LATAM Airlines December 2025 Traffic Improves Year Over Year

LATAM Airlines reported stronger air-traffic metrics in December 2025 with consolidated capacity (ASK) up 10.9% year over year and traffic (RPK) up 10.5%, while monthly passengers rose 7.6% to 7.9 million and full-year 2025 passengers reached 87.4 million (+6.6% y/y); consolidated load factor slipped slightly to 84.5% from 84.8%. The carrier added 10 routes in December and now serves 160 destinations across 27 countries. European rival Ryanair posted 14.5 million December passengers (+7% y/y), a 92% load factor and >82,000 December flights, and has raised its fiscal 2026 traffic outlook to ~207 million passengers, reinforcing positive operational momentum across major carriers; LATAM shares have outperformed recently and carry a Zacks #1 rank.

Analysis

Market structure: LATAM’s ASK +10.9% vs RPK +10.5% (Dec 2025) means capacity is slightly outpacing demand (ASK-RPK gap ~0.4ppt), a modest headwind for yields if continued into Q1–Q2 2026; winners are scale low-cost carriers (RYAAY: 92% LF) and cargo-light, fuel-efficient fleets, losers are smaller legacy/EM carriers with FX and fuel pass-through limits. Competitive dynamics: route additions and long-hauls (SCL–MIA, GYE–JFK) improve network connectivity and revenue diversification for LTM but raise short-term unit cost and seasonal exposure; Ryanair’s scale gives pricing power in Europe and faster absorption of Boeing deliveries. Risks: tail events include Brent/jet fuel spikes >$90/bbl (materially compresses margins), sudden BRL/CLP depreciation (>8% moves over 30 days) that re-states revenue into USD, and operational shocks (strikes, Boeing delivery delays) that can reverse momentum within weeks. Trade implications: prefer exposure to RYAAY as defensive, high-conversion pax at current load factors and guidance; LTM is a higher-beta EM recovery play—good for tactical longs but requires FX/fuel hedges; credit spreads for large LCCs should tighten if traffic persists, improving bond returns. Contrarian view: consensus may be underestimating yield compression risk from accelerated capacity — LTM’s 38.8% six‑month rally could be vulnerable to 10–20% mean reversion if yields slip; conversely, market may underprice Ryanair’s ability to convert incremental capacity to profitable pax given 207m guidance, creating relative-value asymmetry.

Key Decisions for Investors

• Establish a 2–3% portfolio long in LTM (LATAM, ticker LTM) within 2–4 weeks to capture EM capacity recovery; hedge with a 1% notional USD/BRL put or set stop-loss at -12% absolute and target +30% in 6–9 months. Rationale: network expansion and Zacks #1 momentum, but hedge FX risk and cap exposure.
• Initiate a relative-value pair: go long RYAAY 2% and short LTM 2% (equal notional) for 3–6 months to express preference for scale low-cost resilience over EM legacy exposure; unwind if RYAAY underperforms by >8% or if LTM outperforms by >12%.
• Options tactics: (a) Buy 3-month LTM bull call spread (buy ATM, sell ATM+25%) sized to 0.5–1% portfolio to capture upside while capping premium; (b) Sell 30–60 day 5–10% OTM put spreads on RYAAY to collect premium, approx. net credit, size 1–1.5% given strong load factors and delivery tailwinds.
• Macro hedges & triggers: reduce aggregated EM airline exposure by 50% if Brent > $90/bbl for >10 days or USD/BRL strengthens by >8% in 30 days; consider buying short-dated jet-fuel swaps or longer-dated USD call options to cap fuel-driven margin shocks over next 3–6 months.