Q4 2022 LATAM Airlines Group SA Earnings Call

Speaker 1: You you, you.

Operator: Good day, and thank you for standing by. Welcome to the Q4 2022 LATAM Airlines Group Earnings Conference Call. At this time, all participants are in a listen-only mode. After the speakers' presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Before I turn the call over to management, I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements.

Speaker 2: Good day and thank you for standing by. Welcome to the fourth quarter 2022 LATAM Airlines Group Earnings Conference Call. At this time all participants are in a listen only mode. For the speakers presentation there will be a question and answer session.

Speaker 2: To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again. Please be advised that today's conference is being recorded. Before I turn the call over to management, I would like to remind you that certain statements may be read at the same time as the key word.

Operator: Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance or guidance, are forward-looking statements. These statements are based on a range of assumptions that LATAM Group believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings. The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. If there are any members of the press on the call, please note that for the media, this is a listen-only call. I would now like to hand the conference over to your speaker today, CFO of LATAM Airlines Group, Ramiro Alfonsín. Please go ahead.

Speaker 2: or guidance are forward-looking statements. These statements are based on a range of assumptions that LaTann Group believes are reasonable but are subject to uncertainties and risks that are discussed in detail in our CVN and SEC filings.

Speaker 2: The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

Speaker 2: And if there are any members of the press on the call, please note that for the media, this is a listen-only call. I would now like to hand the conference over to your speaker today, CFO of LATAM Airlines Group, Ramiro Alfonsin.

Ramiro Alfonsín: Thank you, Gigi. Hello, everyone, good morning. Welcome to our Q4 2022 Conference Call. Thank you for joining us today. My name is Ramiro Alfonsín. I am the CFO of LATAM Airlines Group. Here with me today is Mr. Roberto Alvo, CEO of LATAM Airlines Group; Mr. Andrés Del Valle, VP of Corporate Finance; and Tori Creighton, Head of Investor Relations. We will present our highlights and results for Q4 2022. Let me start by saying we are delighted to have this instance again, after having our conference calls with the market on hold due to our restructuring proceedings. As you all know, on 03 November 2022, we successfully emerged from Chapter 11 and are proud to inform that as a result, we currently have a strengthened capital structure and solid market share in all of the markets that we operate.

Speaker 3: Please go ahead.

Speaker 4: Thank you, Gigi. Hello, everyone, and good morning.

Speaker 4: Welcome to our fourth quarter 2022 conference call and thank you for joining us today.

Speaker 4: My name is Ramiel Fontaine and I am the CFO of Latin Maryland's group.

Speaker 4: Here with me today is Mr. Roberto Alvo, CEO of Latin Airlines Group, Mr. Andres del Valle, VP of Corporate Finance, and Tory Creighton, Head of Industrial Relations. And we will present our highlights and results for the fourth quarter 2022.

Speaker 4: Let me start by saying we are delighted to have this instance again.

Speaker 4: after having our conference calls with the market on hold due to our restructuring proceedings.

Speaker 4: As you all know, on November 3rd last year, we successfully emerged from Chapter 11 and are proud to inform that as a result, we currently have a strengthened cost structure.

Ramiro Alfonsín: All this places LATAM, without a doubt, as an industry leader for the future. I'd like to pass the presentation to Roberto to set the stage for our Q4 results.

Speaker 4: a strengthened capital structure, and solid market share in all of the markets that we operate.

Speaker 4: All these places that I'm without a doubt an industry leader for the future.

Roberto Alvo: Thank you, Ramiro, and hello, everyone. It's a pleasure being with you this morning. As we reflect on the end of 2022 and LATAM's successful emergence from its Chapter 11 proceedings, it is helpful to remember where things stood back in 2020. The pandemic had a devastating impact on the industry, and thereafter, threatened the collapse of the air travel industry on a global scale. For LATAM Group, this was reflected in a reduction of 95% of our operations during the worst part of the pandemic. Following this complicated situation, LATAM Group was forced to file in Chapter 11 on 26 May 2020, and as a result of the restructuring, LATAM Group has emerged with one of the most competitive and efficient cost structures and liquidity levels in the region and globally.

Speaker 4: I'd like to pass the presentation to Roberto to set the stage for our fourth quarter results.

Speaker 4: Thank you, Ramiro, and hello everyone. It's a pleasure being with you this morning.

Speaker 4: As we reflect on the end of 2022 and the time-successful emergence from its Chapter 11 proceedings, it is helpful to remember where things stood back in 2020.

Speaker 4: The pandemic had a devastating impact on the industry and thereafter threatened the collapse of the air travel industry on a global scale.

Speaker 4: For LATAM group, this was reflected in a reduction of 95% of operations during the worst part of the pandemic.

Speaker 4: Following this complicated situation, the Dam Group was forced to file on Chapter 11, May 26, 2020.

Speaker 4: And as a result of the restructuring, the TAM group has emerged with one of the most competitive and efficient cost structures and liquidity levels.

Roberto Alvo: This wouldn't have been possible without the constant support from our employees, our suppliers, our clients, our shareholders, and investors during these difficult times, and it's important to remember that. As a result of our restructuring process, we were able to reduce our debt significantly, accompanied by a relevant increase in our liquidity levels. With respect to debt, we decreased our gross debt by $3.9 billion from $10.4 to 6.5 billion as of 31 December 2022. In terms of leverage, LATAM ended the year with net financial debt of EBITDA to EBITDA of 4.2 times, despite the challenging H1 of the year due to the Omicron variant. In terms of liquidity, even following the devastating effect that the crisis had on the players of the region, we were able to increase our liquidity from $1.3 to 2.3 billion after our Chapter 11 emergence.

Speaker 5: in the region and globally.

Speaker 5: This wouldn't have been possible without the constant support from our employees, our suppliers, our clients, our shareholders, and investors during these difficult times, and it's important to remember that.

Speaker 5: As a result of our restructuring process, we were able to reduce our debt significantly.

Speaker 5: accompanied by a relevant increase in our liquidity levels.

Speaker 5: With respect to debt, we decrease our gross debt by 3.9 billion from 10.4 to 6.5 billion as of December 31, 2022.

Speaker 5: In terms of leverage, LATAM ended the year with a net financial debt of EBITDA of 4.2 times, despite a challenging first half of the year due to the Omicron variant.

Speaker 5: In terms of liquidity, even following the devastating effect that the crisis had on the players of the region, we were able to increase our liquidity from 1.3 to 2.3 billion after our Chapter 11 emergence. As of December 31, 2022, our liquidity was 24.3% over last 12 month earnings.

Roberto Alvo: As of 31 December 2022, our liquidity was 24.3% over last 12-month revenues. Another important result of the financial restructuring was the simplification of our debt structure. The $6.5 billion in debt comprised of approximately $4.3 billion of financial debt and $2.2 billion in operating leases. When we look at our debt maturity profile, it is very important to highlight that LATAM has no significant non-fleet debt maturities in the next four years. As of today, LATAM only has maturities coming from our exit financing due in 2027, including $450 million five-year notes and a term loan B of $1.1 billion.

Speaker 5: Another important result of the financial restructuring was the simplification of our debt structure.

Speaker 5: The $6.5 billion in debt comprised of approximately $4.3 billion of financial debt and $2.2 billion operating uses.

Speaker 5: When we look at our debt maturity profile, it is very important to highlight that LATAM has no significant non-freed debt maturities in the next four years. As of today, LATAM only has maturities coming from our exit financing due in 2027, including 450 million 5-year notes and a terminal B of 1.1 billion.

Roberto Alvo: It is worth mentioning that these 5-year notes and the term loan B, both amounting to more than half of the exit financing, can be replaced starting in 2024. When we look at our cost, we're delighted to mention that following the cost-saving measures carried out during the restructuring, totaling over $1 billion, LATAM has been able to reduce its unit cost when compared to the pre-pandemic levels and offset several years of inflation. This was done by focusing on simplification and automation of processes, as well as renegotiation of contracts, the use of digital tools, and data analysis. This has resulted in LATAM having an extremely competitive cost structure on an absolute basis, on a relative basis when compared to the US and European most important competitors we have.

Speaker 5: This word mentioning that these five-year notes and the Terminal B both amount to more than half of the exit financing can be replaced starting in 2024.

Speaker 5: your notes and the terminal B both amounting to more than half of the exit financing can be replaced starting in 2024.

Speaker 5: When we look at our cost, we're delighted to mention that following the cost savings measures carried out during the restructuring, totaling over $1 billion, LATAM has been able to reduce its unit costs when compared to the pre-pandemic levels and offset several years of inflation. For more information, visit www.fema.gov

Speaker 5: This was done by focusing on simplification and automation processes, as well as negotiation of contracts, the use of digital tools and data analysis. This has resulted in LATAM having an extremely competitive cost structure on an absolute basis and on a relative basis when compared to the U.S. and European most important competitors we have. In the fourth quarter of 2022, the U.S. has been

Roberto Alvo: In Q4 2022, we reported a passenger CASK ex-fuel of $0.04, which is 6% lower than in the same period in 2019, that was $0.043. That's even taking into account the significant inflationary pressures that the region and the world have experienced during that period of time. When one looks at the available public information of other carriers in the region and select US carriers who didn't go through restructuring, you can easily conclude that the trend is the opposite, with increasing unit costs, especially following the inflationary pressures worldwide. The fleet negotiations played a major role in this result. After filing for Chapter 11, LATAM was able to renegotiate most of the existing and upcoming fleet leasing contracts in the midst of the pandemic during exceptional and challenging times for lessors and financiers.

Speaker 5: we reported a passenger cask ex-fuel of 4 cents, which is 6% lower than in the same period in 2019 that was 4.3 cents.

Speaker 5: That's even taking into account the significant inflationary pressures that the region and the world have experienced during that period of time.

Speaker 5: When one looks at the available plug-in information of other carriers in the region and select U.S. carriers who didn't go through restructuring, you can easily conclude that the trend is the opposite, with increasing unit cost, especially following the inflationary pressures.

Speaker 5: of other carriers in the region and select U.S. carriers who didn't go through restructuring, you can easily conclude that the trend is the opposite with increasing unit costs, especially following the legendary pressures worldwide.

Speaker 5: The fleet negotiations played a major role in this result. After filing for Chapter 11, LATAM was able to renegotiate most of the existing and upcoming fleet leasing contracts in the midst of the pandemic during exceptional and challenging times for the source and final series.

Roberto Alvo: The fleet CASK cost is over 40% lower than pre-pandemic 2019. In 2022, this was approximately $800 million, and in 2023, estimates for the total fleet CASK cost for both operating and financial leases will be between $700 and $800 million. When we look at the group network, and despite the gap in operations vis-à-vis 2019 levels, we can note that in terms of destinations, the network is already fully recovered. As of December 2022, the group operates 144 destinations in 22 countries, which is already in line with the number of destinations operated prior to the pandemic in 2019. During 2022, the group transported more than 62 million passengers, more than in any other airline in the region. This is mainly the result of a solid and competitive market share, accompanied by an efficient cost structure and healthy levels of liquidity.

Speaker 5: As a result, the fleet cash cost is over 40% lower than pre-pandemic 2019. In 2022, this was approximately $800 million, and in 2023, estimates for the total fleet cash cost for both operating and financial leases will be between $700 and $800 million.

Speaker 5: When we look at the group network and despite the gap in operations vis-a-vis 2019 levels, we can note that in terms of destinations, the network is already fully recovered. As of December 2022, the group operated 144 destinations in 22 countries.

Speaker 5: which is already in line with the number of destinations operated prior to the pandemic in 2019.

Speaker 5: During 2022, the group transported more than 62 million passengers, more than in any other airline in the region. This is mainly the result of a solid and competitive market share accompanied by an efficient cost structure and healthy levels of liquidity.

Roberto Alvo: This new cost structure facilitated the opening of new routes that wouldn't have been profitable otherwise. As a result, in 2023, LATAM Group will have 38 new routes operating versus pre-pandemic, continuing to increase capacity, always keeping in mind profitability and cash generation as key drivers. LATAM Group has also been able to strengthen its respective market shares while its affiliates operate. LATAM Group affiliates are currently first in market share in three of the five domestic markets where they operate, Brazil, Chile, and Peru. In Q1, LATAM Group continued to see strong load factors, loyalty of customers, and an improvement in our service and offering reflected in better book RASK in 2019 vis-à-vis Q1 of 2019. Finally, despite the challenging environment, LATAM has launched a sustainability strategy, A Necessary Destination, we call it.

Speaker 5: This new cost structure facilitated the opening of new routes that wouldn't have been profitable otherwise. As a result, in 2023, LATAM Group will have 38 new routes operating versus pre-pandemic, continuing to increase capacity, always keeping in mind profitability and cash generation as key drivers. For more information, visit www.potterybarn.com

Speaker 5: LATAM Group has also been able to strengthen its respective market shares while its affiliates operate. LATAM Group affiliates are currently first in market share in three of the five domestic markets where they operate, Brazil, Chile and Peru.

