LATAM Airlines Group SA (LTM) 2023 Q4 法說會逐字稿

Good day, and thank you for standing by. Welcome to the fourth quarter 2023 LATAM Airlines Group earnings conference call. (Operator instructions) Before I turn the call over to management, I'd like to remind you that certain statements on this presentation and during the Q&A may relate to future events and expectations and as such, constitute forward-looking statements.

Any matters discussed today that are not historical facts, particularly comments regarding the company's future plans or objectives. Our expected performance or guidance are forward-looking statements. These statements are based on a range of assumptions that LATAM believes are reasonable, but are subject to uncertainties and risks there are discussed in detail in our CMS and SEC filings.

The company's actual results may differ significantly from those projected or suggested and any forward-looking statements due to a variety of factors which are discussed in details in our SEC filings. And if there are any members of the press on the call, please note that for the media, this is a listen-only call.

I would like to pass the call over to Ramiro Alfonsin, CFO of LATAM Airlines.

Thank you, Carmen, and hello, everyone, and good morning. Welcome to our fourth quarter and full year 2023 conference call. And thank you for joining us today. My name is Ramiro Alfonsin, and I'm the CFO of LATAM Airlines Group. Here with me today is Mr. Roberto Alvo, CEO of LATAM Airlines Group and Andres del Valle, VP of Corporate Finance and Tori Creighton, Head of Investor Relations. And we will present our highlights and results for the fourth quarter and full year 2023.

I'd like to pass the presentation to Roberto, to set the stage of our fourth quarter and annual results.

Thank you, Ramiro, and good morning to everyone. We are down to very proud of the 2023 years achievements. After devastating pandemic and a lot of restructuring LATAM Group has emerged stronger than ever. This difficult period allowed us to rethink our purpose and our priorities. We decided to build upon the progress of the work of the last 25 years and devote our energies and efforts to taking care of our people, our customers and our environment supporting the societies where we operate.

It's people is that and group, most important asset and caring for them is our main priority. In 2023, the group achieved the highest ever of Essential Health Index score in history with 78 points. It is a result of the efforts of the group, making a more just empathetic, transparent and simple environment for the teams and providing a sense of purpose in our everyday work. Every day, we strive to make traveling within that group of more distinctive experience and it's the staff, each one of them who make this possible.

Last year, the group also attain its best net promoter score, which is a measure of customer satisfaction in its history, reaching 48 points for all travelers, 55 points for our high value customer and 58 point wins for our current customers. LATAM value proposition is based around three main pillars. Providing choice as no one else can do in the region being the most dependable earnings group and caring for the passengers and cargo customers through the entire experience.

The results of this work meant that LATAM group was recognized again and for the fourth year in a row as the best airline in South America by Skytrax Awards and attain the second highest on-time performance for our agents in the world and the best in Latin America according to OAG.

In 2021, the group committed to eliminating single-use plastics from the operations and started a long process in reducing emissions to meet our commitment of carbon neutrality by the year 2050. At the end of the year, the group achieved 96% of single-use plastics elimination and compensated more than 1.7 million tons of CO2 through [CO to BO], a project we developed together with 700 families, and that protects more than 150,000 acres in the wet lands of northeast of Poland.

That work was started to run, the next started that's used work was started around the next study, which is to substantially eliminate our waste to landfill by 2027. After emerging from the pandemic, that FM group network is stronger. It's hard to obtain scale, and the list of destinations is larger and more diverse. Affiliates of the group has the highest market share in three of the five respective domestic countries where they operate, and they are strong second in Europe to approximately 40% of the passengers that fly within South America do so with one or more of our affiliates.

It is also the carrier with the highest market share between South America and Australia, Mexico and together with the partnership with Delta, the largest operator between South America and the US and Canada. In cargo LATAM is also the largest certain regional group between South America and North America. Today LATAM without a doubt the only one-stop group of airlines in the region.

All this work has allowed us to boast, as you will see in a minute, remarkable financial results. The group's 2023 financial numbers highlight the strength and resilience that it has built and laid the foundation for future where the group can continue improving its operations and make it even more meaningful place to work even better, more carriers and more dependable experience for our passengers of current customers and the group that continues to caring for the environment contributing for the development of the people in South America and therefore delivering consistent and strong results.

