LATAM Airlines Group - Q2 2024
August 8, 2024
Transcript
Operator (participant)
Good day, everyone, and thank you for standing by, and welcome to the second quarter 2024 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 participate, you will need to press star one one on your telephone. You will then hear a message advising your hand is raised. To withdraw your question, simply 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. 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 believes are reasonable, but are subject to uncertainties and risks that are discussed in detail in the recently published 20-F earnings release, financial statements, and related CMF and SEC filings. The company 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. Now it's my pleasure to pass the call over to Ramiro Alfonsín.
Ramiro Alfonsín (CFO)
Thank you, Carmen. Hello, everyone, and good morning. Welcome to our second quarter 2024 conference call, and thank you all for joining us today. My name is Ramiro Alfonsín, and I'm the CFO of LATAM Airlines Group. Here with me today is Mr. Roberto Alvo, our CEO, Andrés Del Valle, VP of Corporate Finance, and Tory Creighton, Head of Investor Relations, and we will present our highlights and results for the second quarter of 2024. I'd like to pass the presentation to Roberto for some opening remarks before we go into the numbers.
Roberto Alvo (CEO)
Thank you, Ramiro, and good morning, everyone. I hope you're all doing well. As we begin to look to our second quarter results, it is important to acknowledge that these achievements are the results of the efforts and dedication demonstrated by the more than 37,000 employees that comprise the LATAM family. I would like to express my sincere appreciation to all these individuals who have consistently giving their best to help LATAM Group reach its current goals. The unwavering sense of belonging and commitment they have placed, I think it's a crucial part of our success. One of my primary focus as CEO is to cultivate a culture where LATAM Group employees feel as though LATAM makes sense to them, both from a personal and from a professional level.
It is a continued dedication that has enabled the group to sustain growth quarter after quarter, pushing us to set higher goals and ultimately bringing LATAM to where it stands today. It is a... LATAM is better, it's stronger, it is more diverse, and it's a better group of airlines, as we can see in the second quarter results. During this quarter, we witnessed robust revenue generation, primarily driven by the capacity increase, which remains in line with our full year guidance. Additionally, LATAM generated cash and bottom line net income. It is worth noting that historically, our second quarter results have been relatively softer due to a lower season in the Southern Hemisphere.
The macroeconomic environment has exerted pressure on foreign exchange rates, but there is a possibility to mitigate these effects due to a well-diversified revenue structure, as well as our ability to reposition our assets between the markets. Overall, the second quarter results reflect the ability to adapt, overcome obstacles, and maintain a steady growth trajectory. We remain very confident in the strategic direction and the commitment to further enhance our business. Following this slide, I'd like you to join us on slide number three, please. The group's growth this quarter continued to strengthen LATAM Group's value proposition, and then connecting more people within the region and the rest of the world. During this semester, the group transported over 39.4 million passengers, represented a 15.5% increase compared to previous year.
Last year, LATAM Group managed to reach the same number of passengers transported as pre-pandemic, so for the first 6 months of the year, passenger transported figures demonstrated a solid growth. One of the drivers of these increases in the number of passengers is an increased customer preference for flying with LATAM. LATAM has devoted significant efforts in improving our customer experience, not only on board, but in each one of the touch points where we serve them. We understand that LATAM customers expect the group to be reliable in each one of these areas, and LATAM has worked diligently to meet their expectations. Currently, the group has a Net Promoter Score of 54 points for passenger operations and 59 points for premium customers, reaching the highest levels ever we've had, in our history since we measured NPS.
Additionally, the group has received multiple awards during the quarter, which serve as a testament to the dedication and the effort the company has invested into the customer experience, and it's with great pride that LATAM has been recognized as the best airline in South America now for the fifth consecutive time, solidifying for sure our position in the industry. Regarding capacity, during this quarter, specifically, the group increases capacity by 16.2% in the context of healthy demand. This growth was accompanied by a robust load factor of 82.2%, representing an increase of 1.8 percentage points compared to the second quarter of last year. We reported top-line revenues of $3 billion, representing 13.2% increase.
Additionally, LATAM Group has achieved a net income of $146 million, accumulating to a total of $405 million year-to-date, which represents 52.9% increases at least 2023. Our cash flow has successfully generated a total of $177 million before dividend payments, and even after paying dividends of $175 million, which corresponds to the earnings generated in 2023, 30% of them, by the way. The cash flow, nonetheless, still remains positive by $2 million. This, I believe, demonstrates the financial stability and ability to generate consistent returns to our shareholders. As we look forward, on the other hand, we anticipate a continuing stable demand for the next few months, and we hold an unwavering, unwavering confidence in LATAM's Group customer and value proposition.
The capstone to all of these efforts and consistent financial delivery has been LATAM's return to the New York Stock Exchange just two weeks ago today. The relisting of LATAM is an important achievement. LATAM's reputation as the leading airline group in South America is widely recognized, we believe, and supported by our unwavering commitment to the well-being of our employees and the conservation of the environment. This important milestone fills us with immense pride and holds great significance as LATAM once again takes place in the world's most important stock exchange. It is a recognition from the market of the work that we have been doing and allows us the opportunity to access a deeper, broader, and more liquid market and target new investors. Thank you for your time. Thank you for being here.