Speaker 5: In the first quarter, the TAM group continued to see strong growth factors, loyalty of customers, and an improvement in our service and offering reflected in better book routes in 2019 vis-a-vis first quarter of 2019.

Speaker 5: Finally, despite the challenging environment, LATAM has launched a sustainability strategy, a necessary destination, we call it. In May 2021, it is a solid reflection of our commitment to sustainability and ESG practices as part of the LATAM realization of the role and responsibility that the group has with the planet, the communities, and the customers and shareholders.

Roberto Alvo: In May 2021, it's a solid reflection of our commitment to sustainability and ESG practices as part of the LATAM realization of the role and responsibility that as the group has with the planet, the communities, and the customers and shareholders. As you might be aware, this strategy is based on three pillars: climate change, circular economy, and shared value, and establishes the goals of carbon neutrality by 2050 with a reduction of 50% of carbon emissions in domestic operations by 2030, eliminate single-use plastics by the end of this year, have a target of 5% of 2030 total fuel consumption come from sustainable aviation fuels, and zero waste to landfills by 2027, among other things. During 2022, LATAM made an important announcement with respect to our sustainability agenda.

Speaker 5: As you might be aware, this strategy is based on three pillars, climate change, circular economy and shared value and establishes the goals of carbon neutrality by 2050.

Speaker 5: with a reduction of 50% of carbon emissions in domestic operations by 2030, eliminate single-use plastics by the end of this year, have a target of 5% of 2030 total fuel consumption come from sustainable efficient fuels, and zero waste to landfills by 2027, among other things.

Roberto Alvo: At the end of last year, LATAM announced the expansion of the alliance with the Catarán Foundation in the project to Selvas Bio located in the Colombian Orinoquia wetland region, which aims for the conservation of 575,000 hectares. This is more than 0.5% of the surface of Colombia, expecting to capture more than 11 million tons of CO2 by 2030. As a result of LATAM's continuing effort, it was once again recognized by S&P in its corporate sustainability assessment as the most sustainable airline in the Americas and Europe, and fifth worldwide in terms of its environmental, social, and governance sustainability practices. With that, and thanking you again for being here, I turn the presentation over to Ramiro to take a closer look at our Q4 financial performance. Thank you very much.

Speaker 5: During 2022, LATAM made an important announcement with respect to our sustainability agenda. At the end of last year, LATAM announced the expansion of the Alliance with the Catar Series chocolate Lets President Biden see his slight Yea

Speaker 5: For the conservation of 575,000 hectares, this is more than 0.5% of the surface of Colombia, expecting to capture more than 11 million tons of CO2 by 2030.

Speaker 5: As a result of LATAM's continuing effort, it was once again recognized by S&P in its corporate sustainability assessment as the most sustainable area in the Americas and Europe and fifth worldwide in terms of its environmental, social, and government sustainability consciousness.

Speaker 4: With that, I'm thanking you again for being here. I turn the presentation over to Ramiro to take a closer look at our four quarter financial performance. Thank you very much. Thank you, Roberto. With regard to the operations on slide seven, the group has been able to recover passenger operations to 83% of 2019 levels in the four quarter.

Ramiro Alfonsín: Thank you, Roberto. With regard to the operations on slide seven, the group has been able to recover passenger operations to 83% of 2019 levels in Q4 2022. The group's operation increased 31% in comparison with the same Q4 of 2021. Consolidated RASK increased 11% in Q4 vis-à-vis 2019 levels, in a context marked by strong demand for air travel and by high jet fuel prices. During Q4, LATAM Group continued to increase its passenger capacity. International operations represented 43% of the quarter's capacity, followed by domestic Brazil with 36%, and Spanish-speaking countries with 21%. It is worth noting that the recovery of the operations has been accompanied by a healthy consolidated load factor of 81%.

Speaker 4: smart by strong demand for air travel and by high jet fuel prices.

Speaker 4: During the fourth quarter, LATAM Group continued to increase its passenger capacity.

Speaker 4: International operations represented 43% of the quarter's capacity, followed by domestic Brazil with 36%, and Spanish-speaking countries with 21%.

Speaker 4: It is worth noting that the recovery of the operations has been accompanied by a healthy and consolidated load factor of 81%.

Ramiro Alfonsín: Cargo also continues to be an important pillar for the group's operations, already surpassing 2019's capacity. No one offers the one-stop shop cargo solution with the capillarity and network offering all facilities and capabilities like LATAM in the region. Cargo revenues in 2022 increased 62% versus 2019, moving on from representing 10% of the revenues in 2019 to 18% in 2022. On slide eight, you can see that this quarter, LATAM registered an adjusted operating margin of 8%, better than expected when compared to our updated business plan from August 2022. In Q4, EBITDA amounted to $467 million and an adjusted EBITDA of $520 million. Total operating revenues were almost in line with 2019 levels, and as operations continued to recover, passenger revenues were 7% below the same period of 2019.

Speaker 4: cargo also continues to be an important pillar for the group's operations, already surpassing 2019's capacity.

Speaker 4: No one offers the one-stop shop cargo solution with the capillarity and network offering or facilities and capabilities like I am in the region.

Speaker 4: Cargo revenues in 2022 increased 62% versus 2019, moving on from representing 10% of the revenues in 2019 to 18% in 2022.

Speaker 4: On slide 8, you can see that this quarter, that time registered an adjusted operating margin of 8%.

Speaker 4: Better than expected when compared to our updated business plan from August 22.

Speaker 4: In Q4, EBITDA amounted to $467 million and an adjusted EBITDA of $520 million.

Speaker 4: Total operating revenues were almost in line with 2019 levels. And as operations continued to recover, passenger revenues were 7% below the same period of 2019, while cargo revenues continued to surpass 2019 levels with a notable 50% increase in Q4 of 2022.

Ramiro Alfonsín: While cargo revenues continued to surpass 2019 levels with a notable 50% increase in Q4 of 2022, mainly explained by the healthy levels of cargo demand and yields, further propelled by the increase in LATAM Cargo's capacity. Total adjusted operating costs during the quarter increased 0.2% versus 2019, mainly explained by the increase in the aircraft fuel cost line, which increased 44% versus 2019, following a 67% increase in fuel price during the quarter compared to 2019. Ex-fuel operating expenses were down 18% from 2019 levels. As a consequence, LATAM reported a passenger cost per ASK ex-fuel of $0.04, 6% lower than in 2019, reflecting the group's important cost-saving initiatives that are already fully implemented. Finally, LATAM registered a net income attributable to the owners of the parent company of $2.5 billion for the quarter and $1.3 billion for the year.

Speaker 4: mainly explained by the healthy levels of cargo demand and yields, further propelled by the increasing of atoms' cargo capacity.

Speaker 4: Total adjusted operating cost during the quarter increased 0.2% per system P19.

Speaker 4: Mainly explained by the increase in the aircraft fuel cost line, which increased 44% versus 2019 following a 67% increase in fuel price during the quarter compared to 2019.

Speaker 4: Ex-fuel operating expenses were down 18% from 2019 levels. As a consequence, LATAM reported a passenger cost per ASK ex-fuel of 4 cents, 6% lower than in 2019, reflecting the group's important cost-saving initiatives that are already fully implemented.

Speaker 4: Finally, LATAM registered net income attributable to the owners of the parent company of $2.5 billion for the quarter and $1.3 billion for the year.

Ramiro Alfonsín: It is worth mentioning that this last result is mostly explained by extraordinary gains related to the restructuring activities attributed to our emergence from Chapter 11. Due to the group's accumulated losses, this will not result in the payment of dividends based on 2022 net income. As you can see on the next slide, LATAM Group has seen a sustained improvement in its capacity, reaching almost pre-pandemic levels with a noticeable path of recovery in the past quarters. The financial results have mirrored this recovery with healthy numbers and the best last 12 months EBITDA since the Chapter 11 filing. Lastly, I would just like to highlight that the full year EBITDA was approximately $1.3 billion. Let's turn to our cash flow statement on slide 10.

Speaker 4: It is worth mentioning that this last result is mostly explained by extraordinary gains related to the restructuring activities attributed to our emergence from Chapter 11.

Speaker 4: Due to the group's accumulated losses, this will not result in the payment of dividends based on 2022 net income.

Speaker 4: As you can see on the next slide, La Tan Group has seen a sustained improvement in its capacity, reaching almost pre-pandemic levels, with a noticeable path of recovery in the past quarters.

Speaker 4: The financial results have mirrored this recovery with healthy numbers and the best last 12 months have been done since the chapter 11 filing.

Speaker 4: Lastly, I would just like to highlight that the full year EBITDA was approximately $1.3 billion.

Ramiro Alfonsín: In Q4 2022 and for the full year of 2022, LATAM generated a strong operational cash flow of $1 billion for the year and $400 million for Q4. This was mainly due to the recovery in operations and the ramp-up in demand during the year. As a result, LATAM was able to cover its investments, including maintenance and growth, which mainly consisted of engine maintenance, part of which were staggered during the pandemic. This positive operational cash flow also resulted in a positive unlevered free cash flow. The exit from Chapter 11 in Q4 provided fresh funds to LATAM, enabling the group to reach its liquidity target, and also to be prepared for possible external shocks or opportunities. At the end of Q4, LATAM had a +$320 million change in cash and $170 million for the full year of 2022.

Speaker 4: Let's turn to our casual statement on slide 10.

Speaker 4: In the fourth quarter 2022 and for the full year of 2022, LATAM generated a strong operational cash flow of $1 billion for the year and $400 million for the fourth quarter.

Speaker 4: This was mainly due to the recovery in operations and the ramp up in demand during the year.

Speaker 4: As a result, LATAM was able to cover its investments, including maintenance and growth, which mainly consisted of engine maintenance, part of which were staggered during the pandemic. This positive operational cash flow also resulted in a positive, unlevered pre-cash flow.

Speaker 4: The exit from Chapter 11 in the fourth quarter provided fresh fronts to LATAM, enabling the group to reach its liquidity target and also to be prepared for possible external shocks.

Speaker 4: or opportunities. At the end of the quarter, LATAM had a positive change in cash of 320 million and 170 million for the full year of 2022.

Ramiro Alfonsín: Our liquidity, as Roberto mentioned, amounted to $2.2 billion, representing 24% of last 12 months revenues. As you can see on the graph on the left-hand side in slide 11, LATAM has a well-diversified revenue structure. During 2022, the group's international operations amounted to 33% of revenues, domestic Brazil to 28%, domestic Spanish-speaking to 18%, and cargo to 18%. In addition, due to LATAM's exposure to international markets and the tickets indexation to strong currencies, LATAM Group has a unique currency structure in the region. During 2022, 60% of our revenues were in dollar or euro, while the remaining 40% was in other currencies, mainly Brazilian real and Chilean pesos. This revenue in strong currency is a key differentiating factor. Most of the costs in the airline industry are in dollar-denominated, such as fuel, fleet, debt, and maintenance.

Speaker 4: Our liquidity, as Roberto mentioned, amounted to $2.3 billion, representing 24% of last 12 months' revenues. As you can see on the graph on the left-hand side in slide 11, LATAM has a well-diversified revenue structure. the accommodation Okay hey hey, as we get higher ok by then we re are going with July

Speaker 4: During 2022, the group's international operations amounted to 33% of revenues, domestic Brazil to 28%, domestic Spanish speaking to 18%, and cargo to 18%.

Speaker 4: In addition, and due to LATAM's exposure to international markets and the tickets' relaxation to strong currencies, LATAM Group has a unique currency structure in the region.

Speaker 4: During 2022, 60% of our revenues were in dollar or euro.

Speaker 4: while the remaining 40% was in other currencies, mainly Brazilian Real and Quine Pesos.

Speaker 4: This revenue in strong currency is a key differentiating factor. Most of the costs in the airline industry are in dollar denominated such as fuel, fleet, debt and maintenance.

Ramiro Alfonsín: LATAM has a unique natural FX hedge due to our revenue structure. For the LATAM Group, the JV with Delta Air Lines represent an important opportunity, and we're very excited to be working with Delta in its implementation. The carriers will have the largest capacity share between North and South American markets within the JV scope, where we are allowed to coordinate capacity and pricing and share corporate account information. As per our 2023 guidance on slide 12, we are expecting to grow an average of 20% in 2023, particularly in the international segment, where we see strong demand and have a unique cost structure.

Speaker 4: LATAM has a unique natural effects head due to our revenue structure.

Speaker 4: Furthermore, for the LATAM group, the JB with Delta Airlines represents an important opportunity and we're very excited to be working with Delta in its implementation.

Speaker 4: The carriers will have the largest capacity share between North and South American markets within the JV scope, where we are allowed to coordinate capacity and pricing and share corporate account information.

Speaker 4: After our 2023 guidance in slide 12,

Speaker 4: We are expecting to grow an average of 20% in 2023, particularly in the international segment where we see strong demand and have a unique cost structure.

