Exhibit 99.1
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 2019
CONTENTS
Page | |
Consolidated Statement of Financial Position | 1 |
Consolidated Statement of Income by Function | 3 |
Consolidated Statement of Comprehensive Income | 4 |
Consolidated Statement of Changes in Equity | 5 |
Consolidated Statement of Cash Flows - Direct Method | 7 |
Notes to the Consolidated Financial Statements | 8 |
CLP | - | CHILEAN PESO |
ARS | - | ARGENTINE PESO |
US$ | - | united states dollar |
THUS$ | - | THOUSANDS OF UNITED STATES DOLLARS |
mUS$ | - | millions of united states dollars |
COP | - | COLOMBIAN PESO |
brl/R$ | - | braZILIAN REAL |
thr$ | - | Thousands of Brazilian reaL |
REPORT OF INDEPENDENT AUDITORS
(Free translation from the original in Spanish)
Santiago, March 3, 2020
To the Board of Directors and Shareholders
Latam Airlines Group S.A.
We have audited the accompanying consolidated financial statements of Latam Airlines Group S.A. and subsidiaries, which comprise the consolidated statements of financial position as at December 31, 2019 and 2018 and as at January 1, 2018 and the consolidated statements of income by function, consolidated comprehensive income, consolidated changes in equity and consolidated cash flows – direct method for the years ended December 31, 2019 and 2018, and the corresponding notes to the consolidated financial statements.
Management’s responsibility for the consolidated financial statements
Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with the International Financial Reporting Standards (IFRS). This responsibility includes the design, implementation and maintenance of a relevant internal control for the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.
Auditor’s responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with Chilean Generally Accepted Auditing Standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. As a consequence we do not express that kind of opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Santiago, March 3, 2020
Latam Airlines Group S.A. and subsidiaries
2
Opinion
In our opinion, the consolidated financial statements present fairly, in all material respects the financial position of Latam Airlines Group S.A. and subsidiaries as at December 31, 2019 and 2018 and January, 1, 2018, and the results of operations and cash flows for the years ended December 31, 2019 and 2018 in accordance with the International Financial Reporting Standards (IFRS).
Emphasis of matter
As described in note 2.1 to the consolidated financial statements, on January 1, 2019, the company adopted IFRS 16 - Leases, which establishes the principles for the recognition, measurement, presentation and disclosure of leases. The Company has chosen to apply this standard retrospectively, restating the balances as at January 1 and December 31, 2018. Our opinion is not modified in respect of this matter.
Renzo Corona Spedaliere
RUT: 6.373.028-9
Digitally signed by Renzo Piero Corona Spedaliere RUT: 6.373.028-9. The digital certificate is embedded in the electronic version of this document.
Contents of the Notes to the consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries.
Notes | Page | |
1 - General information | 8 | |
2 - Summary of significant accounting policies | 12 | |
2.1. Basis of Preparation | 12 | |
2.2. Basis of Consolidation | 18 | |
2.3. Foreign currency transactions | 19 | |
2.4. Property, plant and equipment | 21 | |
2.6. Goodwill | 22 | |
2.7. Borrowing costs | 23 | |
2.8. Losses for impairment of non-financial assets | 23 | |
2.9. Financial assets | 23 | |
2.10. Derivative financial instruments and hedging activities | 24 | |
2.11. Inventories | 25 | |
2.12. Trade and other accounts receivable | 25 | |
2.13. Cash and cash equivalents | 26 | |
2.14. Capital | 26 | |
