Some Lessons for Indian Air Carrier Companies

LAN Airlines Reports Net Income of US$122.1 Million for the Third Quarter of 2008
Oct. 28, 2008,4:48 p.m EDT
SANTIAGO, Chile (BUSINESS WIRE)
LAN Airlines S.A , one of Latin America's leading passenger and cargo airlines, announced today its consolidated financial results for the third quarter ended September 30, 2008. "LAN" 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 generally accepted accounting principles in Chile and are expressed in U.S Dollars.

HIGHLIGHTS

-- LAN reported net income of US$122.1 million for the third quarter 2008, excluding extraordinary items. This represents a 55.0% increase compared to net income of US$78.8 million in the third quarter 2007. Including these extraordinary items, LAN reported net income of US$80.4 million.

-- Third quarter results include a non-operating provision of US$50 million in relation to the ongoing US and European global investigations of a large number of international cargo airlines, among them LAN Cargo S.A., LAN's cargo subsidiary, into possible price fixing of fuel surcharges and other fees in the European and United States air cargo markets.

-- The Company reported operating income of US$135.8 million for the third quarter 2008 compared to US$98.7 million for the third quarter 2007, maintaining a flat operating margin for the quarter at 11.3%. This result was in spite of higher fuel prices, which resulted in US$168.7 million in additional fuel costs during the quarter.

-- Total revenues for the third quarter 2008 reached US$1,204.6 million compared to US$874.6 million in the third quarter 2007, due to a 36.1% increase in passenger revenues and a 51.4% increase in cargo revenues. Passenger and cargo revenues accounted for 63% and 34% of total revenues, respectively during the third quarter 2008.

-- For the first nine months of 2008, the Company reported net income of US$260.4 million, excluding extraordinary items. This represents a 25.5% increase compared to net income of US$207.5 million in the same period in 2007. Including these extraordinary items, LAN reported net income of US$218.6 million.

-- Continuing with the expansion and renewal of its fleet, LAN received one new Boeing 767-300 passenger aircraft, three new Airbus A318 passenger aircraft and one new Airbus A320 passenger aircraft during the third quarter 2008.

-- LAN maintains a solid financial position, as reflected by its BBB international credit rating (Fitch). LAN has no short term debt and all its long term debt is aircraft related. As of September 30, 2008, only 8% of debt is maturing in the short term and the Company has a ratio of 2.4 times net debt / EBITDA for the last twelve months. LAN ended the quarter with US$492 million in cash, cash equivalents and committed credit lines, representing 11.2% of revenues for the last twelve months. The Company has limited exposure to foreign exchange rate fluctuations since approximately 84% of revenues are US dollar denominated.

-- On September 2, 2008 LAN launched its service to Toronto, Canada, which is served as an extension of the Santiago-New York City direct flight with five weekly frequencies.

-- On September 15, 2008 LAN launched its new Premium Economy class on board its new Airbus A320 fleet. This is an especially designed product option for passengers who travel short distances for business within the region, offering more cabin room and greater comfort in a cabin designed for 12 passengers. This roll-out of Premium Economy makes LAN the first company in South America to offer this service to passengers who travel for business on regional flights lasting less than 5 hours.

-- During the quarter, LAN continued to receive international recognition. In August 2008, the Company was again named best airline in South America at the World Airline Awards, based on a global survey of passengers carried out annually by SkyTrax.

LAN Airlines is one of the leading passenger airlines in Latin America. The company serves more than 60 destinations around the world through an extensive network that offers full connectivity within Latin America while also linking the region with North America, Europe and the South Pacific, as well as 58 additional international destinations through its various code-share agreements. LAN Airlines and its affiliates have a leading position in their respective domestic markets of Chile and Peru as well as an important presence in the Argentinean domestic market.

Currently, LAN Airlines operates one of the most modern fleets in the world, with 75 passenger aircraft and its cargo affiliate, LAN CARGO, operates 9 dedicated freighters. The company recently completed its short haul fleet renovation process by acquiring new aircraft from the Airbus A320 family, enabling LAN to improve its efficiency and to reduce significantly its CO2 emissions. The fleet renovation is part of the company's commitment to the protection of the environment.

LAN is one of the few Investment Grade airlines in the world (BBB). The company's world class quality standards enabled its membership in oneworld(TM), the global alliance that encompasses the best airlines in the world.


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