I'd like to turn the call over to Ramiro to further discuss our financial and operational results.
Ramiro Alfonsín (CFO)
Thank you, Roberto. LATAM Group has consistently achieved strong quarterly results, driven by increased capacity and robust financial performance. Over the last 12 months, LATAM Group noted a total of 148 billion ASKs, reflecting a 16% increase compared to the same period of the previous year. In terms of revenue generation, the company has been able to deliver a consistent positive trend in terms of the last 12 months revenues, which reached $12.7 billion. We are confident in our ability to reach our full-year guidance forecast, supported by the historically stronger quarters to come and the stable demand environment, as Roberto mentioned. Moving to slide 5. The second quarter has been historically the softest quarter of the calendar year for LATAM.
However, in this second quarter, the group continued to consolidate a trend of strong performance to the income statement, cash flow, and capital structure. We operated 37.7 billion ASKs, representing a growth rate of over 16%, mainly propelled by the international business. We continue to be highly focused on cost containment, and our adjusted passenger cost per ASK ex-fuel decreased 4.7% year-over-year to $0.041. This drove the record adjusted EBITDA generation of $619 million, which represented an increase of over 10%. In our top line, revenues amounted to over $3 billion, representing an increase of 13%. Meanwhile, the cargo figures increased year-over-year for the first time since 2022 by 6.9%, explained by the upsizing in the group's cargo and our passenger fleet.
Adjusted operating income reached $274 million and suffered a negative impact of $25 million, stemming from the canceled operations in the Porto Alegre Airport caused by the flooding in the area. This operating income contributed to a net income of $146 million for the company in the quarter, and an accumulated net income of over $400 million for the first part of the year. In conclusion, strong financial results for a historically weak quarter. Moving to slide 6. Our diversified revenue stream serves as a key differentiating factor within the industry, and also reflects the operational flexibility to adapt to changes in the market demand.
In the quarter, we can see the benefits clearly, as the business and revenue diversification allowed us to mitigate currency depreciation, as well as the operational effects of the closure of the Porto Alegre Airport at the beginning of May, due to intense flooding in the area. In particular, with regard to Porto Alegre, those operations represented an average of 24 daily frequencies as of the end of April 2024. Between May and June, the Brazilian affiliate has reallocated 12% of that capacity and expects 100% of that capacity to be fully reallocated to other airports or routes in August. During these last 12 months, the group's passenger business amounted to 87% of total revenues, of which 47% stems from the international operations, 35% from LATAM Brazil domestic operations, and 19% from domestic operations of the affiliate based in the Spanish-speaking countries.
All these market segments have experienced significant growth during the year, driven by strong demand, particularly in the international operations. Cargo, on the other hand, contributed 11% of the total revenues and continues to be an essential component of LATAM's DNA, with a strengthened presence in the global cargo market. LATAM Group's market shares in the domestic markets are shown on slide 7, and are a testament to our value proposition in the continent. During this quarter, LATAM Group has shown improvement in its market shares in Chile, Brazil, Peru, and Ecuador, due to its relative advantage over the competitors in the region. As the leading airline passenger group, LATAM is proud to connect South America with the world to our extensive network.
On slide eight, we present our international operations, and you can see that LATAM has remained the number one, with a 42% international market share within the region, and also maintain its leadership, connecting South America with the rest of the world. The profit-sharing agreement with Delta, on the right-hand side of the slide, continues to grow in capacity share, adding new routes and expanding its connectivity. During the quarter, a new route of the JBA, Santiago to Orlando, was launched, and is delivering good results. For this reason, we have decided to extend it to the next season. As of the second quarter of 2024, the capacity share in the South American and North American JV markets stands at 39%, representing an increase year-over-year of seven percentage points.
Turning to slide 9, LATAM is the only true full-service carrier group in South America, with a unique value proposition in the region. Even as legacy carrier, the cabin segmentation has allowed us to serve different and more types of customers. Our value proposition has won, once again, been recognized in the industry. During the quarter, LATAM was recognized with several prestigious awards, including the Skytrax Best Airline in South America for the fifth consecutive year, along with the Best Airline Staff Service in South America. These recognitions serve as a testament to the hard work and dedication exhibited by every member of our team. LATAM Group's long-term sustainability strategy, as seen on slide 10, celebrated its third anniversary this quarter. As you may remember, it is based on four pillars: environmental management, climate change, circular economy, and shared value.
I'd like to highlight just a few of the advances from this quarter. During this quarter, at the IATA Wings of Change event, the preliminary results of the study on options for the decarbonizing aviation in Latin America, carried out by MIT and financed by LATAM, together with Airbus, were presented, and the final results will be published shortly. Furthermore, this LATAM Solidarity Plane program played a crucial role in assisting with the emergency situation caused by the floods in the southern region of Brazil. LATAM Airlines Brazil transported over 200 tons of humanitarian cargo, including 300 modular homes. We are also proud to have been recognized with another award this quarter, as the most sustainable cargo operations in America at Freight Week Sustainability Awards. Let's move to the next slide to discuss our business performance.