2.15. Trade and other accounts payables | 26 | |
2.16. Interest-bearing loans | 26 | |
2.17. Current and deferred taxes | 26 | |
2.18. Employee benefits | 27 | |
2.19. Provisions | 27 | |
2.20. Revenue recognition | 27 | |
2.21. Leases | 29 | |
2.22. Non-current assets (or disposal groups) classified as held for sale | 30 | |
2.23. Maintenance | 30 | |
2.24. Environmental costs | 30 | |
3 - Financial risk management | 31 | |
3.1. Financial risk factors | 31 | |
3.2. Capital risk management | 45 | |
3.3. Estimates of fair value | 45 | |
4 - Accounting estimates and judgments | 47 | |
5 - Segmental information | 51 | |
6 - Cash and cash equivalents | 54 | |
7 - Financial instruments | 55 | |
7.1. Financial instruments by category | 55 | |
7.2. Financial instruments by currency | 57 | |
8 - Trade, other accounts receivable and non-current accounts receivable | 58 | |
9 - Accounts receivable from/payable to related entities | 60 | |
10 - Inventories | 61 | |
11 - Other financial assets | 62 | |
12 - Other non-financial assets | 63 | |
13 - Non-current assets and disposal group classified as held for sale | 64 | |
14 - Investments in subsidiaries | 65 | |
15 - Intangible assets other than goodwill | 68 |
i
16 - Goodwill | 69 | |
17 - Property, plant and equipment | 71 | |
18 - Current and deferred tax | 76 | |
19 - Other financial liabilities | 80 | |
20 - Trade and other accounts payables | 89 | |
21 - Other provisions | 91 | |
22 - Other non financial liabiliies | 93 | |
23 - Employee benefits | 95 | |
24 - Accounts payable, non-current | 97 | |
25 - Equity | 97 | |
26 - Revenue | 102 | |
27 - Costs and expenses by nature | 102 | |
28 - Other income, by function | 104 | |
29 - Foreign currency and exchange rate differences | 105 | |
30 - Earnings per share | 113 | |
31 - Contingencies | 114 | |
32 - Commitments | 126 | |
33 - Transactions with related parties | 128 | |
34 - Share based payments | 129 | |
35 – Statement of cash flows | 132 | |
36 - The environment | 134 | |
37 – Events subsequent to the date of the financial statements | 135 |
ii
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
ASSETS | ||||||||||||||
As of | As of | As of | ||||||||||||
December 31, | December 31, | January 1, | ||||||||||||
Note | 2019 | 2018 | 2018 | |||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||||
Restated | Restated | |||||||||||||
Cash and cash equivalents | ||||||||||||||
Cash and cash equivalents | 6 - 7 | 1,072,579 | 1,081,642 | 1,142,004 | ||||||||||
Other financial assets | 7 - 11 | 499,504 | 383,984 | 559,919 | ||||||||||
Other non-financial assets | 12 | 313,449 | 290,476 | 244,778 | ||||||||||
Trade and other accounts receivable | 7 - 8 | 1,244,348 | 1,162,582 | 1,202,945 | ||||||||||
Accounts receivable from related entities | 7 - 9 | 19,645 | 2,931 | 2,582 | ||||||||||
Inventories | 10 | 354,232 | 279,344 | 236,666 | ||||||||||
Current tax assets | 18 | 29,321 | 69,134 | 77,987 | ||||||||||
Total current assets other than non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners | 3,533,078 | 3,270,093 | 3,466,881 | |||||||||||
Non-current assets (or disposal groups) classified as held for sale or as held for distribution to owners | 13 | 485,150 | 5,768 | 291,103 | ||||||||||
Total current assets | 4,018,228 | 3,275,861 | 3,757,984 | |||||||||||
Non-current assets | ||||||||||||||
Other financial assets | 7 - 11 | 46,907 | 58,700 | 88,090 | ||||||||||
Other non-financial assets | 12 | 204,928 | 227,541 | 212,203 | ||||||||||
Accounts receivable | 7 - 8 | 4,725 | 5,381 | 6,891 | ||||||||||
Intangible assets other than goodwill | 15 | 1,448,241 | 1,441,072 | 1,617,247 | ||||||||||
Goodwill | 16 | 2,209,576 | 2,294,072 | 2,672,550 | ||||||||||
Property, plant and equipment | 17 | 12,919,618 | 12,501,809 | 12,930,652 | ||||||||||