Ramiro Alfonsín: LATAM expects to register an adjusted EBIT margin between 6% to 8% in 2023, representing an upside of 1.5 percentage points compared to the 1% in our business plan. With regard to adjusted EBITDA, LATAM expects to reach between $2 to $2.2 billion in 2023, represented again an upside when compared to our projected business plan and in line with 2019 levels. Additionally, and very important to us, is our capital structure. Leverage in 2023 is expected to be three times, the lowest that LATAM would have in over 10 years. Please turn in slide 13. In the context of restructuring proceedings, LATAM carried out a capital increase of approximately $10.3 billion, comprised of an equity rights offering of $800 million, plus $9.5 billion through three different series of convertible notes, that resulted in a cash injection for the company of approximately $5.4 billion.

Speaker 4: LATAM expects to register an adjusted added margin between 6 to 8 percent in 2023. We're presenting an upside of 1.5 percentage points compared to the 1 percent in our business frame.

Speaker 4: With regard to adjusted EBITDA, LATAM expects to reach between $2 to $2.2 billion in 2023. We presented again an upside when compared to our projected business plan and in line with 2019 levels. Additionally, and very important to us is our capital structure.

Speaker 4: Leverage in 2023 is expected to be three times the lowest the LATAM would have in over 10 years.

Speaker 4: Please join me in slide 13. In the context of restructuring proceedings, LATAM carried out the capital increase of approximately $10.3 billion, comprised of an equity rights offering of $800 million plus $9.5 billion through three different series of convertible notes that resulted in a cash injection for the company of approximately $5.4 billion.

Ramiro Alfonsín: As of 28 February 2023, 99.8% of the underlying shares are already subscribed and paid for. As a result of this, according to SEC filings, Sixth Street Partners owns 28% of our total shares outstanding, followed by Strategic Value Partners with 16%, Delta Air Lines with 10%, Qatar Airways with 10%, Sculptor Capital with 6.5%, and The Cueto Group with 5%. LATAM never lost focus of the value proposition and its customers. As a result, the group continued to transform the experience of our passengers through cabin retrofits across our narrow-body fleet. During 2022, we retrofitted 81 aircraft, thereby completing 90% of all of our narrow-body fleet transformation. LATAM was also recognized as South American leading airline in several prestigious awards in the industry. Let me conclude in slide 15.

Speaker 4: by strategic value partners with 16%, Delta Airlines with 10%, Qatar Airways with 10%, Sculpture Capital with 6.5%, and the Queto Group with 5%.

Speaker 4: LATAM never lost focus of the value proposition and its customers.

Speaker 4: As a result, the group continued to transform the experience of our passengers to cabin retrofits across our narrow-body fleet.

Speaker 4: During 2022, we retrofitted 81 aircraft, thereby completing 90% of all of our now-bodied fleet transformation.

Speaker 4: LATAM was also recognized as South American Leading Airline in several prestigious awards in the industry.

Ramiro Alfonsín: As final takeaways, LATAM has ended 2022, a milestone year, with $1.3 billion of EBITDA, $2.3 billion in liquidity, and leverage of 4.2 times. This is the result of the Chapter 11 transformation and dedication to continued operational and financial recovery from the pandemic impacts. The trend of improving results presented here today, the competitive position that we hold both in terms of cost and capital structure, and our unique network in the region gives us great confidence in our ability to deliver on our guidance for 2023. Thank you for your attention. We would like to open the floor for any questions.

Speaker 4: Let me conclude in slide 15. A final takeaway, LATAM has ended 2022, a milestone year, with $1.3 billion of EBITDA, $2.3 billion in liquidity, and leverage of 4.2 times.

Speaker 4: This is the result of the chapter 11 transformation and dedication to continued operational and financial recovery from the pandemic impacts.

Speaker 4: The trend of improving results presented here today, the competitive position that we hold both in terms of cost and capital structure and our unique network in the region gives us great confidence in our ability to deliver on our guidance for 2023.

Operator: Thank you. As a reminder, to ask a question, please press *11 on your telephone and wait for your name to be announced. To withdraw your question, please press *11 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephen Trent from Citi.

Speaker 4: Thank you for your attention and we would like to open the floor for any questions.

Speaker 2: Thank you. As a reminder to ask a question.

Speaker 2: please press star 1-1 on your telephone and wait for your name to be announced.

Speaker 2: To withdraw your question, please press star 1-1 again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Steven Trent from Citi.

Stephen Trent: Hi. Good morning, everybody. Can you hear me okay?

Roberto Alvo: Yes, Stephen. Hi. How are you doing?

Stephen Trent: I'm well, thank you very much. Appreciate the time. Apologies as I did not have access to your slides, but that was my fault. I'm just curious in terms of your thoughts on expansion into other markets. Any high-level thoughts, for example, whether you'd be interested in entering Mexico's domestic market in the event that the AMLO administration approve cabotage, or for example, going back to Argentina's domestic market, would just love to hear your thoughts on that.

Speaker 6: Hi, good morning everybody. Can you hear me okay?

Speaker 4: Yes, Stephen, hi, how are you doing?

Speaker 6: I'm well, thank you very much. Appreciate the time and apologies as I did not have access to your slides, but that was my fault. I'm just trying to curious in terms of your thoughts on expansion into other markets. So, any high level thoughts, for example, whether or not you know...

Speaker 6: you'd be interested in entering Mexico's domestic market in the event that the AMLO administration approved Cavatage or for example, going back to Argentina's domestic market. Would just love to hear your thoughts on that.

Roberto Alvo: Hi, Stephen. How are you? This is Roberto. Thanks for the question.

Stephen Trent: Hey, Roberto.

Ramiro Alfonsín: I guess our focus in the short term is to make sure that we recover the capacity that we have until 2019. We have a lot of growth in front of us. Immediately our focus is in the five domestic markets where we have operation, as well as developing our international network and even growing it beyond what we had prior to 2019. As you probably saw, we announced Guarulhos-Los Angeles, for example, and Bogotá to Orlando together with Delta over the last few weeks. We're interested in the possibilities of expanding, of course, in the region most likely. The situation in Colombia means that we see an opportunity of a stronger position in that market in particular. In the short term, our focus is in South America, I would say.

Speaker 5: Hi Steven, how are you? This is Roberto. Thanks for the question. So I guess our focus in the short term is to make sure that we recover the capacity that we have until 2019. We have a lot of growth in front of us. And immediately our focus is in the five domestic markets where we have operation.

Speaker 5: as well as developing our international network and even growing it beyond what we had prior to 2019. As you probably saw, we announced Guadalupe Los Angeles, for example, and Bogotá to Orlando, together with Delta over the last few weeks. We're interested in the possibilities of expanding, of course.

Speaker 5: in the region most likely. The situation in Colombia means that we see an opportunity of stronger position in that market in particular. And in the short term, our focus is in South America, I would say, so I'm not discarding anything either in Mexico as you mentioned.

Ramiro Alfonsín: I'm not discarding anything either in Mexico, as you mentioned, or in Argentina, but I would say that the focus today is in the five countries where we are. This is the guiding principle, at least for now.

Speaker 5: or in Argentina, but I would say that the focus today is in the five countries where we are. So this is the guiding principle at least for now.

Stephen Trent: Great. Appreciate that. Apologies if I missed, but any high-level view on the potential timing for a Level 2 ADR listing?

Speaker 6: Great, I appreciate that. And apologies if I missed, but sort of any high-level view on the potential timing for a level 2 ADR listing.

Tori Creighton: Hi, Steven. This is Tori here. As for the Level 2 ADR listing, we are currently, as you know, still trading over the counter basis. However, it is still LATAM's intention to relist on the New York Stock Exchange. We're currently evaluating what that timing would be like, depending on several different factors, and we'll update the market when we have any information to this respect.

Speaker 7: Hi Steve, this is Tori here. As for the Level 2 AVR listing, we are currently, as you know, still trading over the counter basis. However, it is still Lausanne's intention to relist on the New York Stock Exchange.

Speaker 7: We're currently evaluating what that timing would be like depending on several different factors and we'll update the market when we have any information to respect.

Stephen Trent: Okay. Appreciate that, Tori. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Savanthi Syth from Raymond James.

Speaker 6: Okay, I appreciate that, Tory. Thank you.

Speaker 8: Thank you.

Speaker 2: Thank you. One moment for our next question. Our next question comes from the line of Savi Sis from Raymond James.

Savanthi Syth: Hey, good morning, everyone, and congrats on completing the restructuring and on this call. Can I ask you, one of the things that was newer since the pandemic that was introduced pre-pandemic but not really executed on was the Delta JV. Could you talk a little bit about the developments there and how you expect that to contribute going forward?

Speaker 9: Hey, good morning, everyone, and congrats on completing the restructuring and end this call. Can I ask you, you know, one of the things that was kind of newer since the pandemic that was kind of introduced pre-pandemic but not really executed on was the Delta JV. Could you talk a little bit about...

Speaker 5: the developments there and how you expect that to contribute going forward. Hi, Sabi. How are you? This is Roberto again. I'll ask the first part of the question and then I'll hand it up to Ramiro for any additional remarks. So, as we know, we were approved by all the authorities last year. The last approval was DOT in October .

Roberto Alvo: Hi, Savi. How are you? This is Roberto again. I'll ask the first part of the question, and then I'll hand it off to Ramiro for any additional remarks. As we know, we were approved by all the authorities last year. The last approval was DOT in October of last year. That means that from that day on, we declared the JV effective, and we started to work together. We are, I would say, in advanced stages of the setup phase of this, making sure that the teams know each other, align, and start working together. We are very optimistic about the prospects, and we feel very good about the relationship and how the teams have come together very quickly, very seamlessly in terms of trying to find ideas and solutions. I'm personally very optimistic on the development of this.

Speaker 5: of last year, so that means that from that day on, we declared the JEVE effective and we started to work together. We are, I would say, in advanced stages of the setup phase of this, making sure that the teams know each other, align, and start working together.

Speaker 5: We are very optimistic about the prospects, and we feel very good about the relationship and how the teams have come together very quickly, very seamlessly in terms of trying to find ideas and solutions. So I'm personally very optimistic on the development of this. We very quickly launched already, or announced two routes.

Roberto Alvo: We very quickly launched already or announced two routes, the ones I already mentioned. Delta also engaged its product from Atlanta to Lima and Atlanta to Santiago, and those are very encouraging first steps in this relationship. It'll take a couple of years for us to be on a run rate basis. The start is a very, very good one and one that has us in LATAM very excited going forward. Ramiro?

Speaker 5: The ones I already mentioned, Delta also up caged its product from Atlanta to Lima and Atlanta to Santiago, and those are very encouraging first steps in this relationship. It will take a couple years for us to be on a run rate basis, but the start is a very, very good one and one that has us in the time.

Ramiro Alfonsín: Yeah, I completely agree. Savi, hi. It's great to hear from you again. Yes, we're very excited. Teams are working very hard. The possibility, the ability to share capacity, pricing, and corporate accounts is very unique, and we see a lot of opportunities there. Allowing our customers to benefit from the 300 destinations that Delta has in North America is quite unparalleled. Becoming the largest carrier between the traffic of the JV scope between South America and North America is very unique. We're very optimistic on what this will mean for our customers and for the company.

Speaker 4: Very excited going forward. Amido? Completely agree. Hi. It's great to hear from you again. So yes, we're very excited. Teams are working very hard. The possibility, the ability to share capacity and pricing and compress accounts is very unique and we see a lot of opportunities there.

Speaker 4: and allowing our customers to benefit from the 300 destinations that Delta has in North America is quite unparalleled and becoming the largest carrier between the traffic of the JV scope between South America and North America is very unique. So we're very optimistic on what this will mean for our customers and for the company.

Savanthi Syth: Appreciate that. If I might, it looks like based on the unit revenue contribution in Q4 here by the various regions and the way you're growing capacity, it seems like fairly good recovery across the different regions. Could you talk a little bit about what you're seeing in demand here, if there's corporate demand recovering? Is it leisure demand? Just generally in the three different entities, if there's any more strength in one over the other.

Speaker 9: I appreciate that. And then if I might, it looks like based on the unit revenue contribution in the fourth quarter here by the various regions and the way you're growing capacity, it seems like fairly good recovery across the different regions. But could you talk a little bit about...

Speaker 9: What you're seeing in demand here, if there's corporate demand recovering, is it leisure demand? And just generally in the kind of three different entities, you know, if there's any kind of more strength in one over the other.

Roberto Alvo: Yes. Savi, it's Roberto again. It's March already. We have seen, I would say, healthy levels of demand in most segments in almost all of the regions and countries where we operate. It looks like a solid Q1 in terms of our unit revenues in most of our business units. Corporate traffic has recovered. We're close to 90% of passengers today, 8%. The post-holiday moment here, remember that this is Southern Hemisphere, has started on a very healthy note. For the time being, we are optimistic about the developments of the demand. Things that concern us, basically the situation in Peru, as you saw, the unrest, and that had an impact on demand both for domestic Peru and for inbound traffic from US, Mexico, and Europe to Peru.

Speaker 5: Yes, it's Roberto again. So it's March already. We have seen, I would say, healthy levels of demand in most segments in almost all of the regions and countries where we operate. It looks like a solid first quarter in terms of our unit revenues in most of our business units.

