Lan's Cost Controls Boost - Analyst Blog

Recently, LAN Airlines S.A. (LFL), one of Latin America's leading passenger and cargo airlines reported results for the fourth quarter and full year 2009. During the quarter, Lan reported a net income of $109.8 million, down 17.6% from the year-ago quarter. EPS was $0.32 compared to $0.28 in the fourth quarter of 2008. It was also above the Zacks Consensus Estimate of $0.22. The increase in EPS was driven by strict cost control initiatives taken by Lan as well the decrease in fuel cost compared to 2008 levels. 

Net income was $231.1 or $0.68 in 2009, down from $427.8 million or $0.99 in 2008. However, the reported EPS was well above the Zacks Consensus Estimate of $0.57. 

Total revenues for the fourth quarter of 2009 reached $1,070.7 million compared to $1,114.9 million in the fourth quarter of 2008 due to a 1.6% decrease in passenger revenues and a 10.7% decrease in cargo revenues. Full year 2009 total revenues were $3,655.5 million down from $4,283.2 million in 2008. This was due to the 7.0% decrease in passenger revenues and 32.1% decline in cargo revenues. 

Full year 2009 operating margin for LAN reached 11.9%, a decrease of 2.6 basis points compared to 14.5% achieved in 2008. Operating income was $435.7 million in 2009, a 29.7% decrease compared to operating income of $619.8 million in 2008. During the quarter, operating income was $190.3 million, a 10.9% decrease compared to $213.7 million in the fourth quarter of 2008. Operating margin reached 17.8% versus 19.2% in the same period of 2008. 

In December 2009, Lan ordered 30 new Airbus A320 aircraft for the company's regional and domestic passenger operations (including domestic operations of its affiliates), to be delivered between 2011 and 2016. In addition to this purchase, Lan's strategic fleet renewal plan involves the sale of five Airbus A318 aircraft in 2011. Continuing with the expansion and renewal of its fleet, during the fourth quarter of 2009, Lan has received two new Boeing 767-300 passenger aircraft. 

During the quarter, Lan signed an agreement with Sabre, one of the airline industry's major operational systems solution’s providers globally, to upgrade and incorporate the most advanced technology in the company's reservations and distribution system, itinerary optimization and operations planning. The implementation process for the new systems platforms includes an adjustment and migration period of two to three years.
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