LATAM Airlines turns profit as margins improve


By Rosalba O'Brien

SANTIAGO, Nov 11 (Reuters) - LATAM Airlines swung to a net profit for the third quarter and improved itsoperating margin in a sign the region's biggest airline,battered by weakness in its Brazilian market, has started toturn the corner.

The company - which formed in mid-2012 when Chile's flagshipLAN took over Brazil's TAM - reported a net profit of $52million for the three months to September, in line withforecasts in a Reuters poll for a $47 million profit.

For the same period a year ago, LATAM posted a $49 millionloss, according to the company's revised figures.

The airline's operating margin for the quarter was 7.6percent, compared with 3.2 percent a year ago, as it saved moneyon wages, fuel and other costs.

LAN, LATAM's Chilean arm, is keen to get back to the days ofdouble digit margins it enjoyed before the merger, when it was aconsidered a model of efficiency by the market.

LATAM as a whole has targeted an operating margin of between4 and 6 percent for the full year 2013, and in the statementwith Monday's results said it now expected about 5 percent.

Revenues for the quarter were $3.36 billion, up slightlyfrom $3.34 billion a year ago.

"We are very happy with the process of integration, synergyand efficency initiatives (and) the significant improvement inour Brazilian operations," it said.

The airline's Brazilian unit, TAM, has been slicing jobs andflights trying to make operations in the country more efficientas it struggles with a weakening economy and real currency.

Load factor - a measure of how full planes are - rose 3.6percentage points in the quarter to 81.6 percent at itsBrazilian domestic business, which makes up over one-third ofthe group's total passenger operations.

The company also said TAM's exposure to the real had beencut nearly in half from a year ago to $2.1 billion and that itexpected to eliminate it entirely by June 2014, as it increasedits U.S. dollar income and covered itself through forwardcontracts.

About half of the value of the company was wiped out betweenthe merger and its last quarterly results in August, when itannounced a wider than expected loss.

However, since then, there has been a shift in sentiment andits Santiago-listed shares have risen around 30 percent.

Of 15 analysts who cover the U.S-listed ADR stock, two havea 'sell' stance, according to Reuters estimates.

The stock is richly valued compared to peers, though, with a12-month price earnings forward ratio of 21.0, compared to 13.2for Panama's Copa and 12.1 for Mexico's AeroMex.

LATAM is due to hold a conference call with analysts onTuesday.

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