November 10, 2016 / 10:12 PM / in 2 years

LATAM Airlines reports slim profit in third quarter

SANTIAGO, Nov 10 (Reuters) - LATAM Airlines , Latin America’s largest carrier, reported earnings of $5 million in the third quarter on Thursday, citing improving conditions in its key Brazil market as it swung from a loss a year ago.

The $5 million net profit for the July-to-September quarter compared with a loss of $113 million for the same period in 2015, but undershot market forecasts for a profit of $39 million.

Its operating margin was 6.0 percent in the quarter, it said, within its guidance range. It narrowed its forecast range for its 2016 margin to between 5.5 and 6.5 percent.

Since its formation in a merger between Chile’s LAN and Brazil’s TAM in 2012, LATAM has struggled to meet investors’ expectations, repeatedly reporting losses as the region’s economic growth slowed and currencies weakened.

However, its shares have jumped about 70 percent this year on growing hopes that the worst of Brazil’s recession is over and that cost-cutting and capacity reductions will start to bear fruit.

The airline has slashed the number of flights it runs within and to Brazil in the last couple of years, particularly between Brazil and the United States.

Demand is now improving and revenues stabilizing, said investor relations director Gisela Escobar, boosted by an appreciation in the Brazilian real currency as well as the capacity cuts.

As it seeks to look for new ways to monetize its routes and encourage Latin America’s growing middle class to switch from buses to planes, LATAM has followed airlines in other regions in switching to lower tariffs and paid-for extras on domestic routes, it announced this week. (Reporting by Rosalba O’Brien; Editing by Jonathan Oatis)

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