Speaker 5: Corporate traffic has recovered close to 90% of passengers to 88%. And the post holiday moment here, remember that this is summer, summer is here, has started on a very healthy note. So for the time being, we are optimistic about the developments of the demand. Things that concerned us.

Speaker 5: Basically, the situation in Peru, as you saw, the unrest, and that has had an impact on demand both for domestic Peru and for inbound traffic from U.S., Mexico, and Europe to Peru. This is getting better as the country has a little bit more stabilization, but that, I would say, has impacted some in the first two months of the year. That's very helpful. Thanks again. Thank you. Thank you.

Roberto Alvo: This is getting better as the country has a little bit more stabilization, but that, I would say, has impacted some in the first two months of the year.

Savanthi Syth: That's very helpful. Thanks again.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Guilherme Mendes from J.P. Morgan.

Guilherme Mendes: Good morning, Roberto, Ramiro, Andrés, Tori, congrats on the first results post-Chapter 11. Two questions on our end. The first on the competitive environment. Thinking in terms of the Brazilian market and take into account the GOL and Azul just announced a recent liability management process, how does the competition in the region and also in terms of Colombia, given the Viva Air situation, if there's any updated news regarding the potential consolidation on the market? My second question is regarding the fleet management. We have been seeing some bottlenecks from the industry, OEMs delaying some of the deliveries. If you're seeing a risk on your current fleet plan going forward. Thank you.

Speaker 10: and take into account the goal and as Azul just announced a recent liability management process. How does the competition in the region and also in terms of Colombia giving the DVR situation if there's any updated and use regarding the potential consolidation on the market? And my second question is regarding the fleet management so has been seen

Speaker 10: some bottlenecks from the industry, OEMs delivering and delaying some of the deliveries if you see any risk on your current fleet plan going forward. Thank you. Hi Guillermo Roberto on this side. So Brazilian domestic and international markets where I would say

Roberto Alvo: Yes. Hi, Guilherme. Roberto on this side. Brazilian domestic and international markets were, I would say, healthy on the Q4. There's a little bit of a lag between Brazil and the US as well. There's a bottleneck in visa emissions for Brazilians going to the US because of the pandemic. I would say that is a market that has been significantly impacted in the last few months on the Brazilian point of sale. Of course, the pandemic is impossible to erase from balance sheets immediately. We chose a restructuring path in 2020. They were three very complicated years, but we feel that the decisions we took and where the company stands today was the right decision given what we're seeing today.

Speaker 5: healthy on the fourth quarter. There's a little bit of a lag between Brazil and the US as well. There's a bottleneck in visa emissions for Brazilians going to the US because of the pandemic. So I would say that that is a market that has been significantly impacted in the last few months on the Brazilian point of sale. We see, of course, the pandemic is impossible to...

Speaker 5: to erase from balance sheets immediately. We chose a restructuring path in 2020. There were three very complicated years but we feel that the decisions we took and where the company stands today was the right decision given what we're seeing today. And all the companies, whether it's in the region or outside the region that did not restructure at the time.

Roberto Alvo: All the companies, whether it is in the region or outside the region that did not restructure at the time, have, in my view, of course, to bear all the impact of the pandemic on their balance sheets and their cost structures and their situation and liquidity. That, I think, marks a very significant difference from the position that LATAM is today vis-a-vis all these other companies that chose to do otherwise. Having said that, I think that our take on the Brazilian market is an optimistic one in terms of traffic going forward, but with a dose of caution, just because we understand that this is going to be a volatile year, not only in terms of the economic situation of the countries and the currencies, but also the fuel prices, particularly due to the war.

Speaker 5: have, in my view, of course, to bear all the impact of the pandemic on the balance sheets and the cost structures and the situation and liquidity. So that, I think, marks a very significant difference from the position that Natan is today vis-à-vis all these other companies that chose to do otherwise.

Speaker 5: Having said that, I think that our take on the Brazilian market is an optimistic one in terms of traffic going forward, but we've had those discussions just because we understand that this is going to be a volatile year, not only in terms of the economic situation of the countries and the currencies, but also the fuel prices, particularly due to the war.

Roberto Alvo: In Colombia, there's an important company called Viva Air, which stopped its operations about 10 days ago, that was a little bit more than 20% of the market. We have brought five aircraft to Colombia during this month. Two of them are already operating. The other three will be operating by the end of the month. We see this as an important opportunity to increase the product that we have, make it better, more competitive for both Colombian passengers and for people that want to fly internationally in and out of Colombia. In that sense, we see this as an important opportunity to strengthen our position in one of the most important markets in the region, actually the second largest after Brazil.

Speaker 5: In Colombia, there's an important company called Viva Air who stopped its operations about 10 days ago that was a little bit more than 20% of the market. We have brought five aircraft to Colombia in this month. Two of them are already operating. The other three will be operating by the end of the month. And we see this as an important opportunity.

Speaker 5: to increase the product that we have, make it better, more competitive for both Colombian passengers and for people that want to fly internationally in and out of Colombia. So in that sense, we see this as an important opportunity to strengthen our position in one of the most important markets in the region, and actually to second largest after...

Ramiro Alfonsín: Yeah. Regarding fleet, Guillermo. Hi, this is Ramiro, and thank you for your question. We are aware of the supply issues that OEMs are facing. We have discussed with them, we are planning to receive 15 NEOS in 2023. We feel very confident that the growth path that we have set on our guidance can be achieved with the aircraft that we have, plus the ones that we are going to be receiving according to the latest schedules. In addition to that, we have certain aircraft under PBH that allow us to grow or to modify our growth plan. This is quite singular industry, but we negotiated, as you know, during the Chapter 11, having this payment by the hour on certain aircraft that allows us to adapt capacity if needed in the plan. We're confident we can deliver on the growth plan for 2023.

Speaker 4: in 2023 and we feel very confident that the growth path that we have set on our guidance can be achieved with the aircraft that we have, plus the ones that we're going to be receiving according to the latest schedules. In addition to that, we are also looking at the growth path that we have set on our guidance

Speaker 4: We have certain aircraft under PVH that allows us to grow or to modify our growth plan. This is quite singular industry, but we negotiated, as you know, during the Chapter 11 having this payment by the hour on certain aircraft that allows us to adapt capacity if needed in the plan. We're confident we can deliver on the growth plan for 2023.

Guilherme Mendes: That's super clear. Thank you, Roberto, Ramiro. Have a good day.

Ramiro Alfonsín: Thank you.

Roberto Alvo: Pleasure. Thank you.

Speaker 10: Thank you, Roberto and Jamiro. Thank you, Roberto and Jamiro. Have a good day.

Operator: Thank you. One moment for our next question. Our next question comes on the line of Neil Glynn from AIR Control Tower.

Speaker 2: Thank you. Thank you. Thank you. Thank you.

Speaker 2: Our next question comes from the line of Neil Glenn from Air Control Tower.

Neil Glynn: Oh, hello. If I could ask two questions, please. The first one with respect to cargo within your outlook for 2023. We've obviously seen a deceleration in growth rates in the Q4 of 2022 as cargo yields normalize. Interested in your thoughts as to 2023's cargo revenues. The second question, in the presentation you highlighted LATAM Pass membership is up 65% on 2017 levels, which is quite an impressive uplift. Interested in your thoughts on what benefits has this had already on revenues thus far, and any plans you have to leverage this critical mass further in the future. Thank you.

Speaker 11: Oh, hello. If I can ask two questions.

Speaker 11: The first one with respect to cargo within your outlook for 2023. We've obviously seen a deceleration in growth rates in the fourth quarter of 2022 as cargo yields normalize. So interested in your thoughts as to 2023's cargo revenues. And then the second question, in the presentation you highlighted LATAM past membership.

Speaker 11: is up 65% on 2017 levels, which is quite an impressive uplift. Interested in your thoughts on what benefits has this had already on revenues thus far and any plans you have to leverage this critical mass further in the future? Thank you. Hi Neil, Roberto. Again, I'll take the car and pass it to Ramiro.

Roberto Alvo: Hi, Neil. Roberto again. I'll take the current question. I'll pass it to Ramiro for the frequent flyer. Yes, we are aware and seeing the slowdown in cargo towards the end of last year. This is impacted by, of course, the uncertainty of the economy, the situation in China. Remember that there was a big lockdown in China because of COVID at the end of last year. That relative weakness that still leaves us in better levels than 2019, is there in the market. It hasn't subsided or changed significantly. In the region, on top of that, weather has impacted flower production out of Colombia. Approximately 20% of the flower production in Colombia was lost to very heavy rains. That has an additional impact on flower exports from Colombia to the US. It was impactful, actually, for Mother's Day.

Speaker 5: That relative weakness that is still leave us in better levels than 2019 is there in the market. It hasn't subsided or changed significantly. In the region on top of that, weather has impacted flower production out of Colombia. Approximately 20% of the flower production in Colombia was lost.

Speaker 5: to very heavy rains. So that has an additional impact on flower exports from Colombia to the US. It was impactful actually for Mother's Day. So this will be recovered in a few months, but those are trends that have softened a little bit the demand for cargo.

Roberto Alvo: These will be recovered in a few months. Those are, I would say, trends that have softened a little bit the demand for cargo in the last months. Our outlook for the rest of the year is positive nonetheless. We still are in the process of converting up to 10 767 passenger aircraft for freighters. We are on track with that conversion, and we feel good about the added capacity that we will have and the ability that will give us in opening new markets and better competing in the ones where we are.

Speaker 5: in the last months. Our outlook for the rest of the year is positive nonetheless. We still are in the process of converting up to 10,767 passenger aircraft for fighters. We are on track with that conversion and we feel good about the added capacity that we will have and the ability that will keep us in opening new markets and better competing in the ones where we are.

Ramiro Alfonsín: Yeah, just to complement that, Neil. In the business plan that we put forward, we were assuming already a softening on the yields on the cargo front. That was already embedded into the business plan. Regarding LATAM Pass, as you said, we have 42 million members. It is very important for their cash stream, cash flow generation for the company. It represents normally, approximately, now a little north of 10% of our load factor in our aircraft. We're investing a lot in the experience from the customer. We're investing in a new app in Brazil. We have launched the club successfully in the last month. Now we're putting in initiatives of using miles plus cash to purchase the tickets. We're also investing in new agreements for the non-air channels. We have very strong partnerships with the leading banks in the region.

Speaker 4: Just to complement that, Neil, in the business plan that we put forward, we were assuming already a softening on the yields on the cargo front and that was already embedded into the business plan.

Speaker 4: Regarding LAT and PASS, as you said, we have 42 million members. It is very important for the cash stream, cash flow generation for the company. It represents normally approximately now a little north of 10% of our load factor in our aircraft. We are investing a lot in the experience from the customer. We are investing in a new app.

in Brazil. We have launched the club successfully in the last month. Now we're putting in initiatives of using miles plus cash to purchase the tickets. We're also investing in new agreements for the non-air channels. And we have very strong partnerships with the leading banks in the world like the Zhangzhu University, SMas,risha charm, O Asset and gold and other experiences

Ramiro Alfonsín: As you know, in Chile, we're partnering with Banco Santander, in Peru with Banco de Crédito del Perú. In Brazil, we have agreements with numerous banks. We think there's a lot of angles still to tap on the LATAM Pass, but we're in the process of launching these initiatives in 2023.

We're partnering with Banco Santander in Peru, with Banco de Credito in Peru. In Brazil we have agreements with numerous banks. And we think there's a lot of angles still to tap on the Latin path, but we're in the process of launching these initiatives in 2023.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question comes from the line of Joao Frizo from Goldman Sachs.

Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced. To withdraw your question, please press star 11 again.

Joao Frizo: Yes, thanks. Good morning, everyone. Thanks for taking my question. I have a follow-up on the pricing environment. You guys could please provide us with an overview on the pricing environment across the three segments, in light of the falling jet fuel prices. Do you guys foresee you will be able to hold prices in order to improve margins, or are you already seeing the need to reduce tariffs and therefore pass through those lower jet fuel costs into prices? Thank you very much.

Our next question comes from the line of Joao Frizo from Goldman Sachs. Yes, thanks for the morning everyone. Thanks for taking my question. I have a follow up on the pricing environment. If you guys could please provide us with an overview on the pricing environment across the three segments. Ok, pollution is something that provides RTUs with a close improve tuberculosis nationalism

in light of the falling jet fuel prices. Do you guys foresee you will be able to hold prices in order to improve margins? Or are you already seeing the need to reduce tariffs and therefore pass through those lower jet fuel prices?

Roberto Alvo: Hi, Joao. How are you? Roberto. Thanks for the question. So far, and during this quarter, we have seen a very healthy pricing environment on most of the markets where we operate. Demand has stayed strong in all segments. We have seen a good leisure period for high season summer holidays. As people come back from holidays as well, we are seeing the corporate segments also present in a good way. We are confident, and we feel good about the current environment and the pricing. The things we're watching, of course, is the impact of the economies and how they fare during the year. That I would say it's something that we need to be very close to and watch. In general, we see a good situation in all of the passenger businesses.

get fuel costs into prices. Thank you very much. Hi, Joao. How are you, Roberto? Thanks for the question. So far and during this quarter, we have seen a very healthy pricing environment on most of the markets where we operate. Demand has stayed strong.