Let me take you to slide number three. Financial and operational strength March 23, 2023, if you wish let them group continued to grow regionally and global. Consequently, it achieved unprecedented results. Our performance, our projected data for 2023 and exceeding the expectations set in its updated business plan publishing in others 2022.

In terms of financial performance that has delivered remarkable results. In 2023, we have achieved total revenues of $11.8 billion from posting a consolidated double digit adjusted operating margin of 11.3% for the full year, net income of $582 million, the highest result achieved by LATAM group excluding 2020 results, which had a positive, as nonoperating impacts of the net income from the Chapter 11 restructuring exit. It is worth noting that as per today or not, the fund must pay out at least 30% of their income in dividends, subject to shareholder approval.

Regarding LATAM's, balance sheet strength, it is noteworthy that the company consistently improved standards. In this sense, it is with great satisfaction that we announce an unprecedented end of year adjusted leverage ratio of 2.1 times. Furthermore, due to our resilient financial position and ability to generate cash, we have sustained a strong liquidity position, reaching $2.8 billion as of December 31, 2023 representing 23.9% of our net profit number. In addition, we reported a competitive full year adjusted passenger CASK ex fuel $0.043, reflecting LATAM Group's initiatives to maintain costs.

Turning our attention to the Funds Group operational results. Consolidated capacity measured in ASKs increased by 20.6% compared to full year 2022, in line with our 2023 guidance. And as a group, we transported 74 million passengers, reaching similar levels to pre-pandemic. Strong demand demonstrates the enduring trust and confidence that passengers have in that time of service.

On the other hand, during 2023, the operation was also boosted by the delivery of 30 aircraft, including 5 body and 25 narrow-body aircraft. That have in group close 2023 with a fleet of 333 aircraft and with one of the most efficient fleet cost global in the year total fleet cash cost was $796 million.

In 2023, LATAM Group network continued to expand as the group proudly launched 21 routes, 17 International for domestic, including four routes implemented within the context of the joint venture with Intel. As I mentioned before, the group's domestic affiliates are leaders in three of the five domestic markets where they operate LATAM Airlines Chile, LATAM Airlines Brazil, LATAM Airlines Peru.

On the other hand, LATAM Airlines Colombia increases market share by quickly allocating resources to the Colombian market. And this is clear, a clear demonstration of our operation as agility and financial flexibility.

On the other hand, our frequent flyer program, baton pass, which is a strategic asset and a core source of value that differentiates us from other carriers and also a key element for marketing and agency strategy. At December as of December 31, of last year that LATAM had approximately 45 million members, representing an increase of 7.1% compared to 2022, which reinforces customer preference for LATAM group, mainly driven by premium prices.

The above are reflections of LATAM's Group consistent financial strength as a resource in November LATAM was included in the MSCI emerging markets, Latin American Index and this is a testament to market investor trust and LATAM Group and its ability to maintain our solid financial performance even in a challenging environment. LATAM group was previously included in other important indexes during the year, in particular, the IPSA in March 2023 and the FTSD, in September 2023.

Finally, on December 14, 2023, we published our 2024 guidance, which contained financial or operational projections for this year type of thing, what would be recognized. We trusted the strategies and plan that we have in place will keep us on this path, and we look forward to sharing our progress with you as we navigate the opportunities and challenges of the year.

Thank you. And with that, I'll turn it back to Ramiro, continuing with the presentation.

Thank you, Robert. This year marks a solid 2023 from LATAM we top to bottom line positive results. During 2023, we posted revenues of $11.8 billion, almost 24% more than 2022 and achieve our historic annual adjusted operating margin of 11.3%.

Notably, our adjusted EBITDA stood at $2.5 billion as of December 31, almost doubling 2022's adjusted EBITDA. We have outperformed both our 2023 guidance and our business plan by far. Additionally, our net income set new records in LATAM's history, achieving a total of $532 million, which clearly differentiates LATAM from other companies.

Please join me on slide 5. In the fourth quarter of 2023, we noted $3.2 billion in revenues, 18% more than the same quarter of 2022. Our adjusted operating margin increased 2.8-percentage-points compared to the same quarter of 2022, reaching 10.8%. LATAM's Group quarterly adjusted EBITDA amounted to $675 million, reflecting a 30% improvement compared to the fourth quarter of 2022.

