LATAM Airlines Group - Earnings Call - Q4 2024

Transcript

Operator (participant)

Hello and welcome to the fourth quarter 2024 LATAM Airlines Group earnings conference call. My name is Alex, and I'll be coordinating the call today. If you'd like to ask a question once the presentation has finished, please press star followed by one on your telephone keypad. 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 published 20-F, 2025 guidance earnings release, financial statements, and related CMF and SEC filings.

The company's actual results may differ significantly from those projected or suggested, and any forward-looking statements are due to a variety of factors which are discussed in detail in our SEC filings, and I'd like to turn it over to the management team to begin. Please go ahead.

Andrés del Valle (VP of Corporate Finance)

Hello everyone and good morning. Welcome to the fourth quarter and full year 2024 conference call, and thank you all of you for joining us today. My name is Andrés del Valle, Vice President of Corporate Finance at LATAM Airlines Group. Here with me today is Roberto Alvo, our CEO, Mr. Ricardo Bottas, our CFO who recently joined the team, and Tori Creighton, Head of Investor Relations, and we will present their highlights and results for the fourth quarter and full year 2024. I will hand it over to Roberto to share opening remarks about the quarters and years' highlights. Once he's finished, I'll present them in more detail alongside the financial results. Over to you, Roberto.

Roberto Alvo (CEO)

Thank you, Andrés. Good morning everyone, and thank you for joining us to review LATAM's group performance for the fourth quarter and full year results. Before we begin, on behalf of LATAM Airlines, I'd like to express our deepest condolences about the recent accident in Washington. Our thoughts are with the loved ones of passengers and crew on board of the aircraft and the helicopter and the American Airlines team during this difficult time. Also, before I turn to the results, I'd like to invite Ricardo to introduce himself. He has a proven track record of over two decades and vast experience in corporate finance, financial planning, tax, accounting, and investor relations. Among other areas, working for multinational public companies in Brazil, he was also a CEO for a few years, and it's great to have him here. So, Ricardo, over to you.

Ricardo Bottas (CFO)

Thank you, Roberto. First of all, I'm thrilled to be joining LATAM Airlines. I've always admired it. It's an exciting time, and it's the best moment in the history of the group, but for sure, there's still a lot to be done, and I'm looking forward to the challenge. As Roberto mentioned, I've worked in finance in many different roles in different industries related to healthcare, insurance, and energy, and now I'm joining the aviation industry, and I couldn't be more excited to work together with LATAM's teams from now on. So thank you, Roberto, again, and back to you.

Roberto Alvo (CEO)

Thank you, Ricardo. Overall, 2024 was a year of significant achievements for LATAM, not only in the financial sense in which we successfully met our 2024 updated guidance, but also with respect to our customer satisfaction, our operations, and our capacity to profitably grow not only on our passenger operations, but also in our cargo business and loyalty program. The results, in my view, are a testimony of the resilient model we have built over the years that allow us to achieve these results in the context of very dynamic macroeconomic and competitive environments. We're incredibly proud of this accomplishment, which wouldn't have been possible without the hard work and dedication of our more than 38,000 employees. Thank you very much to each one of you. You are the engine that is driving LATAM today.

In terms of operations, during the quarter, LATAM Group grew approximately 12% compared to the previous year and grew 15% for the full year while maintaining healthy load factors, highlighting our ability to grow efficiently. For the full year, we transported a record-breaking 82 million passengers, further solidifying our role as a key player in connecting people across 151 destinations in 27 countries and allowing South America to be connected within itself and the world. These achievements reinforce LATAM Group's position as the number one carrier by market share in five domestic markets and the leading airline group in South America. The group cargo operations also delivered robust results during the second half of 2024, ending the year with improved load factors, better unit revenue, and showcasing operational growth.

