Q2 FY2026
Filed Aug 4, 2026LATAM reports a 5.4% Adj. Operating Margin, despite fuel price increase, with revenues up 28% YoY driven by a strong commercial execution
Revenue grew 27.6%, supported by higher passenger and cargo yields, but aircraft fuel expense increased 93.1%, reducing adjusted operating income by 46.3%, adjusted EBITDA by 16.1%, and net income attributable to owners of the parent company by 48.2%.
Key metrics
as reported| Metric | Value | q/q | y/y |
|---|---|---|---|
| Total operating revenueother | US$4,182,638 | – | 27.6% |
| Passenger revenueother | US$3,613,485 | – | 27.9% |
| Cargo revenueother | US$510,009 | – | 21.8% |
| Other incomeother | US$59,144 | – | 63.9% |
| Total operating expensesother | (US$3,964,315) | – | 39.2% |
| Adjusted total operating expensesnon-GAAP | (US$3,955,672) | – | 38.5% |
| Wages and benefitsnon-GAAP | (US$558,704) | – | 25.0% |
| Aircraft fuelother | (US$1,712,179) | – | 93.1% |
| Commissions to agentsother | (US$78,852) | – | 38.6% |
| Depreciation and amortizationother | (US$486,059) | – | 13.8% |
| Other rental and landing feesother | (US$428,128) | – | 4.8% |
| Passenger servicesother | (US$109,856) | – | 28.3% |
| Aircraft maintenanceother | (US$220,948) | – | 24.2% |
| Other operating expensesother | (US$360,946) | – | (1.5%) |
| Operating incomeother | US$218,323 | – | (46.3%) |
| Adjusted operating incomenon-GAAP | US$226,966 | – | (46.3%) |
| Operating marginother | 5.2% | – | -7.7pp |
| Adjusted operating marginnon-GAAP | 5.4% | – | -7.5pp |
| Interest incomeother | US$39,607 | – | 46.8% |
| Interest expenseother | (US$164,465) | – | 5.9% |
| Income before taxesother | US$61,140 | – | (65.3%) |
| Net incomeother | US$117,914 | – | (43.9%) |
| Adjusted net incomenon-GAAP | US$158,882 | – | (43.9%) |
| Net income attributable to owners of the parent companyother | US$125,219 | – | (48.2%) |
| Adjusted net income attributable to owners of the parent companynon-GAAP | US$166,187 | – | (41.2%) |
| Net margin attributable to owners of the parent companyother | 3.0% | – | -5.6pp |
| Adjusted net margin attributable to owners of the parent companynon-GAAP | 4.0% | – | -4.6pp |
| Effective tax rateother | 92.9% | – | 59.5pp |
| Diluted earnings per ADSother | US$0.44 | – | (46.0)% |
| Diluted earnings per shareother | US$0.000218 | – | (46.0)% |
| Adjusted EBITDAnon-GAAP | US$713,025 | – | (16.1%) |
| Adjusted EBITDA marginnon-GAAP | 17.0% | – | -8.9pp |
| Passenger RASKother | US$8.1 cents | – | 17.5% |
| Adjusted passenger CASK ex-fuelnon-GAAP | US$4.5 cents | – | 5.6% |
| Passenger ASKsother | 44,489 million | – | 8.9% |
| Passengers transportedother | 21,098 thousand | – | 2.5% |
| Passenger load factorother | 81.8% | – | (1.7pp) |
| Cargo ATKsother | 2,158 million | – | 5.1% |
| Cargo RTKsother | 1,146 million | – | 3.4% |
| Cargo tons transportedother | 261 thousand | – | 1.9% |
| Cargo yield based on RTKsother | 44.5 US$ cents | – | 17.8% |
| Fuel price (with hedge)other | US$194.5 per barrel | – | 81.3% |
| Adjusted levered free cash flownon-GAAP | US$222,923 | – | – |
| First-half adjusted levered free cash flownon-GAAP | US$732,385 | – | – |
| First-half net cash inflow from operating activitiesother | US$1,542,912 | – | – |
| First-half purchases of property, plant and equipmentother | (US$673,760) | – | (27.9)% |
Segments
| Segment | Revenue | q/q | y/y |
|---|---|---|---|
| PassengerAn 8.9% increase in capacity, Passenger RASK of US$8.1 cents, and premium revenue representing 29% of total passenger revenues. | US$3,613 million | – | 27.9% |
| CargoA 17.8% increase in cargo yields, a 3.4% increase in cargo traffic (RTKs), and 261 thousand tons transported. | US$510 million | – | 21.8% |
| Other incomeAn increase in the LATAM Travel business and higher revenues from non-airline products within the LATAM Pass business. | US$59 million | – | 63.9% |
Full year 2026 outlook
