LAN Airlines S.A. (NYSE: LFL), one of Latin America’s leading passenger and cargo airlines, announced today its consolidated financial results for the third quarter ended September 30, 2009. “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.
—LAN reported net income of US$52.1 million for the third quarter 2009. This represented a 37.3% decrease compared to net income of US$83.0 million in the third quarter 2008. Excluding non-operating extraordinary items recognized in the third quarter 2008, net income decreased 58.3%.
—In the third quarter 2009, consolidated revenues declined 19.1%, driven mainly by lower yields in both the cargo and passenger businesses. This was partially offset by a 14.3% decline in operating expenses, driven mainly by lower fuel costs.
—Operating income reached US$92.4 million in the third quarter 2009, a 46.1% decrease compared to US$171.3 million in the third quarter 2008. Operating margin reached 10.1%, compared to 15.1% in the same period of 2008.
—Third quarter 2009 results continued to be impacted by fuel hedging losses, although to a much lesser extent than in previous quarters. The fuel hedging loss during the quarter amounted to US$14.4 million compared to a fuel hedging gain of US$29.2 million in the third quarter 2008. Excluding the impact of fuel hedging, LAN’s operating margin reached 11.6% in the third quarter 2009 compared to 12.5% in the third quarter 2008.
—During the quarter LAN undertook several initiatives to increase the value of its frequent flyer program, LANPASS, which currently has 3.1 million members worldwide. These initiatives included the launch of a new Flexible Award Exchange Program, as well as the launch of a LANPASS Visa card in Ecuador and co-branding campaigns in Argentina, Uruguay and Chile.
—During the quarter, LAN completed important financing initiatives with the objective of ensuring the Company’s long-term growth plans. LAN finalized securing long-term financing for three Boeing 767 aircraft to be delivered between 2009 and 2010. This financing is expected to be supported by the US EX-IM Bank. Furthermore, LAN is in the final stage of securing financing for three spare engines, to be supported also by the US EX-IM Bank. In addition, the Company arranged bank financing for Pre Delivery Payments (PDP’s) related to 15 Airbus A320 family aircraft to be delivered between 2010 and 2011. These financing initiatives include attractive interest rates that are in line with LAN’s average cost of debt. LAN’s solid financial position and ample liquidity continue to be reflected in the Company’s BBB Investment Grade international credit rating (Fitch).
—In line with LAN’s continued commitment to expand its route network and improve connectivity for passengers traveling within the region, LAN Peru continued to strengthen its regional operations based at its hub in Lima. With this objective, LAN Peru launched new regional routes from Lima to Cali, Colombia; Punta Cana, Dominican Republic; Cordoba, Argentina; and Cancun, via Mexico City.