LATAM Airlines Q2FY26 Results: Net income $125M, revenue up 28%
- Net income reached $125 million in Q2FY26 despite a 93% surge in fuel costs
- Total revenue grew 28% YoY to nearly $4.2 billion, driven by passenger and cargo segments
- Premium segment accounted for 29% of passenger revenues, enhancing revenue quality
- Full-year EBITDA guidance improved by $250 million at midpoint to $4.1-$4.4 billion
*this image is generated using AI for illustrative purposes only.
LATAM Airlines Group reported a net income of $125 million for the second quarter of fiscal year 2026, navigating one of the sharpest increases in jet fuel prices in recent years. Total revenues rose 28% year-over-year to nearly $4.2 billion, driven by strong passenger and cargo performance.
The airline faced significant cost headwinds, with total fuel costs increasing 93% due to an all-in average fuel price hike of over 80% YoY. Despite this, LATAM maintained an adjusted operating margin of 5.4%, aided by effective revenue management and capacity adjustments. Passenger revenues grew 28%, while cargo revenues increased almost 22%, benefiting from higher yields and volume growth.
Commercial execution and demand resilience
Consolidated capacity increased by 8.9% YoY, with load factors remaining healthy at 81.8%. The group successfully implemented fare adjustments, resulting in a 17.5% increase in consolidated passenger RASK (Revenue per Available Seat Kilometer). Premium segment revenues now account for 29% of passenger revenues, reflecting stronger resilience in this segment compared to main cabin.
The LATAM Pass ecosystem continued to strengthen, with more than 67% of passenger revenues generated by members, up from 60% previously. Elite member numbers grew 26% YoY, while third-party sales from this segment rose 48%. This diversification helped mitigate the impact of higher fares on overall demand.
Financial position and guidance update
The group generated $476 million in adjusted operating cash flow during the quarter. Liquidity stood at over $4.2 billion, equivalent to 26.2% of last 12 months' revenues, while adjusted net leverage remained at 1.5 times. A new share repurchase program for up to 5% of shares was approved by shareholders.
What the Numbers Show
A key divergence in the quarter's results is the relationship between cost inflation and margin preservation. While fuel costs surged 93%, the adjusted operating margin held at 5.4%. This indicates that the 28% revenue growth and 17.5% RASK increase were sufficient to absorb the disproportionate fuel shock, demonstrating high pricing power and operational efficiency in a volatile environment.
Updated full-year outlook
LATAM reinstated its full-year 2026 guidance, projecting revenue between $17.3 billion and $17.7 billion. Adjusted EBITDA is expected to range from $4.1 billion to $4.4 billion, improving the midpoint of prior guidance by $250 million. The update reflects more constructive assumptions for jet fuel prices in the second half of the year, with expectations of $147/barrel in Q3 and $130/barrel in Q4.
| Metric | Q2FY26 | Change/Status |
|---|---|---|
| Net Income | $125 million | Positive |
| Total Revenue | ~$4.2 billion | +28% YoY |
| Adjusted Operating Margin | 5.4% | On higher end of estimate |
| Fuel Cost Increase | 93% | YoY |
| Liquidity | >$4.2 billion | 26.2% of LTM revenue |
| Adjusted Net Leverage | 1.5x | Below target |
How will the projected drop in jet fuel prices to $130/barrel in Q4 specifically impact LATAM's adjusted EBITDA margin expansion compared to the 5.4% reported in Q2?
What is the potential dilution effect on earnings per share from the newly approved 5% share repurchase program given the current valuation multiples?
Can the 26% growth in elite members and 48% rise in third-party sales sustain premium segment resilience if macroeconomic conditions weaken consumer discretionary spending?
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