In all segments, we have seen a good leisure period for high season summer holidays, and as people come back from holidays as well, we are seeing corporate segments also present in a good way. So we are confident and we feel good about the current environment and the pricing.

And the things we're watching, of course, is the impact of the economies and how they fare during the year. And that, I would say, is something that we need to be very close to and watch. But in general, we see a good impact on the economy and the economy as a whole.

Roberto Alvo: In the case of cargo, as we already mentioned, pricing has softened a little bit because of lack of demand, still above 2019 levels, as Ramiro said, embedded in our business plan. That's probably where we have seen cargo yields, in this case, soften a little bit vis-a-vis 2022.

a good situation in all of the passenger businesses. In the case of cargo, as we already mentioned, pricing has softened a little bit because of lack of demand. Still above 2019 levels, as Ramiro said, embedded in our business plan, but that's probably where we have seen yields, cargo yields in this case, soften a little bit vis-a-vis 2022.

Joao Frizo: Thank you very much.

Operator: Thank you. At this time, I would now like to turn the conference back over to Ramiro Alfonsín for closing remarks.

Thank you very much. Thank you. At this time, I would now like to turn the conference back over to Ramiro Alfonsin for closing remarks. Thank you Gigi and thank you all again for joining us today. Our investor relations team is around for further questions.

Roberto Alvo: Thank you, Gigi, and thank you all again for joining us today. Our investor relations team is around for further questions. Have a very good day and a nice weekend.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect. Good day, thank you for standing by. Welcome to the Q4 2022 LATAM Airlines Group earnings conference call. At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star one one on your telephone. You will hear an automated message advising your hand is raised. To withdraw your question, please press star one one again. Please be advised that today's conference is being recorded. Before I turn the call over to management, I'd like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations, and as such, constitute forward-looking statements.

Have a very good day and a nice weekend. This concludes today's conference call. Thank you for participating. You may now disconnect.

I.

Thanks for watching!

Good day and thank you for standing by. Welcome to the fourth quarter 2022 LATAM Airlines Group Earnings Conference call.

At this time, all participants are in a listen-only mode. After the speaker's presentation, there will be a question and answer session. To ask a question during the session, you will need to press star 1-1 on your telephone. You will then hear an automated message advising your hand is raised. To withdraw your question, please press star 1-1 again.

Please be advised that today's conference is being recorded. Before I turn the call over to management, I would like to remind you that certain statements in this presentation and during the Q&A may relate to future events and expectations and as such constitute forward-looking statements.

Operator: Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance or guidance, are forward-looking statements. These statements are based on a range of assumptions that LATAM Group believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings. The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings. If there are any members of the press on the call, please note that for the media, this is a listen only call. I would now like to hand the conference over to your speaker today, CFO of LATAM Airlines Group, Ramiro Alfonsín. Please go ahead.

Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans, objectives, and expected performance or guidance are forward-looking statements. These statements are based on a range of assumptions that La Tom Group believes are reasonable but are subject to uncertainties and risks that are discussed in detail in our CVM and SEC filings. For more information, visit www.cvm.com.

The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements due to a variety of factors, which are discussed in detail in our SEC filings.

And if there are any members of the press on the call, please note that for the media, this is a listen only call.

I would now like to hand the conference over to your speaker today, CFO of LATAM Airlines Group, Ramiro Alfonsin. Please go ahead. You all have a great day and take care of yourself.

Ramiro Alfonsín: Thank you, Gigi. Hello, everyone, and good morning. Welcome to our Q4 2022 conference call, and thank you for joining us today. My name is Ramiro Alfonsín, and I am the CFO of LATAM Airlines Group. Here with me today is Mr. Roberto Alvo, CEO of LATAM Airlines Group, Mr. Andrés Del Valle, VP of Corporate Finance, and Tori Creighton, Head of Investor Relations. We will present our highlights and results for the Q4 2022. Let me start by saying we are delighted to have this instance again, after having our conference calls with the market on hold due to our restructuring proceedings.

Thank you, Gigi. Hello, everyone, and good morning. Welcome to our fourth quarter 2022 call and thank you for joining us today.

My name is Daniel Thompson and I am the CFO of the Latin Maryland Group. Here with me today is Mr. Roberto Alvo, CEO of the Latin Maryland Group, Mr. Andres Del Valle, VP of Corporate Finance, and Torrey Creighton, Head of Industrial Relations.

And we will present our highlights and results for the fourth quarter 2022. Let me start by saying we are delighted to have this instance again.

Ramiro Alfonsín: As you all know, on 3 November last year, we successfully emerged from Chapter 11, and are proud to inform that as a result, we currently have a strengthened cost structure, a strengthened capital structure, and solid market share in all of the markets that we operate. All this places LATAM without a doubt as an industry leader for the future. I'd like to pass the presentation to Roberto to set the stage for our Q4 results.

After having our conference calls, with the market on hold due to our restructuring proceedings, as you all know, on November third last year we successfully emerge from chapter eleventh and iare proud to inform that, as a result, we currently have a strengthened cost structure.

a strengthened capital structure, and solid market share in all of the markets that we operate. All these places that I'm without a doubt an industry leader for the future.

Roberto Alvo: Thank you, Ramiro. Hello everyone. It's a pleasure being with you this morning. As we reflect on the end of 2022 on LATAM's successful emergence from its Chapter 11 proceedings, it is helpful to remember where things stood back in 2020. The pandemic had a devastating impact on the industry and thereafter threatened the collapse of the air travel industry on a global scale. For LATAM Group, this was reflected in a reduction of 95% of our operations during the worst part of the pandemic. Following this complicated situation, LATAM Group was forced to file in Chapter 11 on 26 May 2020, and as a result of the restructuring, LATAM Group has emerged with one of the most competitive and efficient cost structures and liquidity levels in the region and globally.

I'd like to pass the presentation to Roberto to set the stage for our fourth quarter results.

Thank you, Ramiro, and hello everyone. It's a pleasure being with you this morning.

As we reflect on the end of 2022 and the time-successful emergence from its Chapter 11 proceedings, it is helpful to remember where things stood back in 2020.

The pandemic had a devastating impact on the industry and thereafter threatened the collapse of the air travel industry on a global scale. For a time group, this was reflected in a reduction of 95 percent of our operations during the worst part of the pandemic.

Following this complicated situation, LATAM Group was forced to file on Chapter 11 on May 26, 2020. And as a result of the restructuring, LATAM Group has emerged with one of the most competitive and efficient cost structures and liquidity levels in the region and globally.

Roberto Alvo: This wouldn't have been possible without the constant support from our employees, our suppliers, our clients, our shareholders, and investors during these difficult times. It's important to remember that. As a result of our restructuring process, we were able to reduce our debt significantly, accompanied by a relevant increase in our liquidity levels. With respect to debt, we decreased our gross debt by $3.9 billion from $10.4 to 6.5 billion as of 31 December 2022. In terms of leverage, LATAM ended the year with net financial debt of EBITDA to EBITDA of 4.2x, despite a challenging H1 of the year due to the Omicron variant. In terms of liquidity, even following the devastating effect that the crisis had on the players of the region, we were able to increase our liquidity from $1.3 to 2.3 billion after our Chapter 11 emergence.

This wouldn't have been possible without the constant support from our employees, our suppliers, our clients, our shareholders, and investors during these difficult times, and it's important to remember that.

As a result of our restructuring process, we were able to reduce our debt significantly, accompanied by a relevant increase in our liquidity levels.

With respect, today we decrease our gross debt by 3.9 billion from 10.4 to 6.5 billion as of December 31, 2022.

In terms of leverage, Latam ended the year with net financial debt of EBITDA of 4.2 times.

Despite the challenging first half of the year due to the Omicron variant. In terms of liquidity, even following the devastating effect that the crisis had on the players of the region, we were able to increase our liquidity from 1.3 to 2.3 billion after our Chapter 11 emergence. As of December 31, 2022, our liquidity was 24.3% over the last 12 months.

Roberto Alvo: As of 31 December 2022, our liquidity was 24.3% over last 12-month revenues. Another important result of the financial restructuring was the simplification of our debt structure. The $6.5 billion in debt comprised of approximately $4.3 billion of financial debt and $2.2 billion in operating leases. When we look at our debt maturity profile, it is very important to highlight that LATAM has no significant non-fleet debt maturities in the next four years. As of today, LATAM only has maturities coming from our exit financing due in 2027, including $450 million five-year notes and a term loan B of $1.1 billion. It is worth mentioning that these five-year notes and the term loan B, both amounting to more than half of the exit financing, can be replaced starting in 2024.

Another important result of the financial restructuring was the simplification of our debt structure. The $6.5 billion in debt comprised of approximately $4.3 billion of financial debt and $2.2 billion in operating leases.

When we look at our debt maturity profile, it is very important to highlight that LATAM has no significant non-flead debt maturities in the next four years. As of today, LATAM only has maturities coming from our exit financing due in 2027, including 450 million 5-year notes and a terminal B of 1.1 billion.

This word mentioning that these five-year notes and the terminal B both amounting to more than half of the exit financing can be replaced starting in 2024. When we look at our cost, we're delighted to mention that following the cost savings measures carried out during the restructuring, totaling over $1 billion, LATAM has been able to reduce its unit cost when compared to the pre-pandemic.

Roberto Alvo: When we look at our cost, we're delighted to mention that following the cost-saving measures carried out during the restructuring, totaling over $1 billion, LATAM has been able to reduce its unit cost when compared to the pre-pandemic levels and offset several years of inflation. This was done by focuses on simplification and automation of processes, as well as renegotiation of contracts, the use of digital tools, and data analysis. This has resulted in LATAM having an extremely competitive cost structure on an absolute basis, on a relative basis when compared to the US and European most important competitors we have. In Q4 2022, we reported a passenger CASK ex-fuel of $0.04, which is 6% lower than in the same period in 2019 that was $0.043.

the US and European most important competitors we have.

In the fourth quarter of 2022, we reported a passenger cask ex-fuel of 4 cents, which is 6% lower, but in the same period in 2019 that was 4.3 cents.

Roberto Alvo: That's even taking into account the significant inflationary pressures that the region and the world have experienced during that period of time. When one looks at the available public information of other carriers in the region and select US carriers who didn't go through restructuring, you can easily conclude that the trend is the opposite, with increasing unit costs, especially following the inflationary pressures worldwide. The fleet negotiations played a major role in this result. After filing for Chapter 11, LATAM was able to renegotiate most of the existing and upcoming fleet leasing contracts in the midst of the pandemic during exceptional and challenging times for lessors and financiers. As a result, the fleet cash cost is over 40% lower than pre-pandemic 2019.

That's even taking into account the significant inflationary pressures that the region and the world have experienced during that period of time. When one looks at the available public information of other carriers in the region and select U.S. carriers who didn't go through restructuring, you can easily conclude that the trend is youreffective.

with increasing unit costs, especially following the inflationary pressures worldwide. The fleet negotiations played a major role in this result. After filing for chapter 11, LATAM was able to renegotiate most of the existing and upcoming fleet leasing contracts in the midst of the pandemic during exceptional and challenging times for the source and final series. As a result, the fleet cash cost is over 40% lower.

Roberto Alvo: In 2022, this was approximately $800 million. In 2023, estimates for the total fleet cash cost for both operating and financial leases will be between $700 million and $800 million. When we look at the group network, and despite the gap in operations vis-à-vis 2019 levels, we can note that in terms of destinations, the network is already fully recovered. As of December 2022, the group operates 144 destinations in 22 countries, which is already in line with the number of destinations operated prior to the pandemic in 2019. During 2022, the group transported more than 62 million passengers, more than in any other airline in the region. This is mainly the result of solid and competitive market shares, accompanied by an efficient cost structure and healthy levels of liquidity. This new cost structure facilitated the opening of new routes that wouldn't have been profitable otherwise.

than pre-pandemic 2019. In 2022, this was approximately $800 million, and in 2023, estimates for the total fleet cash cost for both operating and financial leases will be between $700 and $800 million.

In 2022, this was approximately $800 million, and in 2023, estimates for the total fleet cash costs for both operating and financial leases will be between $700 and $800 million.

When we look at the group network, and despite the gap in operations vis-à-vis 2019 levels, we can note that in terms of destinations, the network is already fully recovered. As of December 2022, the group operated 144 destinations in 22 countries, which is already in line with the number of destinations operated prior to the pandemic in 2019. During 2022, the group transported more than 62 million passengers

Roberto Alvo: In 2023, LATAM Group will have 38 new routes operating versus pre-pandemic, continuing to increase capacity, always keeping in mind profitability and cash generation as key drivers. LATAM Group has also been able to strengthen its respective market shares while its affiliates operate. LATAM Group affiliates are currently first in market share in three of the five domestic markets where they operate, Brazil, Chile, and Peru. In Q1, LATAM Group continued to see strong load factors, loyalty of customers, and an improvement in our service and offering reflected in better book RASK in vis-à-vis Q1 2019. Despite the challenging environment, LATAM Group has launched a sustainability strategy, A Necessary Destination we call it.

always keeping in mind profitability and cash generation as key drivers.