Current tax assets, non-current | 18 | - | 757 | 17,532 | ||||||||||
Deferred tax assets | 18 | 235,583 | 273,529 | 370,564 | ||||||||||
Total non-current assets | 17,069,578 | 16,802,861 | 17,915,729 | |||||||||||
Total assets | 21,087,806 | 20,078,722 | 21,673,713 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
1
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
LIABILITIES AND EQUITY | ||||||||||||||
As of | As of | As of | ||||||||||||
December 31, | December 31, | January 1, | ||||||||||||
LIABILITIES | Note | 2019 | 2018 | 2018 | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||||
Restated | Restated | |||||||||||||
Current liabilities | ||||||||||||||
Other financial liabilities | 7 - 19 | 1,885,660 | 1,794,286 | 1,619,979 | ||||||||||
Trade and other accounts payables | 7 - 20 | 2,222,874 | 1,674,303 | 1,668,612 | ||||||||||
Accounts payable to related entities | 7 - 9 | 56 | 382 | 760 | ||||||||||
Other provisions | 21 | 5,206 | 4,794 | 2,783 | ||||||||||
Current tax liabilities | 18 | 11,925 | 3,738 | 3,511 | ||||||||||
Other non-financial liabilities | 22 | 2,835,221 | 2,454,746 | 2,901,603 | ||||||||||
Total current liabilities other than non-current liabilities (or disposal groups) classified as held for sale | 6,960,942 | 5,932,249 | 6,197,248 | |||||||||||
Liabilities included in disposal groups classified as held for sale | 13 | - | - | 15,546 | ||||||||||
Total current liabilities | 6,960,942 | 5,932,249 | 6,212,794 | |||||||||||
Non-current liabilities | ||||||||||||||
Other financial liabilities | 7 - 19 | 8,530,418 | 8,359,462 | 9,433,450 | ||||||||||
Accounts payable | 7 - 24 | 619,110 | 529,277 | 559,443 | ||||||||||
Other provisions | 21 | 286,403 | 303,495 | 374,593 | ||||||||||
Deferred tax liabilities | 18 | 616,803 | 786,571 | 877,748 | ||||||||||
Employee benefits | 23 | 93,570 | 82,365 | 101,087 | ||||||||||
Other non-financial liabilities | 22 | 851,383 | 644,702 | 158,305 | ||||||||||
Total non-current liabilities | 10,997,687 | 10,705,872 | 11,504,626 | |||||||||||
Total liabilities | 17,958,629 | 16,638,121 | 17,717,420 | |||||||||||
EQUITY | ||||||||||||||
Share capital | 25 | 3,146,265 | 3,146,265 | 3,146,265 | ||||||||||
Retained earnings | 25 | 352,272 | 218,971 | (41,012 | ) | |||||||||
Treasury Shares | 25 | (178 | ) | (178 | ) | (178 | ) | |||||||
Other reserves | (367,577 | ) | (4,365 | ) | 760,761 | |||||||||
Parent's ownership interest | 3,130,782 | 3,360,693 | 3,865,836 | |||||||||||
Non-controlling interest | 14 | (1,605 | ) | 79,908 | 90,457 | |||||||||
Total equity | 3,129,177 | 3,440,601 | 3,956,293 | |||||||||||
Total liabilities and equity | 21,087,806 | 20,078,722 | 21,673,713 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
2
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF INCOME BY FUNCTION
For the year ended | ||||||||||
December 31, | ||||||||||
Note | 2019 | 2018 | ||||||||
ThUS$ | ThUS$ | |||||||||
Restated | ||||||||||
Revenue | 26 | 10,070,063 | 9,895,456 | |||||||
Cost of sales | (7,951,269 | ) | (7,773,432 | ) | ||||||
Gross margin | 2,118,794 | 2,122,024 | ||||||||
Other income | 28 | 360,864 | 472,758 | |||||||
Distribution costs | (580,046 | ) | (615,214 | ) | ||||||
Administrative expenses | (735,218 | ) | (736,333 | ) | ||||||
Other expenses | (422,792 | ) | (356,250 | ) | ||||||
Other gains/(losses) | 11,525 | 53,499 | ||||||||
Income from operation activities | 753,127 | 940,484 | ||||||||
Financial income | 26,283 | 53,253 | ||||||||
Financial costs | 27 | (589,934 | ) | (539,137 | ) | |||||
Foreign exchange gains/(losses) | 29 | (32,571 | ) | (38,070 | ) | |||||
Result of indexation units | (14,989 | ) | (865 | ) | ||||||
Income (loss) before taxes | 141,916 | 415,665 | ||||||||
