Gabriel Rezende

Gabriel Rezende asked about the impact of LATAM's investments in premium customer experience on revenue growth and profitability, seeking to understand the current contribution of premium revenues to total passenger revenue and their future potential.

Answer

CEO Roberto Alvo confirmed that premium revenue is growing faster than capacity, significantly boosting RASC across all segments. He attributed this to impeccable execution, customer care, and product enhancements like the Lima Lounge and Premium Comfort Class, which have increased customer willingness to pay for a 'decommoditized' experience.

Gabriel Rezende asked about the impact of LATAM's investments in premium customer experience on revenue growth and profitability, seeking color on the current relevance of premium revenues as a percentage of total passenger revenue and its future potential.

Answer

Roberto Alvo, CEO of LATAM Airlines Group, confirmed that premium revenue is growing faster than capacity, significantly contributing to RASK improvement through a favorable mix shift. He attributed this to 'impeccable execution and care' in customer interactions and product enhancements like the Lima Lounge and Premium Comfort Class, which have increased customers' willingness to pay.

Gabriel Rezende from Itaú BBA sought to understand the drivers behind the updated, higher capacity guidance for the year and inquired about future opportunities for cost reductions and efficiency improvements.

Answer

CEO Roberto Alvo Milosawlewitsch attributed the increased capacity guidance to several factors: timely aircraft deliveries, stable Pratt & Whitney AOG situations, improved 787 availability, and better aircraft utilization across the network. For future cost efficiency, Alvo emphasized that while cost discipline is a daily cultural practice, the most significant future gains will come from leveraging technology, particularly in maintenance and cargo operations, to streamline processes.

Gabriel Rezende from Itaú BBA sought to understand the key drivers for the upward revision in full-year capacity guidance, asking if it was due to faster aircraft deliveries or stronger demand. He also inquired about future opportunities for cost efficiency improvements.

Answer

CEO Roberto Alvo Milosawlewitsch explained the increased capacity guidance is due to a combination of on-time aircraft deliveries, a stable Pratt & Whitney AOG situation, improved 787 availability, and higher aircraft utilization. Regarding cost efficiency, he stated that while cost discipline is a daily cultural practice, the most significant future gains will come from leveraging technology, particularly in maintenance and cargo operations, to streamline processes.

Gabriel Rezende questioned how much of the improved guidance reflects the strong Q1 versus an improved outlook for the rest of the year, and asked if the CASK ex-fuel guidance might be conservative.

Answer

CEO Roberto Alvo Milosawlewitsch cited strong booking visibility for Q2 and stable demand trends, highlighting that a key driver is the increasing share of premium traffic, with premium revenue growing over 7%. CFO Ricardo Bottas Dourado added that the cost guidance assumes $90/barrel jet fuel and a BRL 5.9 FX rate, which creates both upside and downside risk.

Gabriel Rezende questioned the company's decision to maintain its profitability guidance despite a high year-to-date EBIT margin, asking about the relative relevance of supply chain risks and U.S. tariffs for the fourth quarter.

Answer

CEO Francisco Gomes Neto assured that supply chain risks for 2025 are 'over,' with all necessary parts available for aircraft assembly. He noted the concentration of deliveries in the final two months as the reason for maintaining guidance. CFO Antonio Carlos Garcia added that, assuming successful deliveries, the company is leaning towards the higher end of its margin guidance, potentially surpassing it, despite the original guidance not fully contemplating the tariff impact.

Gabriel Rezende, an Equity Research Associate at Itau BBA, questioned Embraer's decision not to revise its full-year guidance, particularly on profitability, given the high year-to-date EBIT margin already exceeding the full-year expectation. He sought to understand the relative relevance of Q4 supply chain risks versus U.S. tariff impacts in maintaining the conservative outlook.

Answer

President and CEO Francisco Gomes Neto assured that supply chain risks for 2025 are resolved, with all necessary parts available for aircraft assembly. He attributed the maintained guidance to a concentration of aircraft deliveries in the final two months. CFO Antonio Carlos Garcia added that if deliveries proceed as planned, the company anticipates reaching the higher end of its margin guidance, highlighting that the original guidance did not account for tariffs, which Embraer has managed to offset.

Gabriel Rezende asked if the broader aerospace supply chain crisis could create a favorable pricing environment for Embraer's commercial division, potentially leading to higher margins in the future.

Answer

President and CEO Francisco Gomes Neto acknowledged the opportunity for margin improvement in the Commercial division. He stated that profitability will be driven by a combination of growing production volumes, favorable pricing, and internal cost reduction programs, expressing confidence in maintaining positive mid-single-digit margins.

The analyst inquired about the company's CapEx outlook for the coming years compared to 2024 and asked about the potential impact of commodity price dynamics on the market in the first half of the year.

Answer

The executive stated that CapEx for 2025 is expected to be around BRL 500-520 million, focusing on completing projects in Mexico and Europe. Regarding commodities, the environment is generally benign, but the main uncertainty is the effect of North American tariffs on steel prices. The company historically passes these costs to clients, though the greater concern is the potential impact of tariffs on overall consumer demand for vehicles.

Asked about the expectation for the third quarter, specifically regarding the impact of aluminum price dynamics on profitability, and requested more detail on the company's pricing policies and its ability to pass on costs to clients.

Answer

Aluminum prices have stabilized, and since most contracts have automatic pass-through clauses for raw materials, no significant impact on profitability is expected. The company's main pricing effort has been to successfully pass through other inflationary costs beyond raw materials, which is a key factor in the plan to restore historical margins by 2025.

Asked if the recent fare increases are sufficient to meet full-year guidance and questioned the source of lower maintenance expenses in the quarter and the potential for future savings on that line.

Answer

Current fare levels are strong and, if maintained, are sufficient given positive seasonality and new revenue from the codeshare and ancillaries. The significant maintenance savings from the 'Elevate' plan will come from maintenance CapEx (related to heavy checks and engine overhauls), not the smaller line maintenance item in operating expenses.