Similarly, as of the end of the year, our frequent flyer program, LATAM Pass, reached 49 million members, reaffirming its position as the largest loyalty program in the region. LATAM's financial results also reflected continuous cost efficiency. Adjusted passenger CASK ex-fuel for the year was $0.042, which is 1.5% lower than our 2023 figure. This led us to annual double-digit adjusted operating margin of 12.7%, outperforming our guidance. Adjusted EBITDA reached $3.1 billion for the year, bringing full year net income to $977 million, which nearly doubles our 2023 figure. These achievements are not just historical milestones for the company, but they're also a testament of the dedication, resilience, and collective effort of the entire team. We have consistently delivered strong improvements in our capital structure.

As you have followed our progress, you've seen how we've actively reduced our leverage, which now stands at 1.7x, with liquidity currently at 27%, ensuring LATAM has a strong balance sheet. It is worth mentioning our successful refinancing exercise conducted in the fourth quarter, which significantly reduced the cost of the majority of our non-fleet debt. The focus and efforts we have devoted to placing our customers at the center of our decision-making, devoting ourselves to continuously improving the travel experience, also bore fruit. Customer satisfaction reached unprecedented levels, achieving the highest ever total Net Promoter Score of 51 points and 56 points for our premium passengers, and also the lowest rate of customer complaints in Chile, Brazil, and Peru, where we have public figures to be compared.

Additionally, for the sixth consecutive year, LATAM ranked among the top five global airline groups in punctuality, underscoring its operational performance and commitment to ensuring passengers arrive on time and comfortably. Furthermore, LATAM Airlines Group was reincorporated into the Dow Jones Sustainability Index and was recognized as the fifth most sustainable airline group worldwide and the most sustainable group in the Americas and the Western Hemisphere. Once again, these achievements underline our commitment to combining operational excellence with environmental and social responsibility. As we close 2024 and we're embarking on a new year, I believe it's important to summarize again our achievements. In 2024, we delivered our best financial results so far, including very strong balance sheet, keeping at the same time our extremely efficient cost base. Our network presence is strong in every segment we operate.

We transported more passengers than ever before, and we did so with our historically best customer satisfaction score. All of this in the context of being one of the most punctual and more environmentally conscious airlines in the world. Looking ahead, in the short term, we expect demand to remain healthy with steady booking curve for the first quarter of 2025. In particular, the international segment continues to demonstrate strong levels of bookings for the current high season. Thank you again for your time. I'd like to turn the call over to Andrés to further discuss our financial and operating results.

Andrés del Valle (VP of Corporate Finance)

Thank you, Roberto. Let's move to the following slide, please. Diving deeper into fourth quarter operating figures, LATAM Group continues to show robust operational growth year-over-year, with more passengers choosing us across all markets. In this sense, during the quarter, the group transported 21.5 million passengers. This is a 7% increase compared to fourth quarter of 2023, achieving a record-breaking 82 million passengers for the full year, reinforcing LATAM as the largest airline group in South America and among the top 10 globally in terms of seats. Also, during this period, capacity grew by approximately 12% while maintaining healthy load factors across all segments, with a notable consolidated load factor of almost 86% for the quarter. In terms of consolidated revenues per ASK, we see a decrease of 10% year-over-year, though stable compared to the third quarter of 2024.

This decrease was influenced by the decline in jet fuel prices year-over-year and by currency depreciation in some of our main markets, especially in Brazil, since our RASKs are presented in USD. However, when analyzing RASKs in local currency, we observe an average increase of 3% among Spanish-speaking countries where LATAM Group's affiliates operate. In Brazil, however, the comparison base is exceptionally high from the fourth quarter of 2023. LATAM Group's diversified network and strong value proposition have enabled us to deliver solid results this quarter, with improved margins that we can see now on slide five. In this fourth quarter, LATAM continued to consolidate the trend of strong financial performance, achieving an adjusted operating margin of 13.6%, supported by revenue growth and cost discipline.

Total revenues increased by 4% year-over-year, driven by a remarkable 29% growth in cargo revenues, marking the third consecutive quarter of improvements. Total adjusted operating expenses increased by only 1% in the quarter, primarily driven by a 12% increase in capacity offset by a decline of 23% in jet fuel prices, including hedges, which helped mitigate cost pressures and further contributed to operational efficiency. Adjusted EBITDA grew by 28% to $866 million, while net income for the quarter reached $272 million, marking a 228% increase compared to the same period of 2023. These results emphasize the effectiveness of our operational strategy and our focus on consistent financial performance. Turning to the next slide, the financial results achieved reflect our commitment to enhancing the customer experience as a pivotal element of our strategic vision. This year, we made progress on elevating the quality and satisfaction of our services.