LATAM Group is flying more, and at the same time, noting higher load factors in all segments. During the quarter, the group increased capacity by 16% compared to the previous year, reaching a load factor of 82.2% and representing a 1.8 percentage point increase. LATAM Airlines Brazil, domestic capacity increased a little over 6%, despite the negative impact from the closure of the Porto Alegre airport operations. Finally, the international segments continued to show strong growth, with a 25% increase in capacity compared to the previous year. In terms of revenues per ASK, the consolidated revenue per ASK continued to remain healthy, with a slight 1.6% decrease. But here again, we were. We see the impact of the currency fluctuations and the significant increase of the 25% in India, in the international capacity.
On slide 12, we would like to discuss cost containment, as LATAM's commitment to it is once again a key driver for the quarterly results we are presenting. We believe that the results on this slide speak for themselves. During this quarter, LATAM Group reported an adjusted cost per ASK ex-fuel of $0.047, while our adjusted passenger cost, ex-fuel, stood at $0.041. LATAM Group cost discipline not only is an absolute boost to our margins, but also provides a relative advantage to other global full-service carriers that operate in the region and other carriers in South America. In the second quarter of 2024, LATAM Group demonstrated its ability to sustain a positive cash flow trajectory, as you can see on slide 13.
LATAM generated a cash flow of $177 million, before including the main dividend payment, and had positive cash flow after dividend payment. Adjusted operating cash flow amounted to $855 million. The total cash generation includes $221 million in total fleet cash cost for a total fleet of 340 aircraft. As we mentioned in other calls, we anticipate a total fleet cash cost of around $900 million for this full year. We consider our fleet cost a very strong competitive advantage. On slide 14, you can see that the liquidity levels at quarter end stood at $3 billion, representing a liquidity ratio of 23% of the last twelve months revenues.
One important point to note here is that after the quarter closed on July 15, LATAM completed the successful renegotiation of its revolving credit facilities lines, resulting in an extension and increase of both facilities. LATAM total revolving facility now amounts to a little over $1.5 billion, and are fully committed until 2029, providing the company with enhanced financial flexibility and liquidity. Furthermore, turning to slide 15, there is an additional opportunity for LATAM to importantly reduce its interest expense on the relative, on a relevant part of our Chapter 11 emergence debt in the fourth quarter of this year.
Our Term Loan B of a little over $1 billion, with the cost of SOFR + 9.5, is callable at par, and our 2027 senior secured notes for $450 million have a coupon of 13.375. As you can see in this slide, the current yield to worst is significantly lower than that. The decrease in interest rate environment, our financial performance, lower leverage, and rating upgrades make us believe that, subject to market conditions, we should be able to refinance the emergence debt at a lower interest rates, resulting in lower interest expenses and contributing to the overall financial health of the company. Finally, we have already mentioned how excited we are to have LATAM's ADR relisted on the New York Stock Exchange as of July 25. But this also came with a few other changes.
LATAM's ADRs relisted with a new ratio of 2,000 shares to 1 ADR, and additionally, the relisting occurred alongside the secondary offering of 19 million ADRs by some of LATAM's major shareholders. On slide 16, you can see our current ownership structure after the secondary offering, which represented a little over 6% of the company's shares. The secondary offering, added to the relisting, will increase our free float going forward and should be beneficial to enhance liquidity and attract new investors. Let me conclude on slide 17. LATAM is the leading airline group with the South American region with strong growth, efficient costs, and a unique capital structure. These factors allow us- allow the airlines group to make independent decisions about our future. The hard work and dedication of our 30,000 employees in the LATAM Group have contributed to our success.
Their efforts have led to healthy operational growth, with an increase in capacity and passengers transported. The group has achieved consistent financial performance, with 53% increase in year-to-date net income compared to the first half of 2023. The relisting of our ADR on the New York Stock Exchange, accompanied by a secondary offering by certain shareholders, strengthens LATAM stock and ADR, providing greater liquidity and visibility. And last but not least, we are confident in our ability to meet the full year 2024 guidance we have set out. With that, I'd like to turn the call back to you, Operator Carmen, for the Q&A session.
Operator (participant)
Thank you so much. As a reminder, if you would like to ask a question, press the star one one on your telephone and wait for your name to be announced. To withdraw your question, simply press star one one again. One moment for our first question. That comes from the line of Michael Linenberg with Deutsche Bank. Please proceed.
Michael Linenberg (Analyst)
Oh, hey, good morning, everyone. You know, an impressive set of results here. And by the way, Ramiro, congratulations on your promotion.
Ramiro Alfonsín (CFO)
Thank you, Michael. That's very kind of you.
Michael Linenberg (Analyst)
So I just... I have two here. If we can just go back to the $25 million operating impact from Porto Alegre being shut down, that was a bit higher than, than what I expected. Do we have some of that impact, lingering or, you know, having an impact on your third quarter results? And when we look at, you know, sort of as a part two to that question, when we look at your performance in domestic Brazil, it was one of your leading geographies. Should we assume that that type of performance continues into the third quarter, maybe even into the back half of the year?
