Specialist
Former executive at LATAM Airlines Group SA
Agenda
- Pandemic's impact on LATAM Airlines (SNSE: LTM)
- LATAM Airlines’ competitive positioning and market share outlook vs Gol (NYSE: GOL), Azul Airlines (NYSE: AZUL), Avianca (BVC: PFAVH), JetSmart, Abra Group and others
- Expectations for the firm’s ability to manage cost pressures and post-bankruptcy margin and profitability forecasts
- 2022 outlook, including potential market consolidation
Questions
1.
How has the pandemic impacted Latin American carriers? The reduced capacity and demand are obviously well-known, but could you outline the less appreciated impacts?
2.
You outlined the effects we’ve seen over the last two years, but how are things shaping up today across key markets such as Brazil, Chile, Colombia, Ecuador and Peru? What trends are you seeing in the LATAM market today?
3.
How is LATAM Airlines positioned, and what should investors and creditors focus on most around the company and its competitive position?
4.
You seem to believe that LATAM Airlines’ ability to compete moving forward is contingent upon keeping cost per available seat-kilometre low. What increase here would be alarming to you? Would a 10% increase materially hinder the company’s ability to compete?
5.
How do you expect LATAM Airlines’ market share to evolve across the key markets – Chile, Brazil, Peru, Ecuador and Colombia – over the next year or so and then further out?
6.
LATAM Airlines implemented initiatives to reduce costs by more than USD 900m annually. Can the firm still meaningfully manage and reduce costs from here? What other levers can it pull to reduce costs, if any?
7.
How do you expect LATAM Airlines’ market share battle with Abra to shake out? In which markets might LATAM Airlines gain or lose share over the coming years?
8.
Coming out of bankruptcy, LATAM Airlines has a plan to be free cash flow-positive in 2023 and to achieve pre-pandemic profitability in 2024. Are these forecasts realistic, aggressive or conservative in your view, and how do you think about the free cash flow moving forward?
9.
How would you assess LATAM Airlines’ ability to withstand the various risk factors amid cost pressures rising everywhere? You talked about fuel, but there’s also cost inflation generally and wages rising. How should we think about the company’s ability to weather the storm if costs continue to rise?
10.
LATAM Airlines is projecting a record 11.2% operating margin by 2026. What does a realistic operating margin look like going forward for the firm? Will it be more or less profitable than historically?
11.
To play devil’s advocate, what could go wrong for LATAM Airlines’ plan to emergence? We’ve touched on the costs, but are you concerned about anything else, or are there any warning signs investors should watch out for? You seem to be painting a rosy picture.
12.
Is there anything else important to discuss about LATAM Airlines, its competitive position or any cost pressures?
13.
What consolidation would you expect? What might M&A activity look like over the next 12-24 months?
14.
What do outsiders tend to misunderstand or under-appreciate about the LATAM market? Is there anything investors should know about this market?
15.
What will the LATAM market look like in 2-10 years?
16.
Is there anything else investors should monitor over the next 12 months relating to LATAM Airlines?
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