A key metric of our success is the improvement in our Net Promoter Score, which climbed to 51 points, marking a three-point increase from the previous year, while our Net Promoter Score for premium travelers reached 56 points during 2024. While there is always room for improvement, LATAM Group's affiliate has the lowest of customer complaints across Chile, Brazil, and Peru. Punctuality is another cornerstone of our service excellence, and we are proud to be recognized as one of the most punctual groups of airlines in the industry. This commitment to reliability ensures that our flights consistently depart and arrive on schedule, enhancing the travel experience for all our passengers. To further enhance the passenger experience, we have successfully implemented Wi-Fi connectivity across 100% of the narrow-body fleet operated by LATAM Airlines Brazil and 75% of the narrow-body fleet operated by affiliates based in Spanish-speaking countries.

We have also completed the comprehensive modernization of our narrow-body fleet, incorporating the latest technology and comfort-oriented designs to provide a superior travel experience. Additionally, as of December 2024, 54% of LATAM's group wide-body fleet features a retrofitted interior. These achievements reflect our relentless focus on customer satisfaction and loyalty. Let's move to slide seven, please. As I just mentioned, we have made significant progress in the travel experience, but at the same time, we have demonstrated remarkable financial discipline by keeping our unit costs stable. Our annual adjusted passenger CASK ex-fuel remains at a competitive $0.042, highlighting our effective cost management strategies amidst industry challenges and a focus on continually investing in improving our product and customer experience. The next slide, please. Turning to the next slide, in 2024, sustainability continues to be a cornerstone of LATAM's group strategy, guiding our investments and innovations across the region.

In this sense, we have been reincorporated in the Dow Jones Sustainability Index and recognized as the most sustainable airline group in the Americas and ranked fifth worldwide. On the other hand, we proudly secured South America's first sustainability-linked loan, underscoring our leadership and commitment to sustainable finance. Additionally, in December, the results from the joint study with the MIT and Airbus were published, which focused on advancing the production of sustainable aviation fuel in our region. This initiative represents a step forward in reducing carbon emissions and promoting cleaner air travel. Beyond these advancements, LATAM Airlines Group has made tangible environmental progress. In 2024 alone, we recycled 280 tons of waste on domestic flights, contributing to circular economy initiatives, and since 2010, our efforts in fuel efficiency have helped avoid 4.5 million tons of CO2 emissions.

Our Solidarity Plane program has transported over 16,000 passengers and 3,500 tons of cargo free of charge since 2021, reaffirming our commitment to social impact. By investing in sustainable technologies and partnerships, LATAM Group is not only reducing its environmental footprint, but also setting new standards for the aviation industry. We're committed to leading the way in sustainability, ensuring a greener future for generations to come. Let's move to slide nine. Our performance results reflect our commitment to enhancing the customer experience, which contributed to both our quarterly and full year figures. For the full year 2024, LATAM delivered on its updated guidance, achieving notable financial results that continue to improve year-over-year. In this sense, annual revenues reached $13 billion, representing an approximately 11% growth year-over-year. Annual adjusted operating margin was 12.7%.

This is an increase of 1.5 percentage points compared to 2023, while adjusted EBITDA increased by 23% to $3.1 billion. LATAM has a solid foundation for sustained growth in 2025, as you can see in our 2025 guidance figures, which support continued financial improvement. All of these positive results are reflected in the net income generation for the year, which amounted to $977 million, nearly double the 2023 figure. Moving to slide 10, as you know, we consider cash generation to be the true measure of performance. In this sense, adjusted operating cash flow generation through the year totaled $2.8 billion, while investments in maintenance and growth amounted to $1.5 billion. Throughout 2024, LATAM generated $243 million in positive cash. Notably, this includes the allocation of $175 million for the mandatory minimum dividend payment and $207 million for the refinancing exercise conducted in October of last year.