Roberto Alvo (CEO)
Hi, Michael. This is Roberto. Good speaking to you. So there is going to be some impact on the Porto Alegre-
...closing of the operations for the third quarter. At this point in time, what we know is that Porto Alegre will open probably around October. And as Ramiro mentioned, we're redeploying the capacity, but not all of it, during July and to August. There's gonna be an impact, but it's going to be relatively minor. So I would say, it's gonna be probably less than half of what you already saw in second quarter. So that's, I think, at this point in time, what we're seeing. And of course, once Porto Alegre comes back to normality, we will most likely bring our historical operation or something that looks like that into the city again. Okay.
Michael Linenberg (Analyst)
Okay.
Roberto Alvo (CEO)
With respect to domestic Brazil, in general, we feel very good, honestly. We have been able, I think, to enhance our network position in the country in a relatively nice way.
Michael Linenberg (Analyst)
Mm-hmm.
Roberto Alvo (CEO)
Today, we are clearly the largest and, I think, most important operator in the two most important airports in Brazil, which are Guarulhos and Congonhas. We executed a slot swap with VOEPASS during the quarter as well, that allows us to have a significant improved product on the peak times of that airport at the same time. And I think that the position we have today with our customers, the way we are delivering our product on a day-to-day basis, has us in a very confident position regarding our relative performance in the market. The impact of the currency volatility, of course, is mathematically understandable.
Michael Linenberg (Analyst)
Mm-hmm.
Roberto Alvo (CEO)
But I think that the resilience today of our business compensates for that volatility. And when we look at booking curves for the next couple of months, we are not seeing something that significantly impacts our projections, whether it's the currency movements or the demand situation. So in general, we feel that we're in a very good spot in domestic Brazil today.
Michael Linenberg (Analyst)
Oh, that's great, Roberto. Thanks for the comprehensive answer. Just one quick follow-up here. You know, with the regime change in Argentina, it does look like that there are gonna be more opportunities for airlines. You know, we've seen Argentina sign an open skies agreement, I believe, with Canada, with Panama. From your perspective, you have airlines in multiple countries that can, you know, do agreements with Argentina. And I'm not saying that it makes sense for LATAM to go into Argentina and maybe set up a domestic operation. But from an inter or intra-regional basis, can you talk about some of the potential opportunities of being able to just offer a broader service offering to and from Argentina? Thanks for taking my questions.
Roberto Alvo (CEO)
Thank you. Thank you, Michael. So Argentina is an important market for us. If you look at our hubs, Argentina is the largest market south of our hubs, so it's going to always be an important feeding market for the traffic that we have in Santiago, Lima, and São Paulo. We are actually currently the second largest international operator of Argentina. We have close to 25% of the passengers that fly to and from Argentina, flying with our flights. We have 35 or so daily flights from our hubs to not only Buenos Aires, but several cities in Argentina. So I think that it's fair to expect that we will keep on investing and growing an international network to connect Argentina better with our hubs and eventually with the rest of the continent.
That's a strategy that LATAM has pursued over many, many, many years, and we believe it's a sound, good one, and by the way, reinforces a lot the strength of our hubs. In terms of other opportunities in Argentina, I think that we all see that the scenario is changing, yet there's a number of agreements that have been signed. Actually, with Chile, the Open Skies Agreement is very broad. It allows Eighth and Ninth Freedoms at the same time.
Michael Linenberg (Analyst)
Mm-hmm.
Roberto Alvo (CEO)
and as we do normally, we're going to analyze, you know, all these opportunities, and if we believe it's good for the business to do something on top of what we have today, we'll announce it in due time. But, one of our most important tasks here is asset allocation. So if we do this, it's because we believe it's a good opportunity. So stay tuned, but for the time being, you know, our focus has been in reinforcing our international operation there.
Michael Linenberg (Analyst)
Thank you, Roberto.
Operator (participant)
Thank you. Our next question comes from the line of Guilherme Mendes with J.P. Morgan. Please proceed.
Guilherme Mendes (Analyst)
Good morning, Roberto, Ramiro, Andrés, Tori, thanks for taking my question. First of all, I would like to wish Ramiro good luck on the new role as well. I have two points. The first one is the competitive environment. Roberto, you mentioned about Brazil a little bit in the previous question, but just wondering if there's you see any significant signs of oversupply in any of the markets that LATAM operates, and if you could expect any kind of yield pressure going forward? And the second question is on capital allocation. Strong free cash flow generation in the first half of the year, likely the outlook should be even better. How should we think about capital allocation going forward to increase dividend payment, dividend payments, buybacks, or reduce leverage? Thank you.
Roberto Alvo (CEO)
Hi, Guilherme, thanks. So I'll take the first question, Ramiro will take the second. I would say that the only market where we see today an imbalance that is visible between capacity and demand is domestic Colombia. Clearly, the entrance of JetSMART into that market added a number of incremental flights that were not there a few months ago. I've seen this many times. It's normally something that happens, and then the market kind of resets itself. But for the time being, that's where we see today probably somewhat balanced. In the rest of the Pacific, even though there's ample capacity activity, it doesn't look that there is any oversupply that is significant.
And internationally, even though we have grown in a very significant way, I would say that this is still probably the end of the recovery of demand after the pandemic, and the demand has responded very nicely to the point that we were able to feel very well placed with even a 25% capacity. So, summarizing, I would say that domestic Colombia probably is the market where you're seeing that dynamic today.