This figure is a testament to the company's value proposition, sustained financial stability and growth As evidenced by nine successive quarters of positive adjusted EBITDA, underscoring the group's robust performance and ongoing expansion.

Let's take a look at LATAM's competitive position on Slide 6. In 2023, LATAM's Group grew regionally and globally, thanks to lower cost network expansion and customer preference. As of December 2023, LATAM Group successfully operated a total of 148 passenger destinations across 26 countries. LATAM Airlines Chile, LATAM Airlines Brazil and LATAM Airlines Peru not only have maintained the highest market share in the domestic market, but also have increased it by 2-percentage-points each.

On the other hand, LATAM Airlines Colombia, has increased its market share from 24% as of the fourth quarter 2022 to 33% as of the fourth quarter 2023, quickly allocating additional aircraft to accommodate capacity demand in the market. This is a clear demonstration of the group's agility and financial flexibility.

Turning to the next slide, as the largest airline passenger airline group in South America. We are proud to connect our region with the world to a unique and expansive network. The Group has continued to be number one in international market share of 42% within the region and also maintained its market shares from South America to the rest of the world.

LATAM group hand-in-hand with Delta has been able to steadily increase its capacity share, adding new routes and expanding its connectivity capabilities within the scope of the joint venture agreement we end with the addition of six new routes.

Please join me on slide 8. The results that I just mentioned are a true reflection of the trust and confidence our faced passengers placing LATAM Group. This year we were honored to have been awarded the Best Airline in South America, best staff, best main cabin and best business class in South America by Skytrax.

Additionally, we have been recognized as a five star global airline with the best seat comfort and the best onboard service by Apex. And that's the top performing airline in terms of sustainability in Latin America as well as the seven globally according to recent Corporate Sustainability Assessment by Standard & Poor's.

LATAM Group, expansive network remains unparalleled in the industry. Additionally, the group has fostered ongoing passenger commercial agreements with 57 airlines and co-share agreements with 27 airlines, further enhancing the group's network and customer options. Passenger loyalty is strengthened through the frequent flyer program, which now boasts over 45 million members making it approximately the seventh largest in the world.

LATAM is also proud to announce that it was recognized as the best program of the year by the frequent traveler awards in 2023. LATAM continues to grow, we transported approximately 74 million passengers during 2023, representing an 18% increase compared to 2022 and reaching pre-pandemic levels with a particular contribution from the international segment that continues to recover with an impressive 50% more passengers in 2022.

In terms of capacity measured in ASKs, LATAM registered a significant 20% growth throughout the year. In line with the updated guidance published last August. Additionally, the Group ended the year with a fleet of 333 aircraft, representing an increase of 23 aircraft compared to the previous year. This growth demonstrates the customer preference as well as the effectiveness of our cost structure and a healthy capital structure.

In terms of operational performance, the group reported a consolidated passenger load factor of over 82% for 2023, which is 1.8-percentage-points higher than the previous year. Consolidated revenue per ASKs increased almost 11% in a context marked by passenger demand and an attractive value proposition anchored in a unique network.

Turning to Slide 10. In the fourth quarter, the adjusted EBIT margin was 10.8%, contributing to a full year EBIT margin of 11.3%, which represents a record figure of $1.3 billion. This was made possible by our unique value proposition and continually Australia is striving for cost efficient. These cost efficiencies are in large part based on our strategic fleet negotiations carried out during Chapter 11 proceedings in favorable market conditions.

Revenues increased 24% for the full year, reaching an amount of $11.8 billion, driven by the ongoing recovery of operations. Cargo revenues decreased 13% during Q4, primarily due to certain cargo yields. It is worth mentioning that the cargo yields still remain significantly higher than pre-pandemic with a 17% increase compared to 2019 levels.

In terms of adjusted operating expenses, there was an almost 15% increase during the quarter compared to 2022. This growth can be mainly attributed to an almost 15% increase in operations one measured by ASKs. LATAM managed to maintain is cost per CASK ex-fuel in line with the previous year. LATAM reported a net income of $582 million for the full year.

If we move to slide 11, you can see that LATAM group has a well-diversified revenue structure. During 2023, the group passenger business amounted to 87% of total revenues, of which 46% stems from the international operations, 35% from the domestic airlines Brazil and 19% from domestic Spanish-speaking countries operated by other (inaudible)

All these market segments experienced significant growth in the year, driven by strong demand particularly in international operations. This diversified revenue streams serves as a key differentiating factor within the industry, providing operational flexibility to adapt to changes in market demand.