In both cases, we reinforce our commitment to sustainable capital allocation and the reinvest in shareholders. Please join me on slide 11. LATAM continued to strengthen its capital structure in 2024 and also deliver on this front with regard to its updated guidance. Liquidity at the end of the year reached $3.5 billion, equivalent to 27% of last four months' revenues, while adjusted net leverage decreased to 1.7x. These results highlight the continued delivery efforts and commitment to financial discipline. This robust capital structure provides LATAM with the flexibility to fund growth initiatives while ensuring long-term stability. Given the strong cash situation in 2024 and LATAM's consistent financial performance over the past two years, the company has updated its financial policy aligned with its best interest and strategic objectives.

This policy establishes a capital allocation framework focused on balancing strength, profit growth investments, and shareholder returns beyond the mandatory 3% dividend distribution. The strategy focuses on maintaining financial discipline by optimizing the cost of debt, having adjusted net leverage below two times and aspiring to reach a BB+ rating. The policy also outlines a range of optimal liquidity between 21%-25% of last four months' revenues. In line with this policy, LATAM's management and board regularly analyze alternatives for further capital return programs to shareholders, including, but not limited to, incremental dividends, share buybacks, and/or growth capital and strategic investments for most effective allocation of capital in 2025 and beyond.

Considering that the current share ADR price may be undervalued compared to historic multiples, and while share buybacks are not common practice in Chile, the board of directors will evaluate whether an up to $150 million share buyback program can be implemented while mitigating the impact to the share's current trading liquidity. Let's move to slide 12. Looking ahead to 2025, LATAM Group anticipates continued growth and financial strength. Capacity measured in ASKs is expected to grow by 7%-9% as a whole, supported by the addition of 22 new aircrafts throughout the year, with revenues forecast to reach $14 billion-$14.5 billion. Adjusted EBITDA is projected at $3.25 billion-$3.6 billion, supported by a healthy demand environment, a diversified value proposition, disciplined cost management, and strong liquidity. LATAM remains focused on delivering operational excellence and creating value for all stakeholders this year.

Let me conclude with slide 13. 2024 was a strong year for LATAM Group. We witnessed a record-breaking number of passengers transported while achieving significant operational milestones that underscore our strategic progress. Throughout the year, we consistently delivered strong financial results with an annual net income of $977 million, nearly doubling the 2023 figure. We also achieved an Adjusted EBITDA of $3.1 billion, representing a 23% increase year-over-year. Our commitment to cost containment is reflected in our an adjusted passenger CASK ex-fuel of $0.042. For 2025, we expect to sustain this growth momentum. Passenger satisfaction increased, as evidenced by a Net Promoter Score of 51 points, a three-point improvement over 2023. LATAM was ranked as the fourth most punctual global airline during the year, further enhancing customer satisfaction and our reputation for reliability.

Our leadership in sustainability distinguishes us within the industry, having secured South America's first sustainability-linked loan and recognition as the most sustainable airline group in the Americas and the fifth worldwide. These accomplishments illustrate LATAM's forward-looking focus, well-prepared for future opportunities, and to navigate the evolving aviation landscape. Thank you. We now welcome any questions that you may have.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, please press star followed by one on your telephone keypad. Our first question for today comes from Michael Linenberg of Deutsche Bank. Your line is now open. Please go ahead.

Michael Linenberg (Research Analyst)

Oh, yeah. Hey, good morning. You know, Roberto, Andrés, Ricardo, Tori, and by the way, a warm welcome to Ricardo. Not only are you joining an airline that is a leader in Latin America, but I think many view it as the gold standard on a global basis.

Welcome aboard. I have two questions here, and maybe the first one to Andrés and/or the team. You reiterated your December 3rd guidance, and yet over the past two months, we've seen the currency depreciate pretty meaningfully against the dollar, as well as fuel prices move up. And so my question is, what are you seeing with respect to the pass-through of basically the higher cost of doing business that gives you confidence that you feel good about reiterating these numbers, the margins and revenue growth?