Income tax expense / benefit | 18 | 53,697 | (73,879 | ) | ||||||
NET INCOME (LOSS) FOR THE YEAR | 195,613 | 341,786 | ||||||||
Income (loss) attributable to owners of the parent | 190,430 | 309,811 | ||||||||
Income (loss) attributable to non-controlling interest | 14 | 5,183 | 31,975 | |||||||
Net income (loss) for the year | 195,613 | 341,786 | ||||||||
EARNINGS PER SHARE | ||||||||||
Basic earnings (losses) per share (US$) | 30 | 0.31403 | 0.51090 | |||||||
Diluted earnings (losses) per share (US$) | 30 | 0.31403 | 0.51090 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
3
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF COMPREHENSIVE INCOME
For the year ended | ||||||||||
December 31, | ||||||||||
Note | 2019 | 2018 | ||||||||
ThUS$ | ThUS$ | |||||||||
Restated | ||||||||||
NET INCOME | 195,613 | 341,786 | ||||||||
Components of other comprehensive income that will not be reclassified to income before taxes | ||||||||||
Other comprehensive income, before taxes, gains by new measurements on defined benefit plans | 25 | (10,636 | ) | (5,819 | ) | |||||
Total other comprehensive income (loss) that will not be reclassified to income before taxes | (10,636 | ) | (5,819 | ) | ||||||
Components of other comprehensive income that will be reclassified to income before taxes | ||||||||||
Currency translation differences Gains (losses) on currency translation, before tax | 29 | (243,271 | ) | (743,516 | ) | |||||
Other comprehensive (loss), before taxes, currency translation differences | (243,271 | ) | (743,516 | ) | ||||||
Cash flow hedges | ||||||||||
Gains (losses) on cash flow hedges before taxes | 19 | 66,856 | (27,797 | ) | ||||||
Other comprehensive income (losses), before taxes, cash flow hedges | 66,856 | (27,797 | ) | |||||||
Total other comprehensive (loss) that will be reclassified to income before taxes | (176,415 | ) | (771,313 | ) | ||||||
Other components of other comprehensive income (loss), before taxes | (187,051 | ) | (777,132 | ) | ||||||
Income tax relating to other comprehensive income that will not be reclassified to income | ||||||||||
Income tax relating to new measurements on defined benefit plans | 18 | 2,873 | 1,566 | |||||||
Accumulate income tax relating to other comprehensive income (loss) that will not be reclassified to income (loss) | 2,873 | 1,566 | ||||||||
Income tax relating to other comprehensive income (loss) that will be reclassified to income | ||||||||||
Income tax related to cash flow hedges in other comprehensive income (loss) | 414 | (269 | ) | |||||||
Income taxes related to components of other comprehensive (loss) will be reclassified to income | 414 | (269 | ) | |||||||
Total Other comprehensive (loss) | (183,764 | ) | (775,835 | ) | ||||||
Total comprehensive income (loss) | 11,849 | (434,049 | ) | |||||||
Comprehensive income (loss) attributable to owners of the parent | 15,250 | (452,844 | ) | |||||||
Comprehensive income (loss) attributable to non-controlling interests | (3,401 | ) | 18,795 | |||||||
TOTAL COMPREHENSIVE INCOME (LOSS) | 11,849 | (434,049 | ) |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
4
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Change in other reserves | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Note | Share capital | Treasury shares | Currency translation reserve | Cash flow hedging reserve | Actuarial gains or losses on defined benefit plans reserve | Shares based payments reserve | Other sundry reserve | Total other reserve | Retained earnings | Parent's ownership interest | Non-controlling interest | Total equity | ||||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||||||||||||||||||
Equity as of January 1, 2019 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Restated | 3,146,265 | (178 | ) | (2,656,644 | ) | (9,333 | ) | (15,178 | ) | 37,874 | 2,638,916 | (4,365 | ) | 218,971 | 3,360,693 | 79,908 | 3,440,601 | |||||||||||||||||||||||||||||||||||