Ramiro Alfonsín (CFO)
Thank you. Thank you, Guilherme, for your, your wishes. It has been a privilege all, all these years as, as CFO of LATAM. Regarding your question, the company generated very strong cash flow. We're confident on what we're seeing for the second half of the year. Our first priority today, where we see a lot of savings opportunity, is the liability management we discussed during the presentation. With the current yield to worst that we're seeing on our bonds and what we think we can achieve on the Term Loan B, that is the first focus in terms of capital allocation. And then it's basically growth. When you consider our cost structure, when you consider our capital structure, we're- you're seeing the potential that we have to cover new destinations or increase frequencies in certain markets, and then shareholder value.
I would say that growth and shareholder value will be a balancing act for capital allocation. But first priority, most immediate one, is now in the coming months to address liability management exercise.
Guilherme Mendes (Analyst)
Very clear. Thank you both. Have a good day.
Operator (participant)
Thank you. One moment for our next question. That comes from the line of Gabriel Rezende with Itaú BBA.
Gabriel Rezende (Analyst)
Thanks. Good morning. Thanks for taking my question. I would like to make a quick follow-up regarding your forward booking curve and yields in the report. We saw a slight contraction in this quarter, which was maybe already expected on yields. You quoted a 4% lower yield year-on-year. I was just wondering, you mentioned that the forward booking did not seem to question your guidance. However, we are seeing a relevant depreciation of the BRL here in Brazil. So I was just wondering whether your forward bookings are implying that yields are going up in the second semester versus the second semester of 2023. It would be nice if you could confirm that.
Also, Ramiro, I would appreciate if you could comment a little bit on your move to the CCO position. Congrats for that. And what should be your main focus by November, when you assume the new role? Thank you.
Roberto Alvo (CEO)
So, hi, Gabriel. So again, I think our assessment, when you look again at the booking for the next... In domestic, you probably have a good view for a couple of months, okay? And international, maybe tell you a bit further than that. Again, even though we see the volatility in the currency, from a demand perspective, we are not seeing that impacting our operation in a way that we can significantly measure. I again feel very confident in domestic Brazil today. I think that the combination of the improved network we have with an improved execution vis-à-vis our customers, paired with the advantage of cost that we created over the restructuring, it's a very powerful combination at this point in time.
And we see very clearly the trend in our customer preference that you also saw here on the NPS figure. So in general, that leaves us in a very good place. And then, yields or RASK, of course, is in dollars expressed at a lower point, but do remember that you have to look at the exchange rate impact on RASK because we express it in dollars. But my sense is that growing 16%, with a RASK that is not significantly lower and that has the impact of exchange rates, speaks very well about how we were able to deploy the capacity over these 12 months, understanding where we saw opportunities, and at the same time improving the quality and the strength of our network.
So, the summary for me, it's a very positive one over the last twelve months when you combine all these factors together.
Ramiro Alfonsín (CFO)
In terms of the new position, it is very preliminary. I'm very familiar with the team. It's a very seasoned management team that has a lot of experience, and I think we have a roadmap quite set up, where every year we plan for the next five years, so we know how the strategy evolves. To share with you maybe a little bit of color, I see opportunities on the loyalty program side in terms of digitalization of the loyalty program, improving interactions with our passengers. I see some growth opportunities on the loyalty program also. Maybe also a little bit of focus on continuing developing the ancillary products that we have, and then evaluate the whole network in terms of profitability and growth, and try to balance it, well.
But again, it's a very seasoned management team. We have been working together for many years, so I expect a very smooth transition.
Gabriel Rezende (Analyst)
Thank you. Thank you. That, that's very clear.
Operator (participant)
Thank you. One moment for our next question that comes from the line of André Ferreira with Bradesco BBI. Please proceed.
André Ferreira (Analyst)
Hi, good morning. Thank you for taking my questions. I had two points to cover. So, the first one is a follow-up on the question of the supply and yields. But we've been seeing weakness in yield in Latin America, mainly in the international traffic. So I was wondering if you can just give a little bit more detail on the current yield and yields outlook in each international markets, and also get a bit more clarity on yields on the domestic markets that you did not cover so far in this call. And my second question is, it has been discussed in the local media that, in the local Brazilian media, that LATAM is evaluating the purchase of smaller jets.
If you can comment just on, you know, potential size and what routes would they potentially go to if those, the news are correct? Thank you.
Roberto Alvo (CEO)
Great. So thanks, André, for the question. I mean, on international, for me, the big picture here is LATAM grew 25%, RASK fell a little bit 4%, somehow impacted as well for currency. The summary of the equation is extremely positive. You know, you don't find growth of 25% with close to stable RASK performance year over year, very often. The question is, why? And our assessment here is, A, recovery of demand from the pandemic, which I think was still expressed in the last months. I don't think that demand... I think that demand now has fully recovered or very close to fully recovered. B, again, the way we have deployed our capacity, the way we find opportunities in the market, clearly the strength of the JV with Delta is showing up.
You see it very clear on the numbers as well. So again, LATAM has, LATAM has a unique footprint here, and we have to take, and we are, we believe, taking advantage of that footprint, and this is the result of the execution of that. Second part of your question, we normally don't disclose, and we don't disclose, Spanish-speaking countries, country by country. I think that I'll just probably repeat what I answered in the other questions. We are very, we're very comfortable with the situation in domestic Brazil. We see a number of capacity situation in domestic Colombia. And although we see capacity activity in the other Spanish-speaking domestic markets, we see at the same time, good demand performance.