Roberto Alvo (CEO)

Thanks, Mike. This is Roberto that has the question, and thanks for the compliments as well. Well, our guidance has a $90 per barrel of jet fuel and BRL 5.8 at the current levels. On both commodities, we are not very far from that, even though we've seen, of course, volatility.

At this point in time, I think that we still feel very confident about our guidance. The booking curve in the first few months of the year is healthy and solid in almost every line of business where we have. Cargo has bounced back nicely as well since the second semester of last year through the beginning of this year as well, and I think the ability we have to diversify our portfolio, move our assets around, make sure that this is an opportunity for LATAM remains. One of the things I told you in past calls is that one of the things that we've built is something I call relative strength, and actually, in these moments of volatility is when I think that our position allows us to take advantage of that relative strength and eventually induce opportunities of us solidifying our network and our presence.

So we remain confident we have the tools we believe to overcome this volatility. I mean, be mindful that the Real depreciated 20% in 2024. It was below five at the beginning of the year and then in six. And despite that, we were able to deliver the results we had in 2024. So we remain optimistic and confident that we have the abilities to do that in 2025.

Michael Linenberg (Research Analyst)

Great. And then just my second question on—oh, go ahead.

Roberto Alvo (CEO)

No, go ahead.

Michael Linenberg (Research Analyst)

Oh, just my second question. Regarding your sort of potential opportunity with respect to capital deployment, shareholder returns, considering a share repurchase, are there any restrictions or mitigating factors that you mentioned $150 million in size? I realize that a good portion of your float is held by insiders. Is that one of the gating issues in sizing a potential share repurchase? If you could talk about that. And again, thanks for taking my questions.

Roberto Alvo (CEO)

Thank you, Michael. So first, just to remind particularly people in the U.S. that are not necessarily very close to Chilean laws, either dividend distributions at the end of the day policy over 30% or buybacks need to be approved by shareholders. Okay? So this is not a board decision. Board can recommend. Ultimately, shareholders make that decision. So we will do that in case we decide to move in this direction. Yes, we are mindful of the liquidity of the share. These operations are not very typical in Chile either. I mean, there's very few cases and none of relatively important size. So we want to analyze the law provides for this, so it can be done. But of course, we want to analyze very well the feasibility of doing that.

But the size is limited today, basically to our understanding that we don't want to impact the liquidity of the shares, particularly in the U.S. market. So that's a constraint we have very much in mind today.

Michael Linenberg (Research Analyst)

Great. Thanks. And great quarter, everyone.

Roberto Alvo (CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Jens Spiess of Morgan Stanley. Your line is now open. Please go ahead.

Jens Spiess (VP)

Yes, hello. Congrats on the strong results to finish and wrap up the year. I just had a question on prices mainly. I mean, looking at the Brazilian market in local currencies, your prices are down. So if you could just explain a bit more what's going on there and if you see further pressure going forward. And also on the international side, understand what's mainly driving the decrease in prices. Is it more interregional, international yields, or is it long haul? In terms of mix, how should we think about it? Thank you.

Roberto Alvo (CEO)

Yes. So traffic in domestic Brazil remains healthy, and last quarter of 2023 was particularly very strong, so there's a very high basis of comparison vis-à-vis 2023. In absolute terms, nonetheless, during 2024, we saw a healthy movement of yields in domestic Brazil, and at this point in time, we have no indication that demand will not continue to be healthy going forward. With respect to international, it's been relatively across the board. I would say that Brazil to Europe, Latin America to Europe in general has been very healthy, a little bit less so to the U.S., but still in good healthy figures, and regional, which is international within South America, had a very nice rebound as well. Do remember that international was the last segment to recover from the pre-pandemic level.

What we saw in 2024 was still probably the last bit of the recovery, and that's why also we grew around 20% in international. But there are no segments in international that are particularly concerning us, whether it's the regional, again, international within South America or the long haul. And I would complement that, of course, whenever currencies depreciate, we see, I think, a pickup in inbound traffic from coming to South America, I think, which becomes more attractive. And we have definitely seen that across all markets, inbound traffic.