In the next slide, LATAM Group have a solid cash generation. This is a differentiating factor within the Americas. LATAM is generating cash after investments after growth after interest payments and without issuing any financial debt, we determined once again, a solid position, not only regionally, but also globally.

The group generated cash amounting to almost $500 million this year, a figure that enhanced LATAM's liquidity position. Highlighting LATAM's growth investments throughout the year, LATAM allocated almost $500 million for various purposes, with the strategic investments primarily directed towards cabin retrofits, converting passenger aircraft into freighters and then acquire new fleet.

Once again, we are pleased to report improvements in our capital structure, noting quarter over quarter progress in liquidity and leverage. One is positioning the group in an excellent competitive position. LATAM growth presented a $2.8 billion of liquidity this quarter, representing 24% of liquidity as a percentage of last 12 months revenues, which is above our internal target of maintaining a minimum of 20%.

In terms of adjusted net leverage, the group made significant improvements, reducing it from 4 times to 2.1 times. With that said, as shown in the published 2024 guidance, LATAM expects its adjusted net debt to be below two times for the current year. The current capital structure is unparalleled in the Americas, particularly in post-pandemic times.

On a related note with regard to the company's liability management is one of the central priorities for 2024. LATAM holds two senior secured notes and the five year term loan B for $1.1 billion. Which were all offer that's part of the exit financing process from Chapter 11 proceedings.

I hope from this LATAM maintains Insperity and facility that was initially issued in 2014. Taking into account the time line for debt repayment this year brings opportunities as prepayment options at par for both the Spanish facility and the term loan B will become available as of November 24.

Please join me on slide 14. In 2023, LATAM Airlines Group successfully closed the year with a fleet of 333 aircraft. During the year, LATAM group received a total of 30 aircraft, further strengthening its operational capacity. These are the additions included 10 A320Ceo, 8 A320Neo, 7 A321Neo and 5 Boeing 787s.

In addition to this, LATAM Airlines Group was able to complete its retrofitting plan on its entire narrow-body fleet, ensuring all planes are updated and if we use the latest figures and cabin segmentation.

Let's move forward to slide 15, where we can review our guidance for 2024. As indicated LATAM expect to continue solidifying its capacity growth with a 12% to 14% increase in ASKs compared to 2023, primarily propelled by the recovery of the international sector, which is expected to grow up to 18%.

In terms of LATAM operating results, the projected revenues to range between $12.4 billion and $12.8 billion. Furthermore, the group expects to achieve once again at double digit EBIT margin between 10.5% and 12.5%.

Regarding our cost structure. The group has consistently implemented measures to enhance efficiency and drive cost optimization. LATAM Group expects to maintain a passenger cost per ASK in line with the second half of this past 2023 year between 4.3% and 4.5%. LATAM foresees for 2024, a solid financial performance, supported by our liquidity position above 20% over the last 12 months revenues as well as a decrease, as I mentioned, in its adjusted net debt leverage below two times.

Last, but not certainly not least, it is important to mention that in 2023, LATAM leads the South American region in sustainability performance according to the latest Corporate Sustainability Assessment from Standard & Poor's. We are very proud of this recognition, which is a reflection of the firm's commitment to sustainability and the three pillars of our long-term strategy focused on climate change, circular economy and shared value.

In each of these aspects. We have had improvements during the year and in particular, I can highlight that by the end of the year, we reached 90% reduction of single-use plastics in the group's operations.

As we conclude our presentation, let's recap on the achievements of that group in 2023. LATAM group has important scale. The group has transported close to 74 million passengers, a number that equals to pre-pandemic era and increased market share in every market it operates showcasing the trust and confidence that our customers have been that.

It has been without a doubt a year of growth. Our full year revenues reached $11.8 billion, year over year growth of 24% propelled by LATAM you need network and value proposition. LATAM Group has improved its operational efficiency and elevated the overall travel experience for customers by investing in the latest generation of aircraft and integrating a net of 23 aircraft throughout 2023.

Our financial health is robust with an adjusted operating margin of 11.3%, all while effectively managing our costs.