- RevenueUS$17.3 - 17.7 billion
- NoteTotal ASK Growth vs 2025: 9.0 % - 10.0%
- NoteDomestic Brazil ASK Growth vs 2025: 8.0 % - 9.0%
- NoteDomestic Spanish Speaking Countries ASK Growth vs 2025: 4.0 % - 5.0%
- NoteInternational ASK Growth vs 2025: 11.0 % - 12.0%
- NoteTotal ATK Growth vs 2025: 5.0 % - 6.0%
- NoteAdjusted CASK ex fuel: 5.00 - 5.20 US$ cents
- NoteAdjusted Passenger CASK ex fuel: 4.50 - 4.70 US$ cents
- NoteAdjusted Operating Income: US$2.10 - 2.30 billion
- NoteAdjusted Operating Margin: 12.0% - 13.0%
- NoteAdjusted EBITDA: US$4.10 - 4.40 billion
- NoteAdjusted EBITDA Margin: 23.0% - 25.0%
- NoteAdjusted Levered Free Cash Flow: ≥US$1.3 billion
- NoteLiquidity: ≥US$4.7 billion
- NoteTotal Net Debt: ≤US$6.8 billion
- NoteTotal Net Debt /Adjusted EBITDA: ≤1.6x
- NoteAverage exchange rate (BRL/USD): 5.15
- NoteJet fuel price: Q3:US$147 | Q4:US$130
Capital returns
- Dividends paid: (US$37,995) for the three month period ended June 30, 2026.
- Dividends paid: (US$127,288) for the six month period ended June 30, 2026.
- Shareholders approved a new share repurchase program for the acquisition of up to 5% of the Company's total subscribed and paid shares over a period of up to five years.
What drove it
- Passenger revenues increased 27.9%, while Passenger RASK increased 17.5% to US$8.1 cents.
- Premium demand remained robust and premium revenues reached 29% of passenger revenues, up two percentage points from the first quarter of the year.
- Cargo revenues increased 21.8%, driven primarily by a 17.8% increase in cargo yields.
- LATAM Pass reached 56 million members, up 9% year-over-year, while elite members grew by 26%; LATAM Pass members accounted for 67% of total passenger revenues.
- Capacity increased 8.9% year-over-year, while the consolidated passenger load factor was 81.8%.
- The average number of aircraft in the fleet was 379, compared to 355 aircraft in the same period last year.
Concerns
- Aircraft fuel costs increased 93.1% versus the same period of 2025, and the average all-in jet fuel price increased 81.3% to US$194.5 per barrel.
- Adjusted operating margin declined to 5.4% from 12.9%, and adjusted EBITDA margin declined to 17.0% from 25.9%.
- Adjusted passenger CASK ex-fuel increased 5.6% to US$4.5 cents, with local currency appreciation contributing approximately US$0.2 cents to the increase.
- Passenger load factor declined to 81.8% from 83.5%.
- Foreign exchange gains and losses amounted to US$33 million in losses, primarily driven by the appreciation of local currencies compared to March 2026.
- Management stated that the macroeconomic context remains challenging and cited continued jet-fuel price volatility.
What to watch
- Execution against updated full-year adjusted EBITDA guidance of US$4.10 - 4.40 billion and adjusted operating income guidance of US$2.10 - 2.30 billion.
- Jet-fuel price developments relative to the full-year assumptions of Q3:US$147 and Q4:US$130 per barrel.
- The ability to sustain fare pass-through, Passenger RASK, premium demand, and cargo yields amid capacity growth.
- Fuel hedge coverage of 45% of estimated fuel consumption for 3Q26, 27% for 4Q26, 12% for 1Q27, and 7% for 2Q27.
- Fleet deliveries, including the expected delivery of 28 aircraft throughout the remainder of the year.
- The rollout of LATAM Airlines Brazil's Embraer E195-E2 network, which is expected to operate 42 domestic routes through March 2027.
Balance sheet and cash flow
- Cash and cash equivalents: US$2,650,857 as of June 30, 2026, compared to US$2,150,113 as of December 31, 2025.
- Available and fully undrawn revolving credit facilities: US$1,575 million.
- Liquidity: US$4,225,857 as of June 30, 2026, compared to US$3,725,113 as of December 31, 2025.
- Liquidity as % of LTM revenues: 26.2%, compared to 25.7% as of December 31, 2025.
- Total gross debt: US$9,025,248 as of June 30, 2026, compared to US$8,088,526 as of December 31, 2025.