Jens Spiess (VP)

Okay, understood. Yeah, yeah. On that last point, that's what I was trying to dissect. So with international, obviously, you're probably seeing some weakness on the interregional flights due to the volatility on the local currencies. But also, it could end up being positive for long haul, right? In terms of price.

Roberto Alvo (CEO)

But yes, I don't think we have seen weakness. Probably I mis-explained myself. I think that regional, so international within South America has been solid. And what Andrés says is very important. So let me just give you an example. There's a currency depreciation in Brazil we do know, but there's actually, in real terms, a currency appreciation in Argentina. And Argentines love to travel. So you see significant increase in outbound traffic from Argentina through our hubs to long haul within the region. So at the end of the day, the volatility we've seen in the currencies this year has been, in a way, counterbalanced by other markets. We see, in general, strong flows in almost every one of our international segments, whether it's within South America or long haul.

Jens Spiess (VP)

Perfect. Very clear. Thank you.

Roberto Alvo (CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from André Ferreira of Bradesco. Your line is now open. Please go ahead.

André Ferreira (Head of Transportation Equity Research)

Hi, good morning. Thanks for taking my question. Congrats on the results. Two topics here. So first, about the fleet plan, it looks like it relies on a significant increase of the number of A320s being delivered and also significantly more than what was delivered in 2024. So my question is, if you see risks of this being hampered by further delays in deliveries by Airbus. And my second question, it looks like the combination of Azul and Abra or GOL is advancing. And I just wanted to get your view on, I mean, how would this impact LATAM? How would this impact the local fare environment? And if it changes anything in LATAM's longer-term strategy for Brazil, if it goes ahead. Thank you.

Roberto Alvo (CEO)

Yes. Thank you, Guilherme. So we do have 22 Airbus A320 arrivals, A320 family arrivals in 2025. We are not concerned today with the delivery stream from Airbus. Actually, I believe that this relatively high fleet incoming this year is an advantage for LATAM because I think it will allow us to take advantage of our relative strength going forward. We have two 787s arriving in 2025. Probably there's risk of delays there, but we're monitoring very closely Boeing's increase in production. They're trying to recover the 787 production. So we remain very attentive to that. But I would say that there's no big concern that we have internally with respect to our fleet plan in 2025.

I would say probably that more than the deliveries, it's the engine situation, the one that we're monitoring more closely. As Pratt & Whitney and Rolls-Royce have had issues with their supply chains, we've had very productive interactions with them.

We have a few 787s, three at this moment on ground and seven 320 family aircraft on ground. It's a relatively low number, and we have very constructive conversations with them, and this is what we're monitoring more closely. But that risk is, of course, included in our guidance so far. With respect to your second question, I mean, what we have today seen is a non-binding MOU that has very little detail on this transaction. I think it's still premature to opine on what this exactly will mean for LATAM. This is a big potential combination that will have, no doubt, mitigations if approved, and we are expecting to see what are the mitigations that Abra and Azul will propose, and then we'll have a better understanding of what these will mean, so in the meantime, we have improved our presence in domestic Brazil during 2024.

We are almost 40% of the market, and I think we're very happy with the performance of our domestic operation in that market. So we'll see what happens in the next weeks and months. Thank you.

André Ferreira (Head of Transportation Equity Research)

Thank you.

Operator (participant)

Thank you. Our next question comes from Stephen Trent of Citigroup. Your line is now open. Please go ahead.

Stephen Trent (Managing Director)

Good morning, everybody, and thanks very much for taking my question. First of all, definitely appreciate the thoughts for the tragedy that happened in DC. Along those lines, I would love to hear your guys' view on sort of the adequacy of infrastructure and air traffic control capability in your key markets. Do you see sort of room for improvement there, or are you pretty happy with how the infrastructure is set up? Thank you.

Roberto Alvo (CEO)

Hi, Stephen. I mean, this industry in South America in the last 20 years has grown incredibly.

