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Fitch Affirms LAN Airlines S.A.'s IDR at 'BBB'; Outlook Stable

Dépèche transmise le 21 avril 2009 par Business Wire

NEW YORK--(BUSINESS WIRE)--Fitch Ratings has affirmed the foreign currency Issuer Default Rating (IDR) of LAN Airlines S.A. (LAN) at 'BBB'. The Rating Outlook is Stable. Fitch has also affirmed LAN's national equity rating as Level 2 (Primera Clase Nivel 2).

The 'BBB' rating of LAN continues to reflect the company's strong business position, low cost structure, and fleet flexibility. The affirmation of LAN's IDR reflects the company's strong liquidity position, which should allow it to weather the very challenging environment during 2009 and 2010. A revision of the Rating Outlook to Negative could occur in 2009 if weakness in the cargo and passenger segments leads to a material increase in debt and substantial decline in LAN's cash flow generation.

LAN generated $4.5 billion of revenues during 2008, an increase from $3.5 billion in 2007. The most important source of revenues was passenger revenue (62%), followed by cargo (33%). Cash generation, as measured by EBITDAR, also experienced strong growth during 2008, rising to $870 million from $726 million during the prior year. The growth in revenues and cash flow was driven by strong demand within the region in both cargo and passenger routes, as well as additional international routes and an increase in the frequency of existing routes.

LAN's EBITDAR margins of more than 19% during the past three years compare favorably with its global peers. The company's high level of profitability is due to its modern and fuel-efficient fleet; its integrated passenger and cargo operations, which provides revenue diversification and reduces the break-even load factor; and the high utilization level of its fleet.

As of Dec. 31, 2008, LAN had approximately US$2.1 billion in total debt, most of which is secured. The company also has US$1.2 billion of lease adjusted debt. During 2009 and 2010 LAN faces debt amortizations of US$285 million and US$205 million, respectively. The company expects to raise approximately US$ 240 million during 2009 through loans with domestic banks in Chile. As of Dec. 31, 2008, the company had US$410 million of cash and marketable securities and US$250 million of non-committed credit lines that it could access to improve liquidity. Capital expenditures for 2009 are expected to decline by about 50% to US$439 million, of which US$274 million will be for new aircraft.

LAN's revenues in its cargo segment are expected to decline by more than 25% during the first quarter 2009 (1Q'09) versus first quarter 2008 (1Q'08) due to global economic recession. Passenger load levels and yields are also expected to be under pressure during 2009. The expected decrease in revenue should be partially offset by a reduction in fuel prices, as the company has hedged approximately 40% (27% by the end of December 2008) of its annual fuel consumption for 2009. During 2008, LAN's average fuel price was US$3.20 per gallon. In 2009, this figure is expected to fall to about US$1.80 per gallon, which would represent a fuel savings of about US$600 million. LAN's passenger capacity measured by Available Seat Kilometers (ASK) was 35.2 billion by the end of December 2008. The company has the flexibility to reduce scheduled capacity since contracts on three leased aircraft will expire during the next twelve months, which represent approximately 5%-6% of LAN's annual capacity.

LAN Airlines is one of the leading airlines in Latin America. The company operates domestic and international passenger and cargo operations with a fleet of 84 passenger (52 owned) and nine dedicated cargo (eight owned) aircraft. LAN services multiple destinations throughout Latin America, the United States, Europe and the South Pacific.

Fitch's rating definitions and the terms of use of such ratings are available on the agency's public site, www.fitchratings.com. Published ratings, criteria and methodologies are available from this site, at all times. Fitch's code of conduct, confidentiality, conflicts of interest, affiliate firewall, compliance and other relevant policies and procedures are also available from the 'Code of Conduct' section of this site.

Business Wire

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