LATAM Group has also been able to strengthen its respective market shares while its affiliates operate. LATAM Group affiliates are currently first in market share in three of the five domestic markets where they operate, Brazil, Chile and Peru.

In the first quarter, the TAM group continued to see strong growth factors, loyalty of customers, and an improvement in our service and offering reflected in better book routes in 2019, so vis-a-vis first quarter of 2019. Finally, despite the challenging environment that TAM has launched...

Roberto Alvo: In May 2021, it is a solid reflection of our commitment to sustainability and ESG practices as part of the LATAM realization of the role and responsibility that the group has with the planet, the communities, and the customers, and shareholders. As you might be aware, this strategy is based on three pillars, climate change, circular economy, and shared value, and establishes the goals of carbon neutrality by 2050 with a reduction of 50% of carbon emissions in domestic operations by 2030, eliminate single-use plastics by the end of this year, have a target of 5% of 2030 total fuel consumption come from sustainable aviation fuels, and zero waste to landfills by 2027, among other things. During 2022, LATAM made an important announcement with respect to our sustainability agenda.

This strategy is based on three pillars, climate change, circular economy, and shared value, and establishes the goals of carbon neutrality by 2050.

with a reduction of 50% of carbon emissions in domestic operations by 2030, eliminate single-use plastics by the end of this year, have a target of 5% of 2030 total fuel consumption come from sustainable aviation fuels, and zero waste to landfuels by 2027, among other things. During 2022, LATAM made an important announcement with the

Roberto Alvo: At the end of last year, LATAM announced the expansion of the alliance with the Catarán Foundation in the project to Selvas Bio located in the Colombian Orinoquia wetland region, which aims for the conservation of 575,000 hectares. This is more than 0.5% of the surface of Colombia, expecting to capture more than 11 million tons of CO2 by 2030. As a result of LATAM's continuing effort, it was once again recognized by S&P in its corporate sustainability assessment as the most sustainable airline in the Americas and Europe, and fifth worldwide in terms of its environmental, social, and governance sustainability practices. With that, thanking you again for being here, I turn the presentation over to Ramiro to take a closer look at our Q4 financial performance. Thank you very much.

respect to our sustainability agenda. At the end of last year, Naitama announced the expansion of the alliance with the Catarrhuan Foundation in the project of Seidos BIO located in the Colombian or in Oquiá wetland region, which aims for the conservation of 575,000 hectares, this is more than 0.5% of the surface of Colombia, expecting to capture more than 11 million tons of CO2 by 2030. As a result, the

of LATAM's continuing effort. It was once again recognized by S&P in its corporate sustainability assessment as the most sustainable area in the Americas and Europe and fifth worldwide in terms of its environmental, social, and government sustainability practices. With that, I'm thanking you again for being here. I turn the presentation over to Ramiro to take a closer look at our four-quarter financial performance. Thank you very much. Thank you, Roberto. With regard to the operations on slide seven, we will now take a short break.

Ramiro Alfonsín: Thank you, Roberto. With regard to the operations on slide seven, the group has been able to recover passenger operations to 83% of 2019 levels in Q4 2022. The group's operation increased 31% in comparison with Q4 2021. Consolidated RASK increased 11% in Q4 vis-à-vis 2019 levels, in a context marked by strong demand for air travel and by high jet fuel prices. During Q4, LATAM Group continued to increase its passenger capacity. International operations represented 43% of the quarter's capacity, followed by domestic Brazil with 36%, and Spanish-speaking countries with 21%. It is worth noting that the recovery of the operations has been accompanied by a healthy consolidated load factor of 81%. Cargo also continues to be an important pillar for the group's operations, already surpassing 2019's capacity.

The group has been able to recover passenger operations to 83% of 2019 levels in the fourth quarter of 2022. The group's operation increased 31% in comparison with the same quarter of 2021. Consolidated RASC increased 11% in the fourth quarter vis-à-vis 2019 levels, in a context marked by strong demand for air travel and by high jet fuel prices.

During the fourth quarter, LATAM Group continued to increase its passenger capacity. International operations represented 43% of the quarter's capacity, followed by domestic Brazil with 36% and Spanish-speaking countries with 21%.

It is worth noting that the recovery of the operations has been accompanied by a healthy consolidated load factor of 81%. Cargo also continues to be an important pillar for the group's operations, already surpassing 2019's capacity. No one offers the one stop shop cargo solution with a...

Ramiro Alfonsín: No one offers the one-stop shop cargo solution with the capillarity, a network offering all facilities and capabilities like LATAM in the region. Cargo revenues in 2022 increased 62% versus 2019, moving on from representing 10% of the revenues in 2019 to 18% in 2022. On slide eight, you can see that this quarter, LATAM registered an adjusted operating margin of 8%, better than expected when compared to our updated business plan from August 2022. In Q4, EBITDA amounted to $467 million and an adjusted EBITDA of $520 million.

2019 to 18% in 2022. On slide 8, you can see that this quarter, that time registered an adjusted operating margin of 8%.

Better than expected when compared to our updated business plan from August 22. In Q4, EBITDA amounted to $467 million and an adjusted EBITDA of $520 million.

Ramiro Alfonsín: Total operating revenues were almost in line with 2019 levels, and as operations continued to recover, passenger revenues were 7% below the same period of 2019. While cargo revenues continue to surpass 2019 levels with a notable 50% increase in Q4 of 2022, mainly explained by the healthy levels of cargo demand and yields, further propelled by the increase in LATAM's cargo capacity. Total adjusted operating costs during the quarter increased 0.2% versus 2019, mainly explained by the increase in the aircraft fuel cost line, which increased 44% versus 2019, following a 67% increase in fuel price during the quarter compared to 2019. Ex-fuel operating expenses were down 18% from 2019 levels. As a consequence, LATAM reported a passenger cost per ASK ex-fuel of $0.04, 6% lower than in 2019, reflecting the group's important cost-saving initiatives that are already fully implemented.

Total operating revenues were almost in line with 2019 levels. As operations continued to recover, passenger revenues were 7% below the same period of 2019, while cargo revenues continued to surpass 2019 levels with a notable 50% increase in Q4 of 2022.

mainly explained by the healthy levels of cargo demand and yields, further propelled by the increase in LATAM's cargo capacity. Total adjusted operating cost during the quarter increased 0.2% per 2019.

Mainly explained by the increase in the aircraft fuel cost line, which increased 44% versus 2019, following a 67% increase in fuel price during the quarter compared to 2019. Ex-fuel operating expenses were down 18% from 2019 levels.

As a consequence, LATAM reported a passenger cost per ASK ex-fuel of 4 cents, 6% lower than in 2019, reflecting the group's important cost-saving initiatives that are already fully implemented. Finally, LATAM registered a net income attributable to the owners of the parent company of $2.5 billion for the quarter and $1.3 billion for the year.

Ramiro Alfonsín: LATAM registered a net income attributable to the owners of the parent company of $2.5 billion for the quarter, and $1.3 billion for the year. It is worth mentioning that this last result is mostly explained by extraordinary gains related to the restructuring activities attributed to our emergence from Chapter 11. Due to the group's accumulated losses, this will not result in the payment of dividends based on 2022 net income. As you can see on the next slide, LATAM Group has seen a sustained improvement in its capacity, reaching almost pre-pandemic levels with a noticeable path of recovery in the past quarters. The financial results have mirrored this recovery with healthy numbers and the best last 12 months EBITDA since the Chapter 11 filing. I would just like to highlight that the full year EBITDA was approximately $1.3 billion.

It is worth mentioning that this last result is mostly explained by extraordinary gains related to the restructuring activities attributed to our emergence from Chapter 11.

Due to the group's accumulated losses, this will not result in the payment of dividends based on 2022 net income.

As you can see on the next slide, Natan Group has seen a sustained improvement in its capacity, reaching almost pre-pandemic levels with a noticeable path of recovery in the past quarters. The financial results have mirrored this recovery with healthy numbers and the best last 12 months have been done since the Chapter 11 filings. And that concludes our talk on School Candidate versions of the Block

Ramiro Alfonsín: Let's turn to our cash flow statement on Slide 10. In Q4 2022, and for the full year of 2022, LATAM generated a strong operational cash flow of USD 1 billion for the year and USD 400 million for Q4. This was mainly due to the recovery in operations and the ramp-up in demand during the year. As a result, LATAM was able to cover its investments, including maintenance and growth, which mainly consisted of engine maintenance, part of which were staggered during the pandemic. This positive operational cash flow also resulted in a positive unlevered free cash flow. The exit from Chapter 11 in Q4 provided fresh funds to LATAM, enabling the group to reach its liquidity target and also to be prepared for possible external shocks or opportunities.

I would just like to highlight that the full year EBITDA was approximately 1.3 billion dollars. Let's turn to our cash flow statement on slide 10. In the fourth quarter 2022 and for the full year of 2022 LATAM generated a strong operational cash flow of 1 billion for the year and 400 million for the fourth quarter.

This was mainly due to the recovery in operations and the ramp up in demand during the year. As a result, LATAM was able to cover its investments, including maintenance and growth, which mainly consisted of engine maintenance, part of which were staggered during the pandemic. This positive operational cash flow also resulted in a positive, unleveled pre-cash flow.

Ramiro Alfonsín: At the end of the quarter, LATAM had a positive change in cash of $320 million and $170 million for the full year of 2022. Our liquidity, as Roberto mentioned, amounted to $2.2 billion, representing 24% of last 12 months revenues. As you can see on the graph on the left-hand side in Slide 11, LATAM has a well-diversified revenue structure. During 2022, the group's international operations amounted to 33% of revenues, domestic Brazil to 28%, domestic Spanish-speaking to 18%, and Cargo to 18%. In addition, and due to LATAM's exposure to international markets and the tickets indexation to strong currencies, LATAM Group has a unique currency structure in the region. During 2022, 60% of our revenues were in dollar or euro, while the remaining 40% was in other currencies, mainly Brazilian real and Chilean pesos. This revenue in strong currency is a key differentiating factor.

cash of $320 million and $170 million for the full year of 2022. Our liquidity, as Roberto mentioned, amounted to $2.3 billion, representing 24% of last 12 months' revenues.

As you can see on the graph on the left-hand side in slide 11, LATAM has a well-diversified revenue structure. During 2022, the group's international operations amounted to 33% of revenues, domestic Brazil to 28%, domestic Spanish-speaking to 18%, and cargo to 18%.

In addition, and due to LATAM's exposure to international markets and the tickets' annexation to strong currencies, LATAM Group has a unique currency structure in the region.

During 2022, 60% of our revenues were in dollar or euro, while the remaining 40% was in other currencies, mainly Brazilian, Real and Canadian pesos. This revenue in strong currency is a key differentiating factor. Most of the costs in the airline industry are in dollar denominated, such as fuel, fleet, debt and maintenance. La Ban has a unique natural FX head due to our revenue structure.

Ramiro Alfonsín: Most of the costs in the airline industry are in dollar-denominated, such as fuel, fleet, debt, and maintenance. LATAM has a unique natural FX hedge due to our revenue structure. For the LATAM Group, the JV with Delta Air Lines represent an important opportunity, and we're very excited to be working with Delta in its implementation. The carriers will have the largest capacity share between North and South American markets within the JV scope, where we are allowed to coordinate capacity, pricing, and share corporate account information. As per our 2023 guidance in Slide 12, we are expecting to grow an average of 20% in 2023, particularly in the international segment, where we see strong demand and have a unique cost structure.

Furthermore, for the LATAM group, the JB with Delta Airlines represents an important opportunity and we're very excited to be working with Delta in its implementation. The carriers will have the largest capacity share between North and South American markets within the JB scope where we are allowed to coordinate capacity and pricing and share corporate account information. After our 2023 guidance in...

Ramiro Alfonsín: LATAM expects to register an adjusted EBIT margin between 6% to 8% in 2023, representing an upside of 1.5 percentage points compared to the 1 percentage in our business plan. With regard to adjusted EBITDA, LATAM expects to reach between $2 to 2.2 billion in 2023, representing again an upside when compared to our projected business plan and in line with 2019 levels. Additionally, and very important to us, is our capital structure. Leverage in 2023 is expected to be three times, the lowest that LATAM would have in over 10 years. Please turn to Slide 13. In the context of restructuring proceedings, LATAM carried out a capital increase of approximately $10.3 billion, comprised of an equity rights offering of $800 million, plus $9.5 billion to three different series of convertible notes that resulted in a cash injection for the company of approximately $5.4 billion.

to the one presented in our business plan.

With regard to adjusted EBITDA, LATAM expects to reach between $2 to $2.2 billion in 2023. We presented again an upside when compared to our projected business plan and in line with 2019 levels. Additionally, and very important to us is our capital structure.