I mean, it was a very immature industry in the beginning of the century, now still immature in the sense that we can still carry much more passengers as our figures are relatively low as compared to developed markets, and I think that in every area of the chain of aircraft transportation, cargo, and passengers, we've seen improvement in the last few years. I mean, airports have grown. ATC systems have improved. Today, we have GPS-guided landings and takeoffs in almost every significant airport. It works relatively well. We have much less congestion, particularly in ATC than what you have in the U.S. We don't have the complexity of the system of so many regional airports, small aircraft, jets, private jets, air force bases that you have in the U.S., so it's clearly less complex in our view than what you have there.

Having said that, yes, of course, infrastructure has challenges. We're expecting to see the new Lima airport, which hopefully will open in the next two or three months. That's very needed. The concession program in Brazil about new airports, I think, has helped in the infrastructure as well. We have a new terminal in Santiago that is only three years old. I would say probably the airport where there's more constraint today is El Dorado in Bogotá, where really slots are taken at every single hour of the day, and it's a little bit of a constraint in certain places, but I think that the programs of infrastructure are sometimes a little bit slower than what we'd love to have accompanied the growth of the industry in the last 15 or 20 years. We actually are doing something very interesting.

We are looking at our data, but not the data where we have our parameters probably out of our ranges, much to the contrary, where we have our parameters within our ranges, and that is helping us understand if there's things that can be done to improve safety for our operations and the regional together, and actually, that's been very helpful because we have identified opportunities that we have passed to airports and operators in terms of how to improve the way they manage the infrastructure and the operations at this point in time. We're, I think, leading that in the region and being happy to not only help our own operation, but share this with the authorities so that the whole operation in the region is safer.

So I wouldn't say that this is an important, I mean, it's important, of course, but it's not in the level of complexity that you have in the U.S. or that EUROCONTROL, for example, has in Europe as well.

Stephen Trent (Managing Director)

That's very helpful color. Really appreciate that. And as a very quick follow-up, when we think about the joint business agreement with Delta Air Lines, where would you guys say you are in terms of the extent to which that opportunity continues to spool up? Are we still kind of early stages, or are we sort of mid-cycle in terms of the revenue contribution you expect from that? Thank you.

Roberto Alvo (CEO)

Thanks, Steve. So I mean, so the JB with Delta is just over two years old now. The increase in capacity that both airlines put in the first 18 months was significant. We grew around 30%.

Our seat count between South America and the U.S. Delta also upgauged in several markets. It launched now Rio as a seasonal route as well. I think that we—I mean, there's a ton of opportunity for growth and development there, but it's also a moment of maturing, I think, of the investments we have made in the last 18 to 12 to 24 months. I would say where our focus today is in customer satisfaction. We are working very hard in making sure that the connectivity between both metals works seamlessly. We still have, I think, things to improve in that sense as the systems, of course, are different, and that's where our short-term focus is but we just started Ecuador in the scope of the JB late last year so we see opportunity growing there, also opportunity in Colombia.

And, clearly, the combination of both networks has a ton of potential going forward. Very happy with the deal.

Stephen Trent (Managing Director)

Thanks very much.

Roberto Alvo (CEO)

Thank you.

Operator (participant)

Thank you. Our next question comes from Guilherme Mendes of JPMorgan. Your line is now open. Please go ahead.

Guilherme Mendes (Equity Research Executive Director)

Thank you and good morning to all, and welcome, Ricardo. Good luck on the new role. I have two questions. The first one is a follow-up on the capital allocation. So besides the dividends and the buybacks that we already discussed, Andrés, you also mentioned about strategic investments as a potential use of capital. What exactly are you guys thinking about this one? And the second one is, Roberto, you mentioned about the strong demand across different regions. But in terms of competition, do you see any excessive capacity in any other regions that could pressure prices in the near term? Thank you.

Roberto Alvo (CEO)

Thank you, Guilherme, and congratulations on your new position, by the way so capital allocation so dividends and buyback are the two ways that we consider today, among others, but the most important on which we're considering eventually returning capital to shareholders. One of the things that we are being very mindful of is to have the flexibility of growing eventually. Our portfolio are growing within the scope that it's important to us and in that sense, I think that the financial strength we have allows us for the opportunity to take potential opportunities. Nothing to report at this point in time. If there's something, of course, we will let you know in due time but we consider today the position we have built as one that provides options to LATAM, options in terms of growing, bringing fleet, options in looking at deals, options in returning capital to shareholders.

