LATAM Airlines : Report of foreign issuer rules 13a-16 and 15d-16 of the Securities Exchange Act

UNITED STATES

SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 6-K

REPORT OF FOREIGN PRIVATE ISSUER

PURSUANT TO RULE 13a-16 OR 15d-16

UNDER THE SECURITIES EXCHANGE ACT OF 1934

August 13, 2019

Commission File Number 1-14728

LATAM Airlines Group S.A.

(Translation of Registrant's Name Into English)

Presidente Riesco 5711, 20th floor

Las Condes

Santiago, Chile

(Address of principal executive offices)

Indicate by check mark whether the registrant files or will file annual reports under cover of Form 20-F or Form 40-F:

Form 20-F☒ Form 40-F☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(1): ☐

Indicate by check mark if the registrant is submitting the Form 6-K in paper as permitted by Regulation S-T Rule 101(b)(7): ☐

LATAM AIRLINES GROUP REPORTS CONSOLIDATED OPERATING INCOME OF US$40.2 MILLION FOR SECOND QUARTER 2019, TOTALING US$122.3 MILLION FOR FIRST HALF 2019

Santiago, Chile, August 13, 2019 - LATAM Airlines Group S.A. (NYSE: LTM; IPSA: LTM), the leading airline group in Latin America, announced today its consolidated financial results for the second quarter ending June 30, 2019. "LATAM" or "the Company" makes reference to the consolidated entity, which includes passenger and cargo airlines in Latin America. All figures were prepared in accordance with International Financial Reporting Standards (IFRS), including the recent adoption of IFRS16 accounting standard, and are expressed in U.S. dollars. The Brazilian real / US dollar average exchange rate for the quarter was BRL 3.92 per USD.

HIGHLIGHTS

• In the second quarter of 2019, LATAM Airlines Group reported an operating income of US$40.2 million and an operating margin of 1.7%. The Company's net result improved by US$144.9 million year-over-year to a US$62.8 million net loss in second quarter 2019.
• Total revenues rose 0.5% year-on-year in the second quarter of 2019 to US$2,370.0 million. This increase was driven by a 3.2% increase in passenger revenues as a result of 4.8% capacity growth (measured in available seat kilometer (ASK)). Revenue per ASK (RASK) for domestic operations in Brazil rose 29% in Brazilian Real, offsetting most of RASK declines in the international and domestic Spanish Speaking Countries operations, the latter declining due to currency devaluation. On the other hand, cargo revenues declined 10.2% influenced by currency devaluation.
• Total operating expenses increased 1.1% year-over-year in the second quarter to US$2,329.8 million, driven by a 5.2% increase in fuel costs due to a 6.7% increase in fuel consumption. Excluding fuel, total operating expenses declined 0.7% year-on-year in the second quarter. Cost per ASK fell 3.5% year-over-year, while costs per ASK excluding fuel decreased 5.2% year-over-year as a result of the positive effect of currency devaluation of the currencies on costs denominated in local currency, as well as the implementation of the Company's cost saving initiatives.
• During the second quarter, LATAM and its affiliates transported more than 16.8 million passengers, an increase of 1.4 million passengers compared with the second quarter of 2018. In the group's domestic markets alone, passengers carried rose by 1.3 million, representing an increase of 11% year-on-year and reflecting the healthy demand in those countries.
• In May 2019, Chile's Supreme Court ruled against the implementation of the Joint Business Agreements between LATAM Airlines and American Airlines and IAG - the holding company of British Airways and Iberia. These agreements had been previously approved by Chile's competition court (Tribunal de Defensa de Libre Competencia) and have been approved by other pertinent jurisdictions in the region, including Brazil, Colombia and Uruguay. In light of this new scenario in Chile, LATAM is evaluating the potential alternatives, including the implementation of these agreements consistent with the Supreme Court's ruling.
• As previously announced in the first quarter results, LATAM Airlines Brazil completed the merger with Multiplus after acquiring 100% of its outstanding shares.
• During the second quarter of 2019, LATAM Airlines Group was named the 'Best Airline in South America' by Skytrax World Airline Awards, which are based on passenger feedback. LATAM was also distinguished for the 'Best Business Class', 'Best Business Class Lounge' and 'Best Economy Class' in South America. These awards motivate LATAM to continue working towards its commitment of offering an industry-leading travel experience and to maintain passenger preference.