So this is why when I summarize our booking curve, feeling for the next two or three months is one where we feel very comfortable. And with respect to smaller jets, you know, we have 350 aircraft, which is the, you know, one of the 10 or 12 largest airlines in the world. We always look at everything, not only aircraft, also engines. And if we believe that there is something interesting and accretive for the LATAM operation in terms of adding new fleet or any fleet-related movements, of course, we're going to look at it, and if we come to a conclusion, we'll provide that to the market updates. For the time being, just know that we, of course, are looking at everything that we believe is an opportunity for the future.
André Ferreira (Analyst)
Thank you.
Operator (participant)
Thank you. Now our next question is from João Frizo with Goldman Sachs. Please proceed.
João Frizo (Analyst)
Hey, good morning, everyone. Thanks for taking my questions. Just, first of all, congratulations on the releasing of the ADRs. So I have two questions on my side. The first one is related to growth beyond 2024. Looking at 25, 26, should we expect to see the same trend you guys published on your guidance for 2024, meaning international travel growing more, followed by domestic Spanish-speaking countries, and then finally domestic Brazil, on a capacity perspective? Anything you could share on that would be great. And then finally, this is the second follow-up on the OEM, if you could provide an update on the delays, what you're seeing now, how are the conversations? Thank you very much.
Roberto Alvo (CEO)
So thanks, João. So I mean, we don't provide 2025 guidance yet. We will do that towards the end of the year. But probably just a couple data points that are useful here is, you will see rollover of the 2024 growth into 2025 as we deploy capacity throughout the year and not at the beginning, and you can probably have a good estimation of the amount of that rollover if you look at the trend of our capacity during 2024. And what are the other additional important thoughts with respect to capacity? You mentioned them with respect to the OEM side. We don't think today that the deliveries that we have on Airbus will be delayed to a significant effect. We feel very confident on our capacity plan for the rest of the year.
We have a number of AOGs regarding the Pratt engine issue on our A320neos. It's relatively limited because our size of our neo fleet is not significant at this point in time, and we decided to keep 319s flying for a little bit longer, to compensate for that effect, and this is why our capacity for this year has not been affected vis-à-vis our guidance, despite of these changes. We continue to see very tight supply chain and supplier issues going forward. On an industry level, we believe that it's going to be shown very clearly in 2025 and 2026 for the time being. We have ample optionality to adjust up and down our capacity, irrespective of these swings to an extent. And of course, we're very closely monitoring and talking to all these suppliers regarding our plans.
We will probably get more information as the year progresses, and towards the end of the year, beginning 2025, we'll comment on our 2025 guidance.
João Frizo (Analyst)
Great. Thank you very much, guys.
Operator (participant)
Thank you. Our next question comes from the line of Christian Reddy with BNP Paribas. Christian, please check your mute button. Sir, can I continue with you?
Christian Reddy (Analyst)
Oh, sorry about that. Yeah.
Operator (participant)
Okay. Thank you so much.
Christian Reddy (Analyst)
Sorry. Yeah, thank you all for your time. I appreciate it. The really strong results should be, we're all very happy about that. A few quick questions, just some minor items. One, the Brazilian government had been constantly talking about some sort of funding for the airlines. Has anything materialized on that?
Ramiro Alfonsín (CFO)
This is Ramiro. Thank you for your question. You see our capital structure over $3 billion. You see the opportunity we have when you see our yield to worst. So we are evaluating all the possibilities of financing for the company, and we have been advancing with discussions with the Brazilian government. But at this point, I think that we have a lot of alternatives, either in Brazil or in the market. So we're not concerned or specifically working on the Brazilian angle. We are considering it as one additional lever, if necessary, but discussions are currently ongoing.
Roberto Alvo (CEO)
There is no news from the government with respect to this yet.
Christian Reddy (Analyst)
Right. And the form of that is still up in the air, how it would come in, if it would be a grant or anything of that sort, right?
Ramiro Alfonsín (CFO)
Yeah, I, I think grant is pretty much out of the question. It's, it's more some sort of, of guarantee, with banks intervening, but a guarantee from the Brazilian government, but I- we're not foreseeing any, any grants as per se.
Christian Reddy (Analyst)
Right. Okay, and then with regards to your liquidity, you know, you're above that 20% magic threshold of your revenue. As you go forward, you know, it looks as though the supply and demand is in very good shape. You're adding a lot of capacity. The RASK isn't being impacted in a negative fashion. Is there a certain amount of liquidity at a point in time where you say, "It's enough, now we have to do something else with our capital?" And if so, what would be some of, like, the highlights or things that you would like to do if you had a wish list?
Ramiro Alfonsín (CFO)
Yes, absolutely. I, I think that something above 23% of last four months revenues for us would be a little bit too much liquidity if it were sustained during timing. Now, you see us in that range, but bear in mind that we are facing the liability management exercise, subject to market conditions, now in the coming months. So we're preparing for that. If we were to have incremental liquidity with low leverage after that, again, we probably are going to be tackling growth and shareholder value. And there are various mechanisms for shareholder value return that the company is able to implement and put in place.