The strength of our balance sheet and capital structure is evident. With an operating cash generation of $2.3 billion and the bottom line, cash generation of $500 million in 2023, culminating in a total liquidity of $2.8 billion and an adjusted leverage of just 2.1 times net debt to adjusted EBITDA. These figures show consistent delivery and not only exceed our 2022 [guidance], but also I would change the projections from our business plan.

Our net income for the year stands at $582 million, the highest in the LATAM Group's history, which serves as a statement to our commitment in generating shareholder value and returns. 2023 was a remarkable year, delivering outstanding operational and financial results. LATAM will continue its successful path and meet the published guidance for the year ahead just like we did in 2023.

Thank you for your attention and trust, and let's turn it over to Q and A.

(Operator instructions)

Guilherme Mendes, JPMorgan.

Morning. Roberto, Ramiro, Andres del Valle. Thanks for taking my question. I have two actually the first one is regarding the competitive environment, if you can comment how you see competition going forward, especially in Brazil, given the golden Chapter 11 process and also in Colombia, where you clearly have been gaining market share and it should still be the trend going forward.

Second question regarding capital allocation. Congrats on generating cash in 2023. And then looking forward, can we start to think about a regular dividend policy or something on that front? Thank you.

Hi, so I'll take the markets coming on the new capital structure. Hi Guilherme, nice to hearing from you thanks for being here. I think that 20, as we see 2020 for, you know, we were expecting to grow double digits. And most of our in total and most of the markets where we operate, we see in general a stable and healthy level of demand.

And with respect to the competitive environment, what we've seen in terms of announcements of other carriers in the region are also stable competitive environment in general in Brazil, we see, that we are going to have the opportunity, I believe, to increase our market share and reinforce the network we have operating domestically and we will certainly increase over time double digit growth in international level versus total.

Our Brazilian operation will grow double digits if you consider both domestic and international, we see a little bit of a higher capacity pressure on the Pacific side, particularly in Chile and in Peru. But we don't expect that doesn't create significant changes with respect to our position and our markets that we're very confident with respect to what we have built in terms of the strength of our network and so we don't have a particular concern.

Colombia we would going to do so 33% market share. And we see that as a stable number throughout the remainder of the year for the timing.

On the capital rotation and regular dividends for the year met under tale law, we are obliged to distribute at least 30% of our net income to our shareholders, always subject to shareholder approval. But that's a regulation in Chile. It has been consistent pre pandemic in that sense, and I expect it to continue going forward.

Thank you.

[Savi Syth], Raymond James.

Hey, good morning, I was just wondering on the passenger unit cost, if you could talk a little bit about it looks like you're thinking flat to up. I was wondering if you can think of talk about like what the drivers are kind of headwinds and tailwinds on the passenger units of costs there?

And and then also just on the fleet side, are you expecting kind of a balanced mix between the A320's and A321's? Or will you start to see maybe more up gauging?

Thank you, Savi, this is Roberto. On the A321, 20, majorly when you look at our order book with Airbus, it's more linked to 321Neo and we already started receiving does, and it's more biased toward that tightness in aircraft we like for our operations and Casper Sky is a very attractive aircraft. And I would like to highlight the deliveries of for 2024 the first half of [2020] have been confirmed.

So the lift that we're expecting for '24 and the next two years, '25 and '26 is pretty much confirmed. On the cost pressures we're basically seeing inflation and certainly currency fluctuations has an impact. We have been very effective on the implementation of all the initiatives that we laid out when we were on the Chapter 11, we have been very vocal on those savings and those initiatives were implemented with successful results.

And we have to develop that muscle that we believe is going to be there also in 2024. So we're offsetting a little bit the inflation and the currency fluctuations and are very much convinced that we're going to be able to maintain our cost per ASK in line with the second half of 2023.

No, it's definitely impressive performance there and if I may take a step back on your margin, that's a really strong margin guide as well as curious if you could talk about maybe how much of that is driven by maybe a good industry supply demand dynamic versus perhaps some structural changes versus where you were kind of prior to the pandemic and may be a lifetime or the industry's faced kind of structural changes that are driving margins higher?

Let me start with that. We certainly are seeing a different industry in Latin America than pre-pandemic. We have seen certain operators that are no longer operating in certain markets, there was a little bit of consolidation.

