Latam Riding Delta JV, Growing Demand to Post-Bankruptcy Profit

Nine months after emerging from Chapter 11 bankruptcy in the United States, Chile-based Latam Airlines Group is turning a profit, fueled by a new joint venture with Delta Air Lines, increasing passenger revenue and a broadening service map. 

"We are like a renewed Latam," VP of sales Andreas Schek this month told BTN at the Global Business Travel Association convention in Dallas. 

The carrier emerged from bankruptcy in November 2022 after declaring it in 2020. In September 2022, the carrier received approval for its joint venture with Delta Air Lines, and as of May flies to 143 destinations. 

The company earlier this month reported second-quarter net income of $145 million on total revenue of $2.7 billion. Passenger revenue for the quarter was up 32.9 percent year over year to $2.3 billion. Its consolidated capacity reached 93.2 percent of Q2 2019 levels. Its July load factor was 86.8 percent.

"We exited with a completely different cost discipline," Schek said. "During Chapter 11, we were able to restructure the balance sheet and be more competitive in markets. That has helped us a lot. Also, we are focusing now on our commercial strategy. We are constantly introducing new routes, finding new ways to get better products to our customers."

Latam's premium economy cabin now is in all of the carrier's domestic and regional flights, Schek said. He added that the company projects to operate 1,500 flights per day by the end of the year.

"We are always trying to improve," Schek said. "We keep expanding, and with the Delta joint venture, we are investing in this seamless experience. There are a lot of things going on, but I think the most important thing is the discipline. We are focusing heavily on delivering consistently the experience we promise our customers."

Latam, Delta Joint Venture

The Delta joint venture has helped Latam, Schek said. Year to date, volume on flights between North America and South America is up 20 percent year over year, he said. By year-end, he projects that volume to be up nearly 40 percent compared with prior to the joint venture. 

Two of the new routes announced are already active: São Paulo-Los Angeles and Bogota-Orlando. Five additional and expanded routes will start before the end of this year: On Oct. 29, Lima-Atlanta and Medellin-Miami will launch. Rio de Janeiro-New York follows on Dec. 16, and Cartagena-Atlanta service will begin Dec. 22. A second daily flight will launch on Oct. 29 between Bogota and Atlanta.

Latam is continuing to invest in the partnership particularly in the systems, such as baggage check-in, that make flying those routes as seamless as possible for both Latam and Delta customers, Schek said. "We are the only airline in South America that provides premium economy, so you can book a flight from Salt Lake City through Atlanta to Santiago, then fly back through Miami. And the complete route you will have a seamless experience."

The "first priority" of the JV routes is the corporate market, he added. "We have a very similar cultural mindset. Both companies are very involved in the customer experience and understanding how to get better. Both teams are very boots-on-the-ground."

Corporate Business Recovery

About 35 percent to 40 percent of customers on the JV routes are business travelers, Schek said. Further, Latam's business travel is continuing to recover.

On routes between North and South America, business traffic is about 70 percent compared with 2019 levels, Schek said. For traffic originating in the U.S., it's about 60 percent. But for flights starting in South America, it's between 83 percent and 85 percent recovered. Further, in the domestic markets, like Brazil, "we have already exceeded pre-Covid volume in the corporate market."

Schek noted two verticals that are particularly important: mining and financial. The mining business continued to be strong even through the pandemic, he said. 

In domestic markets, since the pandemic, Latam has added more than 10 routes within Brazil and nearly 10 in Colombia. "In terms of routes, we have a more extensive network than we did before the pandemic," Schek said. In terms of traffic, "the numbers are piling up. We are very close to 100 percent of the volume we had before. For example, year-to-date, we transported 20 percent more passengers than last year." 

The company through July transported about 41 million passengers year to date, and Schek said projections are for close to 80 million by the end of the year.

Sustainability Efforts

The carrier by the end of June had eliminated 88 percent of single-use plastic on its aircraft and plans to fully eliminate them by year-end. Latam also recycles its uniforms and textiles and has artisans turn them into new products, such as passport holders, luggage tags, wallets and keychains. 

In addition, Schek noted that since launching its corporate offset program in January 2022—recently renamed 1+1 Offset to Conserve and formerly known as Let's Fly Neutral—Latam has offset nearly ­25,000 tons of carbon. The program allows corporate clients to offset their flying on Latam, and the carrier matches the number of tons offset by the companies on a one-to-one basis. The number of companies in the program to date is more than 140, according to the carrier.

One of the projects the offsets support is "Nii Kaniti" in Peru, which focuses on protecting the Peruvian rainforest and preventing deforestation by expanding sustainable forest management. Latam also supports CO2Bio in Colombia, which is dedicated to the conservation and restoration of the Colombian Orinoquía wetlands region. 

Schek added that despite the progress made so far, Latam has had a "very big challenge" in educating corporate travelers and companies to see the benefits of the program. 

"It's easy to offset, but if you want to put money where your mouth is, it's more difficult," Schek said. "For us sustainability is a challenge we all face as a society. That is why we want to double the amount that the companies pay to just make it happen. It's not the airlines, it's not the company, it's not the flyer, it's not the community. It's everyone together. We want to create awareness and this program helps us with that."

Latam did not provide how much it costs companies to offset their carbon emissions.