Christian Reddy (Analyst)
Great. And then I guess the last thing, just from an economic standpoint, in the U.S. markets, we're seeing, you know, weakening of fares and the demand. A lot of that's obviously tied to the U.S. consumer. In the markets down in Latin America, how is the economic picture for the consumer and, you know, the prospective yields and fares going forward?
Roberto Alvo (CEO)
So I think that the basis of giving you, I would say, a positive sense for the upcoming months, and our confidence within the guidance, is based on the fact that we are not seeing that trend specifically in the region. As I mentioned, yeah, there's one or two markets, mostly Colombia, where clearly there's the overcapacity situation is impacting the market on a broader level. But on the rest of the region, we are not seeing the same dynamics that you saw in the U.S. And clearly, when you look at the European carriers statements that talk more about the weakening of demand more than excess capacity, this is not our case, at least, on what we see on the booking curve for the next month.
But again, I think that, you know, here, it's not about only demand and supply. It's also our ability, and one of the strengths of LATAM, is that we can move our assets around very, very simply, very quickly. So the exercise we make on a day-to-day basis is we just don't think about markets. We just think about our network, and how do we-
Christian Reddy (Analyst)
Mm-hmm
Roberto Alvo (CEO)
... redeploy those assets in a way that we both strengthen the network but also protect the volatility of our returns.
Christian Reddy (Analyst)
Great. Thank you very much for your time. Appreciate it.
Operator (participant)
Thank you, and as a reminder, if you would like to ask a question, simply press star one one to get in the queue. One moment for our next question, please. And it comes from the line of Felipe Villanova with Santander. Please proceed. Felipe, please check your mute button. Yes, we can now. Thank you.
Felipe Villanova (Analyst)
Oh, thank you. Well, first of all, congrats on the new position. I guess it's a better sweetness for the market, though. Anyway, so I have a couple of questions. The first one is: when looking at the Spanish-speaking countries' unit revenue and local currency, are they also decreasing? Any comment how these behave in local currency would be very appreciated. My second question is regarding revenue management. Do you expect any impact on results because of this for the fourth quarter, and by how much? And my third question is, what risk do you see for the second half of the year, if you see any?
I'm asking because you already reached the midpoint of your EBITDA guidance, and the first half of the year is usually the weaker half, but you're still reiterating your guidance. So, I'm trying to see if there might be any risk involved in a downside revision in the guidance that I'm not aware of. That would be all. Thank you very much.
Roberto Alvo (CEO)
Felipe, the second question was if there is going to be impact... So Felipe, I think that we talked about currency impact on Spanish-speaking. Was that the question?
Felipe Villanova (Analyst)
Yeah, sorry, I lost you for a moment. The first question was about how the unit revenue, the RASK of the Spanish-speaking countries, are they also decreasing local currency, or how are they behaving? It can be as a whole or any call you have, that would be appreciated, though.
Roberto Alvo (CEO)
Yeah. So again, we don't, we don't provide specific RASK figures for each one of the Spanish-speaking countries. But, I mean-
Felipe Villanova (Analyst)
Yeah
Roberto Alvo (CEO)
... I'm sure that you can do very easily the exercise of, you know, you can see the size of our business, it's public, you know, you can see the depreciation of the currencies. You can do a weighted average, if you want, of the depreciation of the currencies, and then you can compare that to our average RASK, and you won't be far away. Bear in mind that probably 85% or 90% of our domestic revenues on Spanish-speaking are local point of sale revenues. We still have around 10% or so, which are international point of sale revenues, so people that come from the region and have a domestic layer. So with that, I think that you can understand more or less the dynamics in a way, with public information. The other two questions from you?
Ramiro Alfonsín (CFO)
Yes. Thank you. Thank you, Felipe, for the congrats, much appreciated. In terms of the impact on the P&L, regarding the liability management exercise, we tried to be clear on our earnings release, that if we were to do this, there will be an impact. The impact is basically one non-cash effect of anticipating what you have amortized in terms of structuring costs during the exit financing process, and then a cash impact on the 2027 bonds. If we decide to call them, only the 2027 bonds will have a penalty of 10%. The Term Loan B is callable at par. So I think that with those data points, you can estimate the potential impact if we were to decide to refinance both the Term Loan B and the 2027s.
In terms of rating, the ratings are public. There are some agencies that have mentioned the positive outlook, and have mentioned the conditions on ratings improvements. When you look at the metrics, we're very confident that we're going to land where we need to land in terms of ratings improvements for 2023.
Felipe Villanova (Analyst)
Yeah, I mean, more than, more than the rating, I, I was concerned about it was about your guidance, because you each reiterated your guidance, and you already—you have already reached the. If I analyze the results of the first half, I'm already the midpoint of the EBITDA, yet this is a weaker half. So it looks like there's some upside to it, but you're reiterating the guidance. So I just wanted to know if there is there is some, some risks involved that I'm not aware of.
Ramiro Alfonsín (CFO)
Oh, sorry for that. The audio was a little bit strange. No, in terms of guidance, I think just reiterating what Roberto mentioned, we're extremely confident on our guidance, but that currently is our guidance.
