that we see to operate this level.

That's a very good call. Thank you, Roberto. Do you have any news regarding a potential buyback? Sorry. You're fine.

As I said before, at this point in time, we are close to the financial policy targets that we have. Going forward, we will see what the board decides and do remember that the company has a range of alternatives to allocate capital and also be mindful that the first priority will always be growing the business. And after that, any excess that we believe should go back to shareholders, the company has a few tools to decide on how to do it. So rest, stay tuned eventually.

Understood. Thank you very much again and congrats on the results. Thank you.

Your next question comes from the line of Jen Spies with Morgan Stanley. Your line is open. Please go ahead.

Hello, thank you for taking my questions and congrats on the very strong results. Just wanted to know if you could provide any context on next year. How is the order book, the booking curve looking like now? And also, how much do you expect to grow in terms of ASKs next year based on your fleet plan? That would be very helpful. And if you could remind us, how many leases do you have expiring next year? I would very much appreciate that. Thank you.

Yes. Hi, gents. So as we explained in the press release and Ricardo mentioned here, we expect high single-digit ASK growth, or that's our goal for 2026. We will provide more detailed guidance on 2026 in a few more weeks. You asked about the first part of the question. Fleet. And by the way, yes, fleet. So we have... On slide four of the presentation, you can see 41 arrivals of A320 family and A3 and E2 aircraft plus three white bodies. We have relatively few leases. I don't have the correct figure here, the right figure, but we have the option to, of course, extend them if we want to. And our expectation at this point in time is to end up the year with a total fleet of just over 400 aircraft, around 400. And you can see that as well in the press release. And sorry, I'm just looking at a note here. They're sending me a... Yes. And last thing, just remind me to make you feel comfortable that we have the fleet we need to grow for what we're expecting next year. So I don't expect, we don't expect that we would need to make changes in our fleet plan for the capacity we have. The first part of the question you asked me now, remember, is booking curve into the beginning of the year. Very early still, particularly on domestic markets, the percentage of book seats is very low. But what we're seeing initially for the first couple months of of the year looks in the current trend that we have seen on third quarter and that we expect for the rest of the year.

Perfect. Thank you.

Your next question comes from the line of Ewald Stark with Vice. Your line is open. Please go ahead.

Hi. Thanks for taking my question. I want to know if you can provide any color behind what is driving the lower percentage of head fuel during this quarter.

That's great.

Especially, I would like to focus on if there is anything on booking going forward that is driving this lower percentage of hedge fuel, or maybe you're looking at something different about forecast of oil. Thanks.

Okay. Hi there. Yeah, thanks for the question. If you look at the press release, it's nothing that different from what we usually do. You have about 47% for Q4 of this year, and then 33% for Q1. And of course, as soon as we approach the next quarters, we will get, of course... Consistent with the policy and increased at the fuel heads. But I wouldn't say that this is any different from what you've seen in the past. It's a very standard, I think, coverage that we have today for fuel price. Nothing that really debates from the policy.

But financial statements say that you have a 26% hedge fuel for the next 12 months, starting from first quarter of 2026. Every quarter is below 30%.

so yeah if you look at the detail on the earnings release it's more detailed here i think at the financial that's just about no weighted average about you know what's going forward but here you have the actual percentages covered for every quarter again 47 for q4 33 for q1 so that's a difference you would look at the financials here Then this is as of November 14, 2025. It's more updated. I think, of course, the financials, they call for, I think, September 30th. But this is you have the most updated vision of the current portfolio as of November 14th.

Okay, perfect.

Thanks.

As a final reminder, if you would like to ask a question, please raise your hand now. If you have dialed into today's call, please press star 9 to raise your hand and star 6 to unmute. Your next question comes from the line of Guillermo Mendez with JP Morgan. Your line is open. Please go ahead.

Yes, thanks for the follow-up. Regarding the pilot strike in Chile, can you share some potential expected impact for the fourth quarter? I understand it should be immaterial, but I just wanted to hear your thoughts on what you expect in this negotiation. Thank you.

At this point in time, we have no clarity of the potential impact, so we will update that if necessary at an appropriate time.

Got it. Thanks, Roberto.

There are no further questions at this time. I will now turn the call back to Ricardo Botas for closing remarks.

I'd like to thank you all to participate in today's call and remind you that we will have our investor day again on December 9th. So we'd love to have all of you participate on that opportunity to get more information from the company and additional updates. Thank you all and have a good day.

This concludes today's call. Thank you for attending. You may now disconnect.