LAN Airlines will not issue interim dividends in 2012 for the first time since 2003, according to a report by Diario Financiero, as the carrier purses a more conservative financial strategy following the loss of its investment grade credit rating after the merger with TAM. The conservative strategy will also reportedly help absorb TAM's debt into the combined LATAM Airlines Group and help fund expansion plans.
LAN will not issue 2012 interim dividends
You may also be interested in the following articles...
LATAM and Avianca continue balance sheet clean up as shareholder strife clouds Avianca-United tie up
A two year economic downturn in Latin America has forced the region’s airlines to put even more emphasis on improving their balance sheets through improved leverage, debt reduction and decreasing capital commitments. Two of the region’s largest airline groups – LATAM Airlines Group and Avianca Holdings – have worked to strengthen their balance sheets employing a variety of methods, including renegotiating aircraft delivery schedules to defray capital costs.
Avianca Holdings is taking delivery of six aircraft in 2017, whereas LATAM’s total fleet is shrinking 5.5% year-on-year during 2017 as it slashes its capex commitments by USD2 billion during a two year period.
LATAM is enjoying a boost in its liquidity after receiving an equity infusion by Qatar Airlines in late 2016, and the investment by Qatar helped boost LATAM’s liquidity to trailing 12M revenues by 5.5ppt year-on-year at the end of 2016. Avianca has been searching for an equity provider and strategic partner since mid 2016; but its selection of United has stirred controversy between its two largest shareholders, with lawsuits and counter lawsuits overshadowing the potential commercial benefits of the tie up.
LATAM Airlines Group; newly profitable but caution reigns as low cost entrants prepare to pounce
During 2016 LATAM Airlines Group recorded its first annual profit since 2011, and its first quarterly increase in revenues during 4Q2016 after nine consecutive quarters of decline.
Much of the improvement was driven by a slow recovery in the company’s largest market, Brazil. However, unit revenues in Brazil remain below their historical highs. The country’s two largest airlines – LATAM Airlines Brazil and Gol – continue to practice capacity discipline while other Brazilian airlines plan to expand supply in 2017, which could affect the tenuous recovery just beginning in the country.
Even as overall conditions in Latin America appear to be improving, LATAM is still feeling some macroeconomic pressure in its Spanish speaking markets. In certain geographies, LATAM is facing competitive pressure from capacity increases by its rivals as well as the debut of new low cost airlines in Peru and Chile that is likely to intensify pricing pressure in those regions.
Despite growing signs of a recovery, LATAM remains one of the more cautious operators in the region, with planned capacity growth for 2017 that is lower than that of some of its larger rivals, which feel confident that demand is robust enough to absorb their planned growth.