- Total net debt: US$6,374,391 as of June 30, 2026, compared to US$5,938,413 as of December 31, 2025.
- Net Debt / Adjusted EBITDA (LTM): 1.5x, compared to 1.5x as of December 31, 2025.
- Net cash inflow from operating activities: US$1,542,912 for the six month period ended June 30, 2026, compared to US$1,540,971 for the six month period ended June 30, 2025.
- Net cash outflow from investing activities: (US$625,079) for the six month period ended June 30, 2026, compared to (US$870,478) for the six month period ended June 30, 2025.
- Net cash outflow from financing activities: (US$454,785) for the six month period ended June 30, 2026, compared to (US$620,967) for the six month period ended June 30, 2025.
- Net increase in cash and cash equivalents: US$500,744 for the six month period ended June 30, 2026, compared to US$110,770 for the six month period ended June 30, 2025.
Analysis
LATAM delivered strong top-line growth in the second quarter, with total operating revenue of US$4,182,638, up 27.6%. Passenger revenue increased 27.9% to US$3,613,485 on an 8.9% increase in passenger ASKs and a 17.5% increase in Passenger RASK to US$8.1 cents. The passenger load factor declined to 81.8% from 83.5%, but management described demand as resilient and highlighted premium revenue at 29% of passenger revenues. Cargo revenue increased 21.8% to US$510,009, supported primarily by a 17.8% increase in cargo yields and a 3.4% increase in RTKs.
The quarter's central pressure point was fuel. Aircraft fuel expense rose 93.1% to US$1,712,179 as the average all-in jet fuel price increased 81.3% to US$194.5 per barrel, while fuel consumption increased 6.8%. Total adjusted operating expenses rose 38.5%, outpacing revenue growth. This drove adjusted operating income down 46.3% to US$226,966 and adjusted operating margin down to 5.4% from 12.9%. Adjusted EBITDA declined 16.1% to US$713,025, with the adjusted EBITDA margin falling to 17.0% from 25.9%.
Profitability below operating income also weakened. Net income attributable to owners of the parent company was US$125,219, down 48.2%, and diluted earnings per ADS was US$0.44, down 46.0%. Interest expense increased 5.9% to US$164,465 in connection with aircraft financing, while foreign exchange gains and losses amounted to US$33 million in losses. The reported effective tax rate was 92.9%, compared with (3.9%) in the prior-year quarter. LATAM Pass remained a stated diversification contributor, reaching 56 million members, with members accounting for 67% of total passenger revenues.
Liquidity improved during the first half. Cash and cash equivalents rose to US$2,650,857 from US$2,150,113 at December 31, 2025, and total liquidity reached US$4,225,857. Total net debt was US$6,374,391 and Net Debt / Adjusted EBITDA (LTM) was 1.5x, unchanged from December 31, 2025. First-half net cash inflow from operating activities was US$1,542,912, while first-half adjusted levered free cash flow was US$732,385. The company also paid dividends of US$37,995 in the quarter and obtained shareholder approval for a repurchase program of up to 5% of total subscribed and paid shares.
Management reinstated the full set of full-year 2026 guidance parameters and increased adjusted EBITDA guidance to US$4.10 - 4.40 billion from the prior US$3.80 - 4.20 billion range shown in the release. Updated guidance calls for revenue of US$17.3 - 17.7 billion, adjusted operating income of US$2.10 - 2.30 billion, and adjusted operating margin of 12.0% - 13.0%. The outlook assumes jet fuel prices of US$147 per barrel in Q3 and US$130 per barrel in Q4. The key issue for the second half is whether improved fuel-price assumptions, fare pass-through, premium demand, cargo yields, and planned capacity growth can restore margins from the fuel-pressured second-quarter level.
Management, verbatim
Second quarter results clearly demonstrate the group's structural strength and its capacity to navigate a volatile and uncertain environment,
Ricardo Bottas, CFO of LATAM Airlines Group
LATAM group remains firmly committed to disciplined execution of its profitable growth strategy.
Ricardo Bottas, CFO of LATAM Airlines Group
Not in the filing
stated, not guessed- Gross profit and gross margin were not reported.
- Standalone quarterly net cash inflow from operating activities was not reported.
- Standalone quarterly GAAP or IFRS free cash flow was not reported.
- Forward guidance for gross margin, operating expenses, and tax rate was not reported.
- Prior-quarter comparisons were not reported for the financial metrics.
AlphAI analysis generated from the company’s SEC earnings filing (Form 8-K Item 2.02, or Form 6-K for a foreign private issuer). Every figure was cross-checked against the filing text; consensus estimates, price targets and share-price reactions are not shown because they are not in the filing. AI-generated research, not investment advice.