We will ponder all these options and make use of the capital in the way that it's more efficient for both the company and the shareholders of the group. Sorry. Second question, competition. Clearly, I would say that still domestic Colombia is a market that is with overcapacity. There's been very aggressive growth in the last 18 months by other players there. And it will come, in my opinion, to some kind of equilibrium. It hasn't arrived yet. We're looking at domestic Colombia. There's a little bit of also intensity and capacity between the U.S. and Brazil, mostly driven by a very big growth in capacity from American in the high season into Brazil. It's seasonal. The rest, I would say that the capacity is relatively balanced in most of the markets. No big concerns in terms of that equilibrium at this point in time.

Also, we don't see today significant evidence of new entrants potentially in the markets where we operate.

Guilherme Mendes (Equity Research Executive Director)

Very clear. Thank you so much.

Roberto Alvo (CEO)

Thank you.

Operator (participant)

Thank you. As a reminder, if you'd like to ask a question, that's star one on your telephone keypad. Our next question comes from Pablo Monsivais of Barclays. Your line is now open. Please go ahead.

Pablo Monsivais (Equity Research Analyst)

Hi. Thank you for taking my question. Good morning, everyone. Just a quick question on the demand per segment in terms of corporate and leisure. I remember that you have said probably from the last year and a half that leisure has been very, very strong, and corporate is also recuperated fast. But what are you seeing right now, and what should we expect in terms of your capacity allocation going forward for this trend? Thank you.

Roberto Alvo (CEO)

Thank you, Pablo. So I think that probably two calls ago or something like that, I gave a little bit of a flavor there. We talked about that leisure demand was above 100% as compared to 2019 levels, and that corporate demand at that time was around 100% against 2019 levels. I think that we're seeing today is evolution of demand by segment relatively similar in all segments. So we're not seeing any changes significant in the mix. We see good support on corporate demand across most of the traffics and also leisure. So no real changes in the mix, at least over the last six months. What we have done, though, and we believe it's important for our corporate travels, is that today we're focusing on three important things. One is on-time performance.

We do understand that time is the most important commodity that our customers have and the most premium customers value it the most. We have broad Wi-Fi also to almost all of our narrow-body fleet. In the Pacific side of South America, we're the only airline that provides Wi-Fi. And of course, we have the largest FFP in the region with almost 50 million members. What we have seen actually growing faster in the last year is the number of members in our frequent flyer program. So we believe that's an important addition to that. And in particular, in Brazil, I would say, because in Chile and Peru, our corporate traffic figures have always been healthy, have improved significantly as well in 2024.

ABRACORP, which is the corporate travel agency in Brazil, produced a report with respect to that, and we reached 40.8% revenue share in the corporate segment in Brazil in 2024. That's the highest level we've had since 2013.

Pablo Monsivais (Equity Research Analyst)

If I may ask a follow-up on that, and probably I know it's too early to reach to this conclusion, but after the GOL and Azul merger, would you expect that share on the corporate partners in Brazil for you to be higher than what you already have? Do you see that perhaps an indirect impact of the competitive landscape?

Roberto Alvo (CEO)

Pablo, I think it's, as I said before, I think it's very early to speculate about that. What we have seen today is a non-binding MOU that has, again, very little detail. And I think that we need to see their filing, their public filing, what mitigations they will propose. CADE needs to review, and this is a big transaction eventually, which will have a lot of details seen by CADE. So I'd rather see how this develops. I don't think it's time to speculate what will happen, and we'll see how this evolves in the next few weeks and months.

Pablo Monsivais (Equity Research Analyst)

Absolutely. Thank you very much.

Operator (participant)

Thank you. At this time, we currently have no further questions, so I'll come back to Andrés. But any further remarks?

Andrés del Valle (VP of Corporate Finance)

Thank you very much all for joining us today. As always, our Investor Relations team is available for any further questions, and have a good day, everyone.

Operator (participant)

Thank you all for joining us today's call. You may now disconnect your lines.