So the competitive environment is this different and therefore a little bit more stable and relatively more balanced on the offer demand. When we look forward down to the next two years, we're certainly are seeing capacity being impacted by the supply chain issues and engine manufacturers issues and we see a balanced demand supply, but I'll turn it over to Robert to complement.

Thanks Ramiro, I think I mean, when you put the word structural there in the question. I think that's the right angle of this question, which is what has really changed. And I think that if you see our position today, we have absolute strength and relative strength, absolute strength, clearly stemming from the number that we've seen, our cost position, our balance sheet, our position in the market is clearly unparalleled today.

Nobody in the region can claim that they have a network like the one we have today and this is by far, but also relative positions. Today our cost structure, financial structure allows us to think about we know this cycle in a very different way. LATAM can take opportunities going forward on a positive environment, but I'm can take opportunities going forward if the environment is less strong or you can see, for example, in our Middle Eastern issues on a higher fuel price.

Today LATAM doesn't need necessarily to this is a path, we can take advantage of that relative position as well. So and that is a very deep structural change today. We are the owners of our own destiny in the region, very few harnessing the world, ABB and claim that today and that, I think, puts the TAM in a very, very different way in a very different place than before the pandemic.

Our margins are 4% higher than 2019, and this is despite a much higher fuel price and a significant devaluation of the real plus at three before pandemic at the vessel was probably 20% or 30% below today. So even with those headwinds, macroeconomic headwinds, we've been able to improve, our results vary significantly.

So we're very proud of what we've done. And as we see the next month and we see a good booking curve going forward, we believe that we have we have navigated this for five years and change that bridge would not have (inaudible)

That's all very helpful. Thank you.

Neil Glynn, AIR Control Tower.

Good morning, everybody. And if I could ask three questions, please. And the first one following on from your comments on being able to act strategically, there's obviously been plenty of reports and commentary from yourselves on appetite for gold Boeing 737s. What can you say about the mechanics of how you might procure additional aircraft beyond your current fleet plan over the next few months.

Then tied to that, I think I understand that you're not guiding on cash costs for 2024 possibly because of some uncertainty. But can you help us understand, based on the current fleet plan, how much higher cash fleet costs are likely to be in 2024 than 2023 at this point.

And then a final question on the cargo side. Your cargo load factors were back to 53% in the fourth quarter. And as you continue to grow cargo capacity with belly space. I'm interested in what you think is the right long-term load factor on expanded cargo capacity. If you look back to the first half of the last cycle, you got nearer to 60%. So interested to see your views on whether you can better fill that belly space over time. Thank you.

So I'll take the first and the third question and then Ramiro to tackle the second one. So I mean, this I think it was important to show on that slide in the presentation that we grew our fleet by 30 aircraft and we procured 10 fuels, which were not orders of Airbus. And we've been constantly looking in the market for incremental capacity. We are aware of the Pratt & Whitney engine situation and at the same time on how this has evolved.

But fortunately, I think it looks more challenging for four carriers going forward. And we have been very active in the market looking for aircraft all of those and what we're hearing today in the market is no different up certainly from what we have done and said throughout the last months, we should have a big RFP earlier last year with respect to our (inaudible), we continue seeing that and therefore, I don't think this should be a surprise at all. And as we see a positive demand environment, we're always looking at opportunities to expand further. And this is one of the beauties of our balance sheet.

With respect to the fleet, we are agnostic with respect to aircraft operators as long as they serve the purpose for LATAM. We are A320 narrow-body operator, but we have operated 737s in the past as well and we have a mixed fleet as we've seen the white book.

So we're scanning the market all the time. And if we see aircraft that meet our needs and that are helpful for increasing and improving our network performance, we will look at those. And if they make has to LATAM we will see in corporate and other.

With respect to your third question on cargo. So yes, look, factors are in the mid 50s. I think one of the important unfold things about that is what is the right types of aircraft. When you think about freighter to the market. And LATAM's 767 which has been the backbone of our cargo fleet. I think it highlights the importance of having that price tighter for these marks.

Bigger aircraft like the 777, 874, I challenge the software because our flows are not very big. Take a look at the combination we have between the belly and the freighter allows us to allocate our cargo capacity in a very different way than full cargo airbags because I think that is reasonable to think about load factors in the freighter side, hovering between low 50s or high 50s and going forward.