Total increase (decrease) in equity | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Net income for the year | 25 | - | - | - | - | - | - | - | - | 190,430 | 190,430 | 5,183 | 195,613 | |||||||||||||||||||||||||||||||||||||||
Other comprehensive income | - | - | (233,643 | ) | 66,225 | (7,762 | ) | - | (175,180 | ) | - | (175,180 | ) | (8,584 | ) | (183,764 | ) | |||||||||||||||||||||||||||||||||||
Total comprehensive income | - | - | (233,643 | ) | 66,225 | (7,762 | ) | - | - | (175,180 | ) | 190,430 | 15,250 | (3,401 | ) | 11,849 | ||||||||||||||||||||||||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | 25 | - | - | - | - | - | - | - | - | (57,129 | ) | (57,129 | ) | - | (57,129 | ) | ||||||||||||||||||||||||||||||||||||
Increase (decrease) through transfers and other changes, equity | 25-34 | - | - | - | - | - | (1,585 | ) | (186,447 | ) | (188,032 | ) | - | (188,032 | ) | (78,112 | ) | (266,144 | ) | |||||||||||||||||||||||||||||||||
Total transactions with shareholders | - | - | - | - | - | (1,585 | ) | (186,447 | ) | (188,032 | ) | (57,129 | ) | (245,161 | ) | (78,112 | ) | (323,273 | ) | |||||||||||||||||||||||||||||||||
Closing balance as of December 31, 2019 | 3,146,265 | (178 | ) | (2,890,287 | ) | 56,892 | (22,940 | ) | 36,289 | 2,452,469 | (367,577 | ) | 352,272 | 3,130,782 | (1,605 | ) | 3,129,177 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
5
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CHANGES IN EQUITY
Attributable to owners of the parent | ||||||||||||||||||||||||||||||||||||||||||||||||||
Change in other reserves | ||||||||||||||||||||||||||||||||||||||||||||||||||
Actuarial gains | ||||||||||||||||||||||||||||||||||||||||||||||||||
or losses on | ||||||||||||||||||||||||||||||||||||||||||||||||||
Currency | Cash flow | defined benefit | Shares based | Other | Total | Parent's | Non- | |||||||||||||||||||||||||||||||||||||||||||
Share | Treasury | translation | hedging | plans | payments | sundry | other | Retained | ownership | controlling | Total | |||||||||||||||||||||||||||||||||||||||
Note | capital | shares | reserve | reserve | reserve | reserve | reserve | reserve | earnings | interest | interest | equity | ||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||||||||||||||||
Equity as of January 1, 2018 | 3,146,265 | (178 | ) | (2,131,591 | ) | 18,140 | (10,926 | ) | 39,481 | 2,639,780 | 554,884 | 475,118 | 4,176,089 | 91,147 | 4,267,236 | |||||||||||||||||||||||||||||||||||
Increase (decrease) by application of new accounting standards | 2-25 | - | - | 205,877 | - | - | - | - | 205,877 | (516,130 | ) | (310,253 | ) | (690 | ) | (310,943 | ) | |||||||||||||||||||||||||||||||||
Initial balance Restated | 3,146,265 | (178 | ) | (1,925,714 | ) | 18,140 | (10,926 | ) | 39,481 | 2,639,780 | 760,761 | (41,012 | ) | 3,865,836 | 90,457 | 3,956,293 | ||||||||||||||||||||||||||||||||||
Total increase (decrease) in equity | ||||||||||||||||||||||||||||||||||||||||||||||||||
Net income for the year | 25 | - | - | - | - | - | - | - | - | 309,811 | 309,811 | 31,975 | 341,786 | |||||||||||||||||||||||||||||||||||||
Other comprehensive income | - | - | (730,930 | ) | (27,473 | ) | (4,252 | ) | - | - | (762,655 | ) | - | (762,655 | ) | (13,180 | ) | (775,835 | ) | |||||||||||||||||||||||||||||||
Total comprehensive income | - | - | (730,930 | ) | (27,473 | ) | (4,252 | ) | - | - | (762,655 | ) | 309,811 | (452,844 | ) | 18,795 | (434,049 | ) | ||||||||||||||||||||||||||||||||
Transactions with shareholders | ||||||||||||||||||||||||||||||||||||||||||||||||||
Dividends | 25 | - | - | - | - | - | - | - | - | (54,580 | ) | (54,580 | ) | - | (54,580 | ) | ||||||||||||||||||||||||||||||||||