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• In July, LATAM issued an additional US$200 million of its 7.000% Senior Notes, which are due in 2026 at a yield to maturity of 5.979%. The proceeds were used in a cash tender offer to prepay US$238 million of the LATAM2020 bond, which matures in June 2020.
• On July 9th, Fitch Ratings upgraded LATAM's corporate credit rating to BB- (from B+), with a 'stable' outlook, as a result of the Company's debt reduction, financial flexibility and consistently high liquidity levels in recent years.
• Finally, LATAM strengthened its sustainability commitments in July with the launch of 'Recycle your Journey', a program to recycle waste from Mercado LATAM, the company's buy-on-board food service. As part of the airline group's wider sustainability strategy and its commitment to being a leader in on-board recycling, this initiative will be gradually implemented throughout LATAM's operation in Latin America. Between August and December 2019, LATAM projects that it will recycle more than 20 tons of waste from domestic flights in Chile, and, by the end of 2020, it expects to recycle more than 55 tons of on-board waste per year.

MANAGEMENT COMMENTS ON THE SECOND QUARTER 2019

During the second quarter 2019, LATAM Airlines Group carried 1.4 million passengers more than the same period last year and over the past 12 month has transported more than 71 million passengers for the first time since the association between LAN and TAM. This growth has been especially strong in LATAM's domestic markets, both in Brazil and in Spanish-speaking Countries, which accounted for 1.3 million of the additional passengers in the quarter.

In Brazil, the local regulator has begun to redistribute the slots that became available at different airports, which will enable LATAM Airlines Brazil to accelerate growth in the second half of 2019.

Passengers carried by the affiliates in domestic Spanish-speaking Countries operations continue to grow, while its consolidated RASK continues to show increases measured in local currency as a result of a healthy demand environment. LATAM Airlines Brazil domestic operations showed a strong RASK increase of 29.5% in local currency, which helped to offset RASK declines in international operations that continue to be affected by the impact of currency devaluations on international demand. As a result, consolidated RASK declined by 1.5% year-on-year, compared with a 12.3% decline in the first quarter of 2019.

During the quarter, LATAM made further advances as part of its commitment to providing an industry-leading customer experience. As planned, LATAM Airlines Brazil merged with Multiplus S.A. after completing the acquisition of 100% of its outstanding shares. In addition, LATAM Airlines Brazil received the first Boeing 777 with the Company's new cabin configuration, which is designed to offer an industry-leadingon-board experience with more options, flexibility and personalization, to better serve different passenger needs. With the gradual introduction of the new cabins across more than half of LATAM Airlines Group's global fleet, the Company will also increase system capacity by adding more seats per aircraft, thereby reducing costs per ASK.

LATAM's focus on customer experience was recognized once again by Skytrax World Airline Awards, where LATAM was named the 'Best Airline in South America', and was also distinguished for the 'Best Business Class', 'Best Business Class Lounge' and 'Best Economy Class' in South America. In addition, LATAM Airlines Group was the most punctual airline in the world in April and June 2019 (and second in May 2019), according to Flightstats' Global Airlines Performance ranking. These awards reflects the Company's ongoing commitment to improving its passengers' travel experience.

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MANAGEMENT DISCUSSION AND ANALYSIS OF SECOND QUARTER 2019 RESULTS

Total revenues in the second quarter 2019 totaled US$2,370.0 million, compared to US$2,357.4 million in second quarter 2018. The 0.5% increase was composed by a 3.2% increase in passenger revenues, offset by a 10.2% decrease in cargo revenues and 19.9% decrease in other revenues. Passenger and cargo revenues accounted for 85.2% and 11.4% of the total operating revenue of the quarter, respectively.

Passenger revenuesincreased 3.2% during the quarter as a result of a 4.8% increase in capacity, offset by a decrease of 1.5% in consolidated passenger unit revenue (RASK). The passenger RASK decline resulted from a 3.6% yield reduction together with a load factor increase of 1.8 p.p. Declines in RASK were explained mainly by the devaluation of currencies in the region and its effect on international passenger demand.

Revenues per ASK for LATAM's main passenger business units are shown in the table below:

					For the three month period ended June 30
		RASK		ASK				Load Factor
		(US cents)		(millions)
				% Change					% Change			% Change
	2Q19			(YoY)			2Q19			(YoY)			2Q19		(YoY)
Business Unit
Domestic SSC	6.5	-7.3%	6,038			16.4%		79.5%	-0,8pp
Domestic Brazil	6.7	18.7%*	9,115			1.3%		79.9%	2,7pp
International		5.4		-12.1%	19,683			3.3%		86.1%	2,2pp
Total
	5.8	-1.5%	34,836			4.8%		83.3%	1.8pp

• RASK in domestic Brazil increased 29.5% measured in BRL

Note: revenues include ticket revenue, breakage, ancillary, frequent flyer program revenues and other revenues

The domestic operations of LATAM Airlines Group's Spanish Speaking Country affiliates (SSC) -which include LATAM Airlines Chile, LATAM Airlines Peru, LATAM Airlines Argentina, LATAM Airlines Colombia and LATAM Airlines Ecuador- accounted for 19.1% of total passenger revenue in the quarter. Their consolidated capacity increased 16.4% year-over-year, mainly in Peru and Chile, while traffic measured in RPK rose 15.2%, resulting in a 0.8 percentage points decline in load factor to 79.5%. Revenue per ASK in USD decreased 7.3% in the quarter as a result of the depreciation of local currencies, especially the Argentinian and Colombian Peso.

In Brazil's domestic passenger operation - which represented 29.6% of total passenger revenues in the quarter - LATAM Airlines Brazil increased its domestic capacity by 1.3% year-over-year, while traffic measured in RPK increased 4.8% in the same period, thus consolidated load factor rose 2.7 percentage points to 79.9%. Revenues per ASK increased 18.7% year-over-year due to a lower comparison base due to the trucker's strike in the second quarter 2018 and continued recovery in domestic demand, partially offset by the devaluation of the Brazilian real, as in local currency revenues per ASK increased by 29.5% year-over-year.

International passenger operations accounted for 51.3% of total passenger revenues. Consolidated capacity increased 3.3% year-over-year in the quarter, while international traffic rose 6.0%. As a result, passenger load factor increased by 2.2 percentage points to 86.1%. Consolidated RASK declined 12.1%, mainly driven by lower demand from Argentina and capacity pressures in long haul routes from Brazil to Europe.

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Cargo revenuesdecreased by 10.2% in the quarter, reaching US$269.3 million, partially affected by the sale of our former Mexican subsidiary MasAir in the second half of 2018 that reduced our cargo revenues by approximately US$10 million. Excluding MasAir, cargo yield declined by 4.6% while load factor rose 1.3 percentage points to 55.8%. As a result, cargo revenues per ATK declined by 2.2% in comparison to the same quarter of the previous year. Import markets continued to show declines year-over-year, especially to Brazil and Argentina driven by weaker currencies and general economic uncertainty. On the other hand, export markets continue improving, especially salmon from Chile.

Other revenuestotaled US$81.0 million in the second quarter of 2019, US$20.1 million less compared to the same period of last year. This year-over-year decline is mainly due to revenues from sale & leaseback transactions recognized in second quarter 2018.

Total operating expensesin the second quarter amounted to US$2,329.8 million, a 1.1% increase compared to the same period of 2018 mainly due to the 4.8% increase in total capacity. As a result, cost per ASK declined by 3.5% and Cost per ASK excluding fuel costs declined by 5.2% in the same period. Changes in operating expenses were mainly explained by:

• Wages and benefits decreased 0.8%, explained by a 2.7% decline in the average headcount during the quarter, in line with the company's cost efficiency efforts.
• Fuel costs rose 5.2%, as a result of a 6.7% increase in fuel consumption. The latter was partially offset by a 4.3% decrease in the average fuel price per gallon (excluding hedge) as compared to the second quarter of 2018. In the second quarter 2019, the Company recognized a US$4.3 million loss related to hedging contracts.
• Commissions to agents decreased 2.6% mainly due to a decline of 2.9% in cargo traffic (RTK).
• Depreciation and amortization rose 4.2% due to 6 more aircraft on average in our fleet compared to the same period of 2018.
• Other rental and landing fees increased 2.7%, mainly due to higher passenger operations as well as higher costs related to ground handling operations.
• Passenger service expenses declined by 15.4% due to lower fixed costs associated with the outsourcing of catering services and lower rate of passenger contingencies during the quarter compared to the same period of 2018 due to the strikes in Chile and in Brazil last year.
• Maintenance expenses remained flat year-over-year, as the Company recognized similar redelivery costs in 2018 and in 2019, both years redelivering one aircraft.
• Other operating expenses decreased 5.2%, mainly due to a decline in costs related to the passenger service system, as the company unified the reservation platform across the entire airline group in the second quarter of last year.

Non-operating results

• Interest income decreased by US$6.4 million year-over-year to US$6.3 million in second quarter 2019, mainly due to a lower return on financial investments of Multiplus as a result of the devaluation of the Brazilian real.
• Interest expense increased 1.9% to US$141.8 million in the second quarter 2019, from US$139.2 million in the same period of 2018, mainly due to the issuance of US$600 million senior unsecured notes in February 2019.
• Under Other income (expense), the Company registered a US$28.1 million net gain, including a US$24.0 million in foreign exchange gain. This compares to the US$146.0 million net loss in other income (expense) in the second quarter of 2018, which included a foreign exchange loss of US$177.8 million.

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