LATAM Posts a Record Quarter, Then Trims Flights as Fuel Spikes

Chile · Aviation

LATAM Airlines, the largest carrier in South America, has just posted the best quarter in its history — and is already cutting July flights and lowering its full-year outlook, because a jet-fuel spike is eating into the profits that record quarter produced.

The Santiago-based group reported first-quarter results on May 5 that set company records across the board: revenue of US$4,151 million, up 22%; adjusted EBITDA of US$1,315 million, up 37%, a record, at a 31.7% margin; and net income attributable to shareholders of US$576 million, up 62%, for earnings of US$2.01 per ADS. It carried 22.9 million passengers, filled 85.3% of its seats and cut net leverage to 1.3 times.

For an airline that exited Chapter 11 bankruptcy only a few years ago, it was a remarkable statement of strength.

LATAM’s journey from bankruptcy to record profitability reflects a broader transformation of South American aviation. Chapter 11 is a US. legal process that allows companies to restructure debt while continuing operations, and LATAM used it to shed obligations and emerge leaner.

The carrier now dominates a region where air travel has historically been fragmented and expensive, connecting cities across a continent where geography—mountains, rainforest, vast distances—makes flying often the only practical option.

A fuel shock changes the math

Then geopolitics intervened. A spike in jet-fuel prices tied to conflict in the Middle East forced LATAM to replace its 2026 guidance with a lower set of targets, cutting its adjusted-EBITDA range to US$3.80–4.20 billion from a prior US$4.20–4.60 billion.

The airline roughly doubled its fuel-price assumption to about US$170 a barrel for the middle of the year and warned of more than US$700 million in extra fuel costs in the second quarter alone, with second-quarter operating margins guided down to the low-to-mid single digits.

Jet fuel typically accounts for a quarter to a third of an airline’s operating costs, making carriers acutely vulnerable to oil-market swings. When fuel prices double in a matter of weeks, even the most efficient operator faces a stark choice: absorb the hit to margins, raise ticket prices and risk losing passengers, or fly less.

LATAM is choosing the third path, at least in its largest market.

The clearest sign of the squeeze came on June 8, when LATAM said its Brazilian unit, LATAM Brasil, would trim July capacity by about 3% against earlier plans — repeating a June reduction and likely extending into the third quarter. Speaking at the airline industry’s annual meeting, LATAM Brasil chief executive Jerome Cadier framed it as a prudent response to costs, while group leadership warned the whole industry may pull down capacity if fuel stays high into 2027.

The unit is still flying more than a year ago, just not as much more as it had hoped.

Brazil represents LATAM’s single biggest market by revenue and passenger volume, so any capacity adjustment there reverberates across the network. The question now is whether fuel prices moderate quickly enough for the carrier to restore growth plans, or whether the cuts deepen and spread to other units across the group’s footprint in Chile, Peru, Colombia, Ecuador and beyond.

The long-haul bet keeps expanding

Even amid the cost pressure, LATAM is pressing its boldest strategic move: a long-haul push into Europe from its São Paulo hub. It launched São Paulo–Amsterdam in late March and São Paulo–Brussels on June 1 — the first nonstop service between Brussels and Latin America in about 25 years — alongside a new route to Cape Town, building toward roughly 90 weekly flights to 10 European cities this year.

To feed its network, the group last September agreed to take up to 74 Embraer E195-E2 jets, with 24 firm orders and 50 options, the first of which arrive in the second half of 2026.

Long-haul international routes are typically the most profitable segments for airlines, especially when a carrier can fill premium cabins with business travelers. Europe remains a key destination for South American trade, tourism and family ties, and LATAM is betting it can capture share from European carriers by offering convenient connections through São Paulo.

Whether that bet pays off depends partly on whether business and leisure demand holds up if ticket prices rise to cover fuel costs.

The story, then, is one of timing. LATAM has built itself into the region’s strongest airline just as a fuel shock tests every carrier’s discipline.

Its record balance sheet and margins give it room to absorb the blow and keep growing in Europe — but the July capacity cut is a reminder that even the strongest operator cannot fly above the price of fuel.

Investors and travelers alike will be watching whether fuel markets stabilize, how competitors respond, and whether LATAM can sustain its European expansion while managing costs at home. The answers will shape not just one carrier’s fortunes but the competitive landscape of an entire continent’s skies.

Frequently Asked Questions

How good was LATAM’s first quarter of 2026?

It was a record. Revenue rose 22% to US$4,151 million, adjusted EBITDA hit a record US$1,315 million (up 37%), and net income rose 62% to US$576 million, or US$2.01 per ADS.

Why is LATAM cutting flights if it is so profitable?

A jet-fuel price spike linked to Middle East conflict sharply raised costs. LATAM Brasil will trim July capacity about 3%, and the group lowered its 2026 EBITDA outlook to US$3.80–4.20 billion after roughly doubling its fuel-price assumption.

What new European routes is LATAM adding?

From São Paulo, LATAM launched Amsterdam in late March and Brussels on June 1 — the first nonstop Brussels–Latin America link in about 25 years — plus Cape Town, building toward roughly 90 weekly flights to 10 European cities in 2026.

Is LATAM buying new aircraft?

Yes. In September 2025 it agreed to take up to 74 Embraer E195-E2 jets (24 firm, 50 options), with the first deliveries due in the second half of 2026.