And as we increase our international capacity as you saw in our guidance during 2024. And that is belly capacity mostly, it shouldn't be surprised of seeing an increase on ATK's coming probably even more from belly's and proprietary during 2024. Ramiro?

Thank you and thank you for your question. Your question was regarding the fleet cash cost going forward and if we can provide a little bit of color. In 2023, we have the free cash costs or our 300 plus aircraft of around $800 million. This is a unique cash cost to the industry and this stems very much from the renegotiations that we did under Chapter 11.

Those negotiations work and negotiations that once we lock in those prices were also extended to we're going to benefit from those prices for approximately the next seven years as we are incorporating new aircraft new aircraft that are of course, a little bit more related to market prices. We also renegotiated those contracts and those deliveries under Chapter 11, but they're more linked to the current market prices and as we go forward and incorporate those aircraft, this is going to be slightly increased.

I would say that for 2024, it's going to be North of the $800 million for sure. And I would say approximately, depending on the aircraft that we incorporate and if we go to market to which aircraft we will incorporate into our fleet. But I would say approximately $900 million is a good proxy.

That's very helpful. Thank you.

Andrea Ferraz, Bradesco BBI.

Good morning. Thank you for taking my question. I have two questions here. First, if you see an upside, do you see an upside for yields and for the 2024 guidance, given the capacity constraints in Brazil, especially considering the main competitor's situation. And myself, my second question is, what should be the CapEx for 2024 and 2025 with the new update (inaudible)? Thank you.

Hi, Andrea, how are you? This is Robert, I'll take the first question and Ramiro take the second. So the booking curve for the first few months of the year looks healthy and we see healthy demand at this point in time. We just launched our issue with our guidance and others. And so we're not making changes to the guidance.

So I think I'm not going to comment beyond that with respect to that, in particular, as I said before, we know LATAM has ability and is prepared to take market opportunities as they arise. And we're constantly looking for those opportunities, not proceeds, but in other countries as well.

I think it's too early to anticipate any impact on the market other than the one we have already issued in the guidance. So we'll see what happens during the year. And we hope that demand stays healthy and strong as we have seen these first couple of months of the year.

In terms of fleet CapEx for the coming years. Andrea, then we are receiving next year certain aircraft this year, '24 certain narrow-body aircraft, which is going to account approximately for $500 million, pre-financing of investments. The coming two years, '25 and '26. In '26 is a similar amount, a little north of the [500], you can see it in our [20F]. And for the 2025, we have a little bit of a ramp-up, a little north of $1 billion in terms of investments as we are receiving approximately 12 narrow-bodies and for 787's that we have incorporated.

All these figures, of course, are pre-financing as you know, we go to market. Some of them are sale and leasebacks and others are operating leases and sometimes with the financial leases. And so we're going to be it's not going to be this the impact on our cash flow, but these are the CapEx investments on the fleet.

Thank you.

Jay Singh, Citi.

Yes. Good morning, everybody. I wanted to ask, do you have any update on when you can see a level two ADR program launch?

Thank you, Jay. We're still assessing adequate market conditions will keep the market informed once we we move forward.

And a follow-up I wanted to ask, are there any routes that you used to serve before the pandemic that you do serve now, but might return back to later?

Hi, Jay. I think that the only long-haul route that we used to serve before the pandemic and that we're now serving is [Sao Paulo] for the remainder, we have pretty much we brought the whole network, we launched as it was in the presentation, a few new routes under the scope of the JV, most of them being the most important one that was handed to Sao Paulo.

And in domestic in general, we have we taken most of our routes. We have increased about 10 cities in Brazil on top of what we have in 2019. And also, we are serving more cities in Colombia as we increase our our size there. Plus route we issued or, some domestic was the CDO by cash in Peru, which is the 17 destination we have.

So today, even though our capacity in terms of ASK is more or less similar insights as the one we got pre-pandemic, our network is more diverse. We have more destinations on our top selling, general, bigger and more upscale.

That's it me. Thank you so much guys.

Thank you. As now, I don't see any further questions in the queue. I will turn it to Ramiro Alfonso for final comments.

Thank you, Carmen, and thank you all again for joining us today. As always, our Investor Relations team is around for further questions. Have a very nice weekend.

Thank you. And with that we conclude our call today. Thank you for joining us. You may now disconnect.