Leveraging 2023 is expected to be three times the lowest that LATAM would have in over 10 years. Please join me in slide 13. In the context of restructuring proceedings, LATAM carried out the capital increase of approximately $10.3 billion, comprised of an equity rights offering of $800 million plus $9.5 billion.

through three different series of convertible notes that resulted in a cash injection for the company of approximately $5.4 billion. As of February 28, 2023, 99.8% of the underlying shares are already subscribed and paid for. As a result of this, according to sex violence,

Ramiro Alfonsín: As of February 28, 2023, 99.8% of the underlying shares are already subscribed and paid for. As a result of this, according to SEC filings, Sixth Street Partners owns 28% of our total shares outstanding, followed by Strategic Value Partners with 16%, Delta Air Lines with 10%, Qatar Airways with 10%, Sculptor Capital with 6.5%, and the Cueto Group with 5%. LATAM never lost focus of the value proposition and its customers. As a result, the group continued to transform the experience of our passengers through cabin retrofits across our narrow-body fleet. During 2022, we retrofitted 81 aircraft, thereby completing 90% of all of our narrow-body fleet transformation. LATAM was also recognized as South American leading airline in several prestigious awards in the industry. Let me conclude in slide 15.

Six Street partners owns 28% of our total shares outstanding, followed by Strategic Value Partners with 16%, Delta Airlines with 10%, Qatar Airways with 10%, Sculpture Capital with 6.5% and the Queto Group with 5%.

LATAM never lost focus of the value proposition and its customers. As a result, the group continued to transform the experience of our passengers to cabin retrofits across our narrow body fleet. Here in 2022, we retrofitted 81 aircraft, thereby completing 90% of the flight.

of all of our narrow body fleet transformation. LATAM was also recognized as South American leading airline in several prestigious awards in the industry. Let me conclude in slide 15.

Ramiro Alfonsín: As final takeaways, LATAM has ended 2022, a milestone year, with $1.3 billion of EBITDA, $2.3 billion in liquidity, and leverage of 4.2 times. This is the result of the Chapter 11 transformation and dedication to continued operational and financial recovery from the pandemic impacts. The trend of improving results presented here today, the competitive position that we hold both in terms of cost and capital structure, and our unique network in the region, gives us great confidence in our ability to deliver on our guidance for 2023. Thank you for your attention, and we would like to open the floor for any questions.

As final takeaways, LATAM has ended 2022, a milestone year, with $1.3 billion of EVIDAR, $2.3 billion in liquidity, and leverage of 4.2 times.

This is the result of the chapter 11 transformation and dedication to continued operational and financial recovery from the pandemic impacts.

The trend of improving results presented here today, the competitive position that we hold both in terms of cost and capital structure and our unique network in the region gives us great confidence in our ability to deliver on our guidance for 2023.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Please stand by while we compile the Q&A roster. Our first question comes from the line of Stephen Trent from Citi.

Thank you for your attention and we would like to open the floor for any questions. Thank you. As a reminder, to ask a question, please press star 11 on your telephone and wait for your name to be announced.

To withdraw your question, please press star 11 again. Please stand by while we compile the Q&A roster.

Stephen Trent: Hi. Good morning, everybody. Can you hear me okay?

Our first question comes from the line of Steven Trent from Citi. Hi, good morning everybody. Can you hear me okay? Yes Steven, hi, how are you doing?

Roberto Alvo: Yes, Stephen. Hi, how are you doing?

Stephen Trent: I'm well, thank you very much. Appreciate the time. Apologies as I did not have access to your slides, but that was my fault. I'm just curious in terms of your thoughts on expansion into other markets. Any high-level thoughts, for example, whether you'd be interested in entering Mexico's domestic market in the event that the AMLO administration approve cabotage, or for example, going back to Argentina's domestic market, would just love to hear your thoughts on that.

I'm well, thank you very much. Appreciate the time and apologies as I did not have access to your slides, but that was my fault. I'm just trying to curious in terms of your thoughts on expansion into other markets. So, any high level thoughts, for example, whether you're St Kerr,ung savvy or not, I don't know if there's a reason a lot of them

you'd be interested in entering Mexico's domestic market in the event that the AMLO administration approved sabotage or for example, going back to Argentina's domestic market. We'd just love to hear your thoughts on that. Hi Steven, how are you? This is Roberto, thanks for the question. So I guess our focus in the short term is to make sure that we recover the capacity of all of these recommendations under such standardERC public karma. And the fact that the USffff is rubb acquisition against

Roberto Alvo: Hi, Stephen. How are you? This is Roberto. Thanks for the question.

Stephen Trent: Hey, Roberto.

Stephen Trent: I guess our focus in the short term is to make sure that we recover the capacity that we have until 2019. We have a lot of growth in front of us. Immediately our focus is in the five domestic markets where we have operation, as well as developing our international network and even growing it beyond what we had prior to 2019. As you probably saw, we announced Guarulhos, Los Angeles, for example, and Bogota to Orlando together with Delta over the last few weeks. We're interested in the possibilities of expanding, of course, in the region most likely. The situation in Colombia means that we see an opportunity of a stronger position in that market in particular. In the short term, our focus is in South America, I would say.

We're interested in the possibilities of expanding, of course, in the region most likely. The situation in Colombia means that we see an opportunity of stronger position in that market in particular. And in the short term, our focus is in South America, I would say. So I'm not discarding anything.

Roberto Alvo: I'm not discarding anything either in Mexico, as you mentioned, or in Argentina, but I would say that the focus today is in the five countries where we are. This is the guiding principle, at least for now.

either in Mexico, as you mentioned, or in Argentina, but I would say that the focus today is in the five countries where we are. So this is the guiding principle, at least for now. Great. I appreciate that. And apologies if I missed, but sort of any high-level view on the potential timing for a Level 2 ADR listing.

Stephen Trent: Great. Appreciate that. Apologies if I missed, but sort of any high-level view on the potential timing for a Level 2 ADR listing?

Tori Creighton: Hi, Steve. This is Tori here. As for the Level 2 ADR listing, we are currently, as you know, still trading over the counter basis. However, it is still LATAM's intention to relist on the New York Stock Exchange. We're currently evaluating what that timing would be like depending on several different factors, and we'll update the market when we have any information to this respect.

Hi Steve, this is Tori here. As for the Level 2 ADR listing, we are currently, as you know, still trading over the counter basis. However, it is still Lausanne's intention to relist on the New York Stock Exchange. We're currently evaluating what that timing would be like, depending on several different factors, and we'll update the market when we have any information.

Stephen Trent: Okay. Appreciate that, Tori. Thank you.

Operator: Thank you. One moment for our next question. Our next question comes in the line of Savanthi Syth from Raymond James.

Savanthi Syth: Good morning, everyone, congrats on completing the restructuring this call. Can I ask you, one of the things that was kind of newer since the pandemic that was kind of introduced pre-pandemic but not really executed on was the Delta JV. Could you talk a little bit about the developments there and how you expect that to contribute going forward?

Hey, good morning everyone and congrats on completing the restructuring and end this call. Can I ask you, you know, one of the things that was kind of newer since the pandemic that was kind of introduced pre-pandemic but not really executed on was the Delta JV. Could you talk a little bit about, you know, the developments there and how you expect that to contribute going forward?

Roberto Alvo: Hi, Savi. How are you? This is Roberto again. I'll ask the first part of the question, and then I'll hand it off to Ramiro for any additional remarks. As we know, we were approved by all the authorities last year. The last approval was DOT in October of last year. That means that from that day on, We declared the JV effective and we started to work together. We are, I would say, in advanced stages of the setup phase of this, making sure that the teams know each other, align, and start working together. We are very optimistic about the prospects, and we feel very good about the relationship and how the teams have come together very quickly, very seamlessly, in terms of trying to find ideas and solutions. I'm personally very optimistic on the development of this.

From that day on, we declared the JB effective and we started to work together. We are, I would say, in advanced stages of the setup phase of this, making sure that the teams know each other, align, and start working together. We are very optimistic about the prospects and we feel very good about the relationship and how the world deals with the longer term.

Roberto Alvo: We very quickly launched already, or announced two routes, the ones I already mentioned. Delta also engaged its product from Atlanta to Lima and Atlanta to Santiago, and those are very encouraging first steps in this relationship. It'll take a couple of years for us to be on a run rate basis. The start is a very good one, and one that has us in LATAM very excited going forward. Ramiro?

also upgaged its product from Atlanta to Lima and Atlanta to Santiago, and those are very encouraging first steps in this relationship. It will take a couple years for us to be on a run rate basis, but the start is a very, very good one and one that has us in La Tam very excited going forward. Juanito? Yeah, completely agree. Hi, it's great to hear from you again.

Ramiro Alfonsín: Yeah, I completely agree. Savi, hi. It's great to hear from you again. Yes, we're very excited. Teams are working very hard. The possibility, the ability to share capacity, pricing, and corporate accounts is very unique, and we see a lot of opportunities there. Allowing our customers to benefit from the 300 destinations that Delta has in North America is quite unparalleled. Becoming the largest carrier between the traffic of the JV scope between South America and North America is very unique. We're very optimistic on what this will mean for our customers and for the company.

So yes, we're very excited. Teams are working very hard. The possibility, the ability to share capacity and pricing and compare accounts is very unique and we see a lot of opportunities there. And allowing our customers to benefit from the 300 destinations that Delta has in North America is quite unparalleled and becoming the largest carrier between the traffic.

of the JV scope between South America and North America is very unique. So we're very optimistic on what this will mean for our customers and for the company. I appreciate that. And then if I might, it looks like based on the unit revenue of contribution in the fourth quarter here by the various regions.

Savanthi Syth: Appreciate that. If I might, it looks like based on the unit revenue contribution in the Q4 here by the various regions and the way you're growing capacity, it seems like fairly good recovery across the different regions. Could you talk a little bit about what you're seeing in demand here? If there's corporate demand recovering, is it leisure demand? Just generally in the three different entities, if there's any more strength in one over the other?

and the way you're growing capacity, it seems like fairly good recovery across different regions. But could you talk a little bit about what you're seeing in demand here? You know, if there's corporate demand recovering, is it leisure demand? And just generally in the kind of three different entities, you know, if there's any kind of more strength in one over the other? Yes, sorry, Roberto again.

Roberto Alvo: Yes, Savi, it's Roberto again. It's March already. We have seen, I would say, healthy levels of demand in most segments in almost all of the regions and countries where we operate. It looks like a solid Q1 in terms of our unit revenues, in most of our business units. Corporate traffic has recovered. We're close to 90% of passengers, today 88%. The post-holiday moment here, remember that this is summer in this hemisphere, has started on a very healthy note. For the time being, we are optimistic about the developments of the demand. Things that concern us, basically the situation in Peru, as you saw, the unrest, and that had an impact on demand both for domestic Peru and for inbound traffic from US, Mexico, and Europe to Peru. This is getting better as the country has a little bit more stabilization.

So it's March already. We have seen, I would say, healthy levels of demand in most segments in almost all of the regions and countries where we operate. It looks like a solid first quarter in terms of our unit revenues in most of our business units. Corporate traffic has recovered to close to 90% of passengers today, 88%.

And the post-holiday moment here, remember that this is summer, summer is here, has started on a very healthy note. So for the time being, we are optimistic about the developments of the demand. Things that concern us, basically the situation in Peru, as you saw, the unrest, and that has had an impact on demand both for domestic Peru and for inbound traffic from U.S., Mexico, and Europe to Peru. This is getting better as the country has a little bit more stabilization, but that...

Roberto Alvo: That, I would say, has impacted some in the first two months of the year.

Savanthi Syth: That's very helpful. Thanks again.

I would say has impacted some in the first two months of the year. That's very helpful. Thanks again. Thank you. One moment for our next question. Our next question comes from the line of Gil Hermes Mendez from JP Morgan. Good morning, Roberto, Jamiro, Andres, Tori, and congrats on the first results post Chapter 11. Two questions on Iran. The first one, the competitive environment. So thinking in terms of the Brazilian market.

Operator: Thank you. One moment for our next question. Our next question comes from the line of Guilherme Mendes from J.P. Morgan.

Guilherme Mendes: Good morning, Roberto, Ramiro, Andrés, Tori, congrats on the first results post-Chapter 11. Two questions on our end. The first on the competitive environment. Thinking in terms of the Brazilian market and take into account the GOL and Azul just announced a recent liability management process, how does the competition in the region, and also in terms of Colombia, given the Viva Air situation, if there's any updated news regarding the potential consolidation on the market? My second question is regarding the fleet management. Having seen some bottlenecks from the industry, OEMs delaying some of the deliveries, if you're seeing the risk on your current fleet plan going forward? Thank you.

and take into account the goal and as Azul just announced a recent liability management process. How does the competition in the region and also in terms of Colombia giving the DVR situation if there's any updated and use regarding the potential consolidation on the market. And my second question is regarding the fleet management. So we have been seeing some bottlenecks from the industry OEMs delivering and delaying some of the deliveries.