Felipe Villanova (Analyst)
Okay. Understood. Perfect. Congrats again, Rami, and thanks everyone for the call.
Ramiro Alfonsín (CFO)
Thank you, Felipe.
Operator (participant)
Thank you. Our next question comes from the line of Neil Glynn with AIR Control Tower. Please proceed.
Neil Glynn (Analyst)
Oh, good morning, everybody. If I could first of all ask your thoughts on the Gol, sorry, the Azul discussions. The announcement was obviously made, but discussions are ongoing after your first quarter. So do you think any potential combination or deal there may have significant ramifications for competition as you see it? And then a second question on the balance sheet. At the second quarter, in non-current liabilities, there's $900 million of a provision. This figure, for context, was below $300 million in pandemic. So I'm just interested in your thoughts as to how likely that is to result in a cash outflow over the course of the next few years. Thank you again.
Roberto Alvo (CEO)
Yeah. Hi, Neil. So on the first question, of course, we have, we read the news, and we hear rumors of, I guess, what you hear the most is Abra, Azul.... We have absolutely no idea if that will happen or not, or the origin of the rumors. What I think is real is the announcement of codeshare between Azul and Gol, that has been implemented in early stages. CADE also announced that they will look at that codeshare. I think that the important here thing is that our strategy is very clear vis-à-vis ourselves. We understand where our strengths are, and we're executing our plan, in the way we believe that time will be successful.
We'll see if there's any deployment or any news with respect to that, we'll tackle that, if it happens, when it happens.
Ramiro Alfonsín (CFO)
Okay, Neil, thank you. In terms of the details on the non-current liability, our IR team will be reaching out for further details.
Neil Glynn (Analyst)
Great. Thank you.
Ramiro Alfonsín (CFO)
Thank you.
Operator (participant)
Thank you. And our last question will come from the line of Fernanda Recchia, with BTG Pactual. Please proceed.
Fernanda Recchia (Analyst)
Hey, guys, good morning. Thank you for taking my question, and Ramiro, good luck on your new position. Two points here from our side. First, the government recently announced the launch of Voa Brasil, with an initial focus on retirees and pensioners. Just wondering to hear your net reading of this program. Do you see room for improvement of load factor? What is your net reading of it? And the second, could you please provide us if there is any update regarding the Pratt & Whitney compensation? And also, could you clarify if your Adjusted EBITDA is taking into consideration the $25 million of one-off regarding Porto Alegre Airport? That's, that is it from my side. Thank you.
Roberto Alvo (CEO)
First question was?
Ramiro Alfonsín (CFO)
Voa. So Voa is just for the audience that doesn't know this, basically, the government started a program called Voa Brasil. This is for allowing certain groups of people to fly with lower fares, and we're very happy that LATAM participates in this program. Currently, what you have is low fares for pensioners that have not flown in the last many months, so it's a relatively small percentage of the population. I would say that is, at this point in time, nothing that looks very significant vis-à-vis the size of the operation.
We understand that the government may want to increase the scope of Voa Brasil, and we are, of course, talking with the ministry there, and we'll be happy to do our part in helping more Brazilians, particularly the ones that have the least opportunities, to have the ability to fly. But clearly, we are not considering the Voa Brasil impact as a significant impact today given the size of our operation. Want to take the other two, Ramiro? Yeah. In terms of Pratt & Whitney, we're still with ongoing discussions. Currently, we have 5 AOGs on the neo family. It's very limited, and we're offsetting that capacity with the extensions of 3, some 319s and 320s. We haven't reached an agreement yet. Discussions are still ongoing, but they're progressing well.
In terms of Porto Alegre, little to add, Fernanda, really, to what Roberto mentioned, $25 million impact now and with a significant reduction from August going onwards, and we expect the airport to be back operationally from October.
Roberto Alvo (CEO)
I think that Fernanda's clarification is, it was included in our numbers?
Ramiro Alfonsín (CFO)
Yes, of course.
Roberto Alvo (CEO)
Yes.
Ramiro Alfonsín (CFO)
The EBITDA that we had was impacted by more or less that amount because of the closure of the operation.
Fernanda Recchia (Analyst)
And just a follow-up, actually, my question was, is the Adjusted EBITDA adjusted for the $25 million or not, or not?
Ramiro Alfonsín (CFO)
No, no. No, Fernanda, absolutely not. We're just highlighting that that is impact we're... No. The only things that we're adjusting is what we're highlighting, which are non-recurrent events, and this is not part of that, no.
Fernanda Recchia (Analyst)
Perfect. Thank you, guys. Have a good day.
Ramiro Alfonsín (CFO)
No problem.
Operator (participant)
Thank you. With that, I will close Q&A for today, and we'll pass it back to Ramiro Alfonsín for final remarks.
Ramiro Alfonsín (CFO)
Thank you, Carmen, and thank you everyone for attending. Again, very strong results, very strong cost containment from the company. Positive margins for a second quarter that historically was soft. And this resulted in a very strong quarter for us and good perspectives going down the line for the next few months. So thank you everyone for attending. If you have any further questions, please feel free to connect with our investor relations team.
Operator (participant)
Thank you all for participating in today's conference. You may now disconnect.