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TheStreet Open House

LAN Airlines Reports Net Income Of US$320.2 Million For Full Year 2011 And US$112.5 Million For Fourth Quarter 2011

Stock quotes in this article: LFL

LAN Airlines S.A. (NYSE: LFL), one of Latin America’s leading passenger and cargo airlines, announced today its consolidated financial results for full year and fourth quarter ended December 31, 2011. “LAN” or “the Company” makes reference to the consolidated entity, which includes passenger and cargo airlines in Latin America. All figures were prepared in accordance with International Financial Reporting Standards (IFRS) and are expressed in U.S. Dollars.

HIGHLIGHTS

  • LAN reported net income of US$320.2 million for full year 2011. Results in 2011 were driven by solid demand, strong yields and high load factors in both passenger and cargo operations. Nevertheless, net income decreased 23.7% compared to the US$419.7 million reported in full year 2010, mainly due to the impact of the startup of LAN’s operations in Colombia and the volcanic ash cloud that disrupted air traffic throughout the region, as well as higher fuel prices, a portion of which was not recovered via the fuel surcharge mechanism.
  • For full year 2011, operating income reached US$539.7 million, a 13.4% decrease compared to the US$622.9 million in full year 2010. Operating margin reached 9.4% a decrease of 4.3 points compared to 13.8% in 2010.
  • For fourth quarter 2011, LAN reported net income of US$112.5 million, a decrease of 31.6% compared to the US$164.6 million reported in fourth quarter 2010. Results in the fourth quarter 2011 reflected costs related to the startup of LAN’s operations in Colombia and the ongoing effects of the volcanic ash cloud on domestic operations in Chile and Argentina, as well as the 28.8% increase in fuel prices, a portion of which was not recovered via the fuel surcharge mechanism. Nevertheless, LAN continued to show solid traffic growth and yield increases in both passenger and cargo operations.
  • Operating income reached US$169.5 million in fourth quarter 2011, a 19.6% decrease compared to US$210.7 million in fourth quarter 2010. Operating margin reached 11.0% compared to 16.2% in fourth quarter 2010.
  • Total revenues in fourth quarter 2011 reached US$1,535.3 million compared to US$1,302.5 million in fourth quarter 2010 due to a 20.8% increase in passenger revenues and a 15.8% increase in cargo revenues. Revenue increases continue to reflect solid demand trends in both passenger and cargo operations. Passenger and cargo revenues accounted for 69.9% and 27.9% of total revenues, respectively, in fourth quarter 2011.
  • In December 2011, the Company launched the LAN brand in Colombia, a significant step in the successful turnaround of the Colombian domestic passenger operations undertaken in 2011. In fourth quarter 2011, LAN recognized a US$21 million operating loss from its Colombian passenger operations. This loss includes significant costs related to the rebranding process, migration of LAN Colombia to LAN’s IT systems, marketing initiatives aimed at integrating Colombia into LAN’s regional network, and one-time maintenance costs.
  • In line with the Company’s expansion, the Company received 1 Airbus A319, 5 Airbus A320 and 2 Boeing 767-300 passenger aircraft in fourth quarter 2011.
  • During fourth quarter 2011, LAN and TAM S.A. (“TAM”) continued to advance on the merger transaction to create LATAM Airlines Group S.A. (“LATAM Group”). The companies have obtained all required anti-trust and shareholder approvals and are currently in the process of registering the transaction with the relevant securities authorities. LAN will launch the exchange offer promptly after all required registrations with securities authorities are complete and the Supreme Court of Chile has resolved LAN’s pending appeal regarding the carve-outs imposed by the TDLC ( Tribunal de Defensa de la Libre Competencia, Chile’s antitrust authority). The Company expects this will occur before the end of first quarter 2012.
  • In January 2012, LAN and TAM announced a revised estimate of expected synergies to be achieved through the merger of the two airlines. LAN and TAM estimated that the combined synergies arising from the proposed combination could increase LATAM Group’s annual operating income over time to between US$600 million and US$700 million, before depreciation and taxes, beginning four years after completion of the transaction. This represents a 50% to 75% increase over the initial synergy estimate of US$400 million per year, announced in August 2010.

For a full version of this release, please visit www.lan.com

About LAN

LAN Airlines is one of the leading passenger and cargo airlines in Latin America. The Company and its affiliates serve over 100 destinations around the world through an extensive network that offers full connectivity within Latin America, while also linking the region with North America, Europe and the South Pacific, as well as 70 additional international destinations through its various code share agreements. LAN Airlines and its affiliates have a leading position in their respective domestic markets of Chile and Peru as well as an important presence in the Argentinean, Ecuadorian and Colombian domestic markets.

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