Roberto Alvo: Yes. Hi, Guilherme, Roberto on this side. Brazilian domestic and international markets were, I would say, healthy on the Q4. There's a little bit of a lag between Brazil and the US as well. There's a bottleneck in visa emissions for Brazilians going to the US because of the pandemic. I would say that that is a market that has been significantly impacted in the last few months on the Brazilian point of sale. Of course, the pandemic is impossible to erase from balance sheets immediately. We chose a restructuring path in 2020. They were three very complicated years, we feel that the decisions we took and where the company stands today was the right decision given what we're seeing today.

if you're seeing the risk on your current fleet plan going forward. Thank you. Hi Guillermo, Roberto on this side. So Brazilian domestic and international markets were, I would say, healthy on the fourth quarter. There's a little bit of a lag between Brazil and the US as well. There's a bottleneck in visa emissions for Brazilians going to the US because of the pandemic. I would say that that is a market that has been significantly impacted in the last few months.

on the Brazilian point of sale. We see, of course, you know, the pandemic is impossible to erase from balance sheets immediately. We chose a restructuring path in 2020. There were three very complicated years, but we feel that the decisions we took and where the company stands today was the right decision given what we're seeing today. And all the companies, whether it's in the region or outside the region that did not restructure at the time...

Roberto Alvo: All the companies, whether it's in the region or outside the region, that did not restructure at the time, have, in my view, of course, to bear all the impact of the pandemic on their balance sheets and their cost structures and their situation and liquidity. That I think marks a very significant difference from the position that LATAM is today vis-à-vis all these other companies that chose to do otherwise. Having said that, I think that our take on the Brazilian market is an optimistic one in terms of traffic going forward, but with those discussions, just because we understand that this is going to be a volatile year, not only in terms of the economic situation of the countries and the currencies, but also the fuel prices, particularly due to the war.

have, in my view, of course, to bear all the impact of the pandemic on the balance sheets and the cost structures and the situation and liquidity. So that, I think, marks a very significant difference from the position that Natan is today vis-à-vis all these other companies that chose to do otherwise.

Having said that, I think that our take on the Brazilian market is an optimistic one in terms of traffic going forward, but we've had those discussions just because we understand that this is going to be a volatile year, not only in terms of the economic situation of the countries and the currencies, but also the fuel prices, particularly due to the war.

Roberto Alvo: In Colombia, there's an important company called Viva Air, who stopped its operations about 10 days ago. That was a little bit more than 20% of the market. We have brought five aircraft to Colombia during this month. Two of them are already operating. The other three will be operating by the end of the month. We see this as an important opportunity to increase the product that we have, make it better, more competitive, for both Colombian passengers and for people that want to fly internationally in and out of Colombia. In that sense, we see this as an important opportunity to strengthen our position in one of the most important markets in the region, actually the second largest after Brazil.

In Colombia, there's an important company called Viva Air, who stopped its operations about 10 days ago. That was a little bit more than 20% of the market. We have brought five aircraft to Colombia in this month. Two of them are already operating. The other three will be operating by the end of the month. And we see this as an important opportunity to increase the product that we have, make it better, more competitive for both Colombian and assault rose are still here. We're looking to make the customers happy, get it to the most awesome brand that they can. For us, what that means is that we now actually have high performance users and we impact them once a year on that. We're not ser restore, and therefore amusements apply to that. So we will move on to the latest market. Our next event is going to be the high performance advertising organization.

passengers and for people that want to fly internationally in and out of Colombia. So in that sense, we see this as an important opportunity to strengthen our position in one of the most important markets in the region, actually the second largest after Brazil. Yeah, regarding fleet key and high, this is Ramiro, and thank you for your question. We are aware of the supply issues that OEMs are facing. We have discussed with them, we are planning.

Ramiro Alfonsín: Yeah. Regarding fleet, Guilherme, hi, this is Ramiro. Thank you for your question. We are aware of the supply issues that OEMs are facing. We have discussed with them. We are planning to receive 15 neos in 2023. We feel very confident that the growth path that we have set on our guidance can be achieved with the aircraft that we have, plus the ones that we are going to be receiving according to the latest schedules. In addition to that, we have certain aircraft under PBH that allow us to grow or to modify our growth plan. This is quite singular industry, we negotiated, as you know, during the Chapter 11, having this payment by the hour on certain aircraft that allows us to adapt capacity if needed in the plan. We're confident we can deliver on the growth plan for 2023.

to receive 50 meals in 2023. And we feel very confident that the growth path that we have set on our guidance can be achieved with the aircraft that we have, plus the ones that we're going to be receiving according to the latest schedules. In addition to that, we are also very confident that the growth path that we have set on our guidance

We have certain aircraft under PDH that allows us to grow or to modify our growth plan. This is quite singular industry, but we negotiated, as you know, during the Chapter 11 having this payment by the hour on certain aircraft that allows us to adapt capacity if needed in the plan. We're confident we can deliver on the growth plan for 2023.

Guilherme Mendes: That's super clear. Thank you, Roberto and Ramiro. Have a good day.

Ramiro Alfonsín: Thank you.

Roberto Alvo: Pleasure. Thank you.

Operator: Thank you. One moment for our next question. Our next question goes to the line of Neil Glynn from AIR Control Tower.

Thank you, one moment for our next question. Our next question goes on the line of Neil Glynn from Air Control Tower. Hello, if I can ask two questions please.

Neil Glynn: Oh, hello. If I could ask two questions, please. The first one with respect to cargo within your outlook for 2023. We've obviously seen a deceleration in growth rates in the Q4 of 2022 as cargo yields normalize. Interested in your thoughts as to 2023 cargo revenues. The second question, in the presentation you highlighted LATAM Pass membership is up 65% on 2017 levels, which is quite an impressive uplift. Interested in your thoughts on what benefits has this had already on revenues thus far, and any plans you have to leverage this critical mass further in the future. Thank you.

The first one with respect to cargo within your outlook for 2023, we've obviously seen a deceleration in growth rates in the fourth quarter of 2022 as cargo yields normalize. So interested in your thoughts as to 2023's cargo revenues. And then the second question, in the presentation you highlighted that past membership.

is up 65% on 2017 levels, which is quite an impressive uplift. Interested in your thoughts on what benefits has this had already on revenues thus far, and any plans you have to leverage this critical mass further in the future. Thank you.

Roberto Alvo: Hi, Neil. Roberto again. I'll take the cargo question. I'll pass it to Ramiro for the frequent flyers. Yes, we are aware and seeing the slowdown in cargo towards the end of last year. This is impacted by, of course, the uncertainty of the economy, the situation in China. Remember that there was a big lockdown in China because of COVID at the end of last year. That relative weakness that still leaves us in better levels than 2019 is there in the market. It hasn't subsided or changed significantly. In the region, on top of that, weather has impacted flower production out of Colombia. Approximately 20% of the flower production in Colombia was lost to very heavy rains. That has an additional impact on flower exports from Colombia to the US. It was impactful, actually, for Mother's Day.

Hi, Neil, Roberto. Again, I'll take the cargo question. I'll pass it to Ramiro for the frequent flyer. So, yes, we have – we're aware and seeing the slowdown in cargo towards the end of last year, and this is impacted by, of course, the uncertainty of the economy, the situation in China. Remember that there was a big lockdown in China because of COVID at the end of last year. So, that relative weakness –

that it still leaves us in better levels than 2019 is there in the market. It hasn't subsided or changed significantly. In the region, on top of that, weather has impacted flower production out of Colombia. Approximately 20% of the flower production in Colombia was lost to very heavy rains. So that has an additional impact on flower exports.

Roberto Alvo: This will be recovered in a few months, but those are, I would say, trends that have softened a little bit the demand for cargo in the last months. Our outlook for the rest of the year is positive nonetheless. We still are in the process of converting up to 10 767 passenger aircraft for freighters. We are on track with that conversion, and we feel good about the added capacity that we will have and the ability that we'll have, that will keep us in opening new markets and better competing in the ones where we are.

from Colombia to the US. It was impactful actually for Mother's Day. So, and these will be recovered in a few months, but those are, I would say, trends that have softened a little bit the demand for cargo in the last months. Our outlook for the rest of the year is positive nonetheless. We still are in the process of converting up to 10,767 passenger aircraft for fighters.

We are on track with that conversion and we feel good about the added capacity that we will have and the ability that will keep us in opening new markets and better competing in the ones where we are. Just to complement that, Neil, in the business plan that we put forward, we were assuming already a softening on the years on the cargo front and that was already embedded into the business plan.

Ramiro Alfonsín: Yeah, just to complement that, Neil, in the business plan that we put forward, we were assuming already a softening on the yields on the cargo front, and that was already embedded into the business plan. Regarding LATAM Pass, as you said, we have 42 million members. It is very important for the cash stream, cash flow generation for the company. It represents normally, approximately now a little north of 10% of our load factor in our aircraft, and we're investing a lot in the experience from the customer. We're investing in new app in Brazil. We have launched the club successfully in the last month. Now we're putting an initiative of using miles plus cash to purchase the tickets. We're also investing in new agreements for the non-air channels. We have very strong partnerships with the leading banks in the region.

Regarding LAT and PASS, as you said, we have 42 million members. It is very important for the cash stream, cash flow generation for the company. It represents approximately now a little north of 10% of our load factor in our aircraft. We are investing a lot in the experience from the customer. We are investing in a new app.

In Brazil, we have launched the club successfully in the last month. Now we're putting in initiatives of using miles plus cash to purchase the tickets. We're also investing in new agreements for the non-air channels. And we have very strong partnerships with the leading banks in the region. As you know, in Chile, we're partnering with Banco Santander in Peru.

Ramiro Alfonsín: As you know, in Chile, we're partnering with Banco Santander, in Peru with Banco de Crédito del Perú. In Brazil, we have agreements with numerous banks. We think there's a lot of angles still to tap on the LATAM Pass, but we're in the process of launching these initiatives in 2023.

with Banco de Peru in Brazil. We have agreements with numerous banks. And we think there's a lot of angles still to tap on the Latin path, but we're in the process of launching these initiatives in 2023. Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again.

Operator: Thank you. As a reminder, to ask a question, please press star one one on your telephone and wait for your name to be announced. To withdraw your question, please press star one one again. Our next question goes to the line of Joao Frizo from Goldman Sachs.

Joao Frizo: Yes, thanks. Good morning, everyone. Thanks for taking my question. I have a follow-up on the pricing environment. If you guys could please provide us with an overview on the pricing environment across the three segments, in light of the falling jet fuel prices. Do you guys foresee you will be able to hold prices in order to improve margins? Are you already seeing the need to reduce tariffs and therefore pass through those lower jet fuel costs into prices? Thank you very much.

Our next question comes on the line of Joao Frizo from Goldman Sachs. Yes, thanks. Good morning, everyone. Thanks for taking my question. I have a follow-up on the pricing environment. If you guys could please provide us with an overview on the pricing environment across the three segments in light of the falling jet fuel prices. Do you guys foresee you will be able to hold prices in order to improve the pricing environment

Roberto Alvo: Hi, Joao. How are you, Roberto? Thanks for the question. Far, and during this quarter, we have seen a very healthy pricing environment on most of the markets where we operate. Demand has stayed strong in all segments. We have seen a good leisure period for high season summer holidays. As people come back from holidays as well, we are seeing the corporate segments also present in a good way. We are confident, and we feel good about the current environment and the pricing. The things we're watching, of course, is the impact of the economies and how they fare during the year. That I would say it's something that we need to be very close to and watch. In general, we see a good situation in all of the passenger businesses.

the markets will be upgrade. Demand has stayed strong in all segments. We have seen a good leisure period for high season summer holidays and as people come back from holidays as well, we are seeing corporate segments also present in a good way. So we are confident and we feel good about the current environment and the pricing and the things we are watching of course is...

the impact of the economies and how they fare during the year. And that I would say it's something that we need to be very close to and watch. But in general, we see a good situation in all of the passenger businesses. In the case of cargo, as we already mentioned, pricing has softened a little bit because of lack of demand. Still above 2019 levels, as Ramiro said, embedded in our business plan. But that's probably where we have seen cargo use in this case.

Roberto Alvo: In the case of cargo, as we already mentioned, pricing has softened a little bit because of lack of demand. Still above 2019 levels, as Ramiro said, embedded in our business plan. That's probably where we have seen cargo yields, in this case, soften a little bit vis-a-vis 2022.

Joao Frizo: Thank you very much.

soften a little bit vis-a-vis 2022. Thank you very much.

Operator: Thank you. At this time, I would now like to turn the conference back over to Ramiro Alfonsín for closing remarks.

At this time, I would now like to turn the conference back over to Ramiro Alfonsin for closing remarks.

Roberto Alvo: Thank you, Gigi, and thank you all again for joining us today. Our investor relations team is around for further questions. Have a very good day and a nice weekend.

Thank you, Gigi, and thank you all again for joining us today. Our investor relations team is around for further questions. Have a very good day and a nice weekend.

Operator: This concludes today's conference call. Thank you for participating. You may now disconnect.

This concludes today's conference call. Thank you for participating. You may now disconnect.