Increase (decrease) through transfers and other changes, equity | 25-34 | - | - | - | - | - | (1,607 | ) | (864 | ) | (2,471 | ) | 4,752 | 2,281 | (29,344 | ) | (27,063 | ) | ||||||||||||||||||||||||||||||||
Total transactions with shareholders | - | - | - | - | - | (1,607 | ) | (864 | ) | (2,471 | ) | (49,828 | ) | (52,299 | ) | (29,344 | ) | (81,643 | ) | |||||||||||||||||||||||||||||||
Closing balance as of December 31, 2018 Restated | 3,146,265 | (178 | ) | (2,656,644 | ) | (9,333 | ) | (15,178 | ) | 37,874 | 2,638,916 | (4,365 | ) | 218,971 | 3,360,693 | 79,908 | 3,440,601 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
6
LATAM AIRLINES GROUP S.A. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS DIRECT – METHOD
For the year ended | |||||||||||
December 31, | |||||||||||
Note | 2019 | 2018 | |||||||||
ThUS$ | ThUS$ | ||||||||||
Restated | |||||||||||
Cash flows from operating activities | |||||||||||
Cash collection from operating activities | |||||||||||
Proceeds from sales of goods and services | 11,079,333 | 10,787,804 | |||||||||
Other cash receipts from operating activities | 127,683 | 95,099 | |||||||||
Payments for operating activities | |||||||||||
Payments to suppliers for goods and services | (6,663,875 | ) | (6,775,003 | ) | |||||||
Payments to and on behalf of employees | (1,644,806 | ) | (1,789,022 | ) | |||||||
Other payments for operating activities | (267,643 | ) | (255,988 | ) | |||||||
Income taxes (paid) | (45,311 | ) | (29,186 | ) | |||||||
Other cash inflows (outflows) | 35 | 241,286 | 39,612 | ||||||||
Net cash flows from operating activities | 2,826,667 | 2,073,316 | |||||||||
Cash flows from investing activities | |||||||||||
Cash flows from losses of control of subsidiaries or other businesses | - | 69,724 | |||||||||
Other cash receipts from sales of equity or debt instruments of other entities | 4,063,582 | 3,640,208 | |||||||||
Other payments to acquire equity or debt instruments of other entities | (4,131,890 | ) | (3,542,839 | ) | |||||||
Amounts raised from sale of property, plant and equipment | 50,322 | 223,753 | |||||||||
Purchases of property, plant and equipment | (1,276,621 | ) | (660,707 | ) | |||||||
Purchases of intangible assets | (140,173 | ) | (96,206 | ) | |||||||
Interest received | 17,822 | 10,175 | |||||||||
Other cash inflows (outflows) | 35 | (2,249 | ) | (2,476 | ) | ||||||
Net cash flow (used in) investing activities | (1,419,207 | ) | (358,368 | ) | |||||||
Cash flows from financing activities | 35 | ||||||||||
Payments for changes in ownership interests in subsidiaries that do not result in loss of control | (294,105 | ) | (2 | ) | |||||||
Amounts raised from long-term loans | 1,781,728 | 779,062 | |||||||||
Amounts raised from short-term loans | 93,000 | 293,000 | |||||||||
Loans repayments | (1,860,455 | ) | (1,738,348 | ) | |||||||
Payments of lease liabilities | (398,992 | ) | (373,439 | ) | |||||||
Dividends paid | (55,116 | ) | (72,620 | ) | |||||||
Interest paid | (550,877 | ) | (540,303 | ) | |||||||
Other cash inflows (outflows) | (58,704 | ) | 44,053 | ||||||||
Net cash flows (used in) financing activities | (1,343,521 | ) | (1,608,597 | ) | |||||||
Net increase in cash and cash equivalents before effect of exchanges rate change | 63,939 | 106,351 | |||||||||
Effects of variation in the exchange rate on cash and cash equivalents | (73,002 | ) | (166,713 | ) | |||||||
Net increase (decrease) in cash and cash equivalents | (9,063 | ) | (60,362 | ) | |||||||
CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR | 6 | 1,081,642 | 1,142,004 | ||||||||
CASH AND CASH EQUIVALENTS AT THE END OF YEAR | 6 | 1,072,579 | 1,081,642 |
The accompanying Notes 1 to 37 form an integral part of these consolidated financial statements.
7
LATAM AIRLINES GROUP S.A.AND SUBSIDIARIES
NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS
AS OF DECEMBER 31, 2019 AND 2018
NOTE 1 - GENERAL INFORMATION
LATAM Airlines Group S.A. (the "Company") is a public limited company registered with the Commission for the Financial Market under No. 306, whose shares are listed in Chile on the Electronic Stock Exchange of Chile - Stock Exchange and the Santiago Stock Exchange - Stock Exchange, besides being listed in the United States of America on the New York Stock Exchange ("NYSE"), in the form of American Depositary Receipts ("ADRs").
Its main business is the air transport of passengers and cargo, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil, as well as in a series of regional and international routes in America, Europe and Oceania. These businesses are developed directly or by its subsidiaries in Ecuador, Peru, Brazil, Colombia, Argentina and Paraguay. In addition, the Company has subsidiaries that operate in the cargo business in Chile, Brazil and Colombia.
The Company is located in Chile, in the city of Santiago, on Avenida Américo Vespucio Sur No. 901, Renca commune.
As of December 31, 2019, the Company's statutory capital is represented by 606,407,693 ordinary shares without nominal value. All shares are subscribed and paid considering the capital reduction that occurred in full, after the legal period of three years to subscribe the balance of 466,832 outstanding shares, of the last capital increase approved in August of the year 2016.
The shareholder major of the Company is the Cueto Group, which through the companies Costa Verde Aeronáutica S.A., Costa Verde Aeronáutica SpA, Costa Verde Aeronáutica Tres SpA, Inversiones Nueva Costa Verde Aeronáutica Ltda., Inversiones Priesca Dos y Cía. Ltda., Inversiones Caravia Dos y Cía. Ltda., Inversiones El Fano Dos y Cía. Ltda., Inversiones La Espasa Dos S.A. e Inversiones La Espasa Dos y Cía. Ltda., Owns 21.46% of the shares issued by the Company.
As of December 31, 2019, the Company had a total of 1,228 shareholders in its registry. At that date, approximately 4.17% of the Company's property was in the form of ADRs.
For the period ended December 31, 2019, the Company had an average of 41,043 employees, ending this period with a total number of 41,729 people, distributed in 6,966 Administration employees, 4,911 in Maintenance, 13,538 in Operations, 9,511 Cabin Crew, 4,298 Cockpit Crew and 2,505 in Sales.
8
The main subsidiaries included in these consolidated financial statements are as follows:
a) | Participation rate |
Country | Functional | As December 31, 2019 | As December 31, 2018 | |||||||||||||||||||||||||||
Tax No. | Company | of origin | Currency | Direct | Indirect | Total | Direct | Indirect | Total | |||||||||||||||||||||
% | % | % | % | % | % | |||||||||||||||||||||||||
96.518.860-6 | Latam Travel Chile S.A. and Subsidiary | Chile | US$ | - | - | - | 99.9900 | 0.0100 | 100.0000 | |||||||||||||||||||||
96.969.680-0 | Lan Pax Group S.A. and Subsidiaries | Chile | US$ | 99.8361 | 0.1639 | 100.0000 | 99.8361 | 0.1639 | 100.0000 | |||||||||||||||||||||
Foreign | Latam Airlines Perú S.A. | Peru | US$ | 49.0000 | 21.0000 | 70.0000 | 49.0000 | 21.0000 | 70.0000 | |||||||||||||||||||||
93.383.000-4 | Lan Cargo S.A. | Chile | US$ | 99.8940 | 0.0041 | 99.8981 | 99.8940 | 0.0041 | 99.8981 | |||||||||||||||||||||
Foreign | Connecta Corporation | U.S.A. | US$ | 100.0000 | 0.