LATAM Airlines Group S.A. American Depositary Shares (each representing two thousand (2,000) shares of Common Stock) 2026 Q2 Earnings Call

Thank you. Hello, everyone, and good morning. Welcome to our second quarter 2026 conference, and thank you all for joining us today. Here with me is Roberto Alvo, our CEO, Andrés del Valle, Corporate Finance Director, and Tori Creighton, Head of Investor Relations, and we will present the highlights and results for the second quarter 2026. I'll hand it over to Roberto to share his opening remarks.

Roberto. Good morning and thank you, Ricardo.

The second quarter of 2026 was an important demonstration of the resilience of LATAM Airlines Group's business model. During this period, the industry faced one of the sharpest increases in jet fuel prices in recent years, creating a significant cost headwind across the sector. As we estimated back in May, alongside our first-quarter publication, the impact of higher jet fuel prices was in excess of $700 million in the second quarter alone. Yet, despite this environment, LATAM delivered profitable results, reflecting an adjusted operating margin of 5.4%, which was also on the higher end of the estimate that we had made of mid to low single digits back then. These results are not explained by a single initiative. They are the outcome of a business that has been consistently strengthened over the last several years to perform across different environments.

Which starts with a dedicated effort to care for our customers, constantly improving their experience and making them willing to experience LATAM. In addition to this, a diversified business structure integrating our passenger, cargo, and LATAM Pass businesses, together with an effective commercial strategy, a competitive cost structure, a strong balance sheet, and above all, the commitment of more than 43,000 employees across the group, enable LATAM's agile response while maintaining a focus on profitability. Throughout the quarter, this ecosystem delivered exactly what it was designed to deliver. Customer preference remains strong across the network, particularly in the premium segment, which now accounts for 29% of the passenger revenues, allowing the group to partially offset higher fuel costs through deferred adjustments while preserving healthy demand. At the same time, cargo, loyalty, and other ancillary sources of revenue diversification reinforced the resilience of the model during a particularly challenging period.

Diversification only becomes an asset when it's supported by effective execution. LATAM has consistently demonstrated that capability. During the period, the group rapidly activated multiple commercial operation initiatives to mitigate the impact of higher fuel prices while continuing to invest in customer experience, operational reliability, and the long-term competitiveness of the business. Financial strength also remained a key enabler, particularly in such a volatile environment. A strong balance sheet and healthy liquidity over 26% of last 12 months revenues provided LATAM with the flexibility to navigate a period of heightened uncertainty without losing focus on its long-term strategy and value-creating objectives. As we enter the second half of 2026, the environment remains highly dynamic. The significant swings in jet fuel prices we have seen over the last few weeks are a clear reminder that volatility continues to be present.

The second quarter provided us with one of the most severe fuel crises the industry has experienced in recent years. We believe we have navigated it well. We don't expect that price volatility to decrease during the remainder of the current quarter. In this sense, we remain cautious, although this quarter also reinforced our confidence in the group's ability to navigate these challenging environments. As we now enter what is seasonally a stronger half of the year for the business, we do so with the confidence that comes from having demonstrated the resilience of our business model. LATAM Group has commercial and financial tools, operational flexibility, and most importantly, the people and the mindset to continue adapting effectively, navigating volatility, and creating long-term value.

Finally, regarding guidance, given the information we gathered during the past quarter and therefore better visibility, we are reinstating our full list of parameters. We have improved our outlook for the year. However, it is important to note that because of the high fuel price volatility, these numbers should not be only seen as our expectation, given the stated assumptions, but also as an understanding of the resilience of the model in the current environment. With that said, I'll hand it over to Ricardo to go over specifics of LATAM's performance during the quarter.

Thank you. Thank you, Roberto.

Please join me on slide four to have a look at our overall results. As Roberto just explained, the second quarter was defined by an unprecedented increase in jet fuel prices. During the quarter, the all-in average fuel price, including hedges, increased by more than 80% year-over-year, resulting in a 93% increase in total fuel costs and creating one of the most significant cost headwinds the industry has faced in recent years. In response, LATAM rapidly implemented revenue management actions and targeted capacity adjustments. With these, total revenues increased almost 28% year-over-year, reaching nearly $4.2 billion. This was propelled by passenger revenues, which grew 28%, reflecting the consistent capacity growth together with their successful implementation of continued fare adjustments, while preserving resilient demand across the network.

Cargo revenues increased almost 22%, benefiting from both higher yields and continued growth in tons transported, which demonstrate the flexibility of this business to adjust pricing given its significantly shorter booking cycle. On the cost side, adjusted costs, excluding fuel, increased by 14%, broadly in line with the continued growth of the operation. It is worth noting that part of this increase reflect costs that are directly linked to higher passenger fares, together with the appreciation of local currencies, particularly the Brazilian Real, which pressures the dollar-denominated cost base. Just as a reference, the Brazilian reference in Q2 2025 was 5.6, and now was 5.05. That said, passenger CASK ex-fuel remaining sequentially in line at $0.045.

Despite this unprecedented fuel environment and while growing capacity by 8.9% at a healthy 82% consolidated load factor level, LATAM remained profitable and delivered an adjusted operating margin, as Roberto mentioned, at 5.4% during what is seasonally the weakest quarter of the year. This translated all the way to the bottom line, with the group generating a positive net income of $125 million. These results demonstrate that while the fuel shock had a significant impact on costs, the combination of effective execution, commercial flexibility, and the resilience of LATAM's diversified business model allowed the group to increase unit revenues this quarter, successfully mitigating a substantial portion of that impact. Let us now take a closer look at the commercial execution behind these results on the next slide number five.

During the quarter, LATAM Group continued executing its profitable growth strategy, increasing consolidated capacity by 8.9% year-over-year, alongside some targeted capacity adjustments to mitigate the impact of higher fuel prices. These actions were selective, allowing LATAM to preserve profitability without compromising the strength, connectivity, or integrity of its overall network. Importantly, demand for LATAM Group remained resilient across all markets, even under a high fare environment. Consolidated load factors declined modestly from 83.5% to 81.8%, remaining at healthy levels across all markets where the group's affiliates operate during the quarter. It is worth mentioning that, particularly in June, there was a higher impact on demand, reflecting the temporary impact of the FIFA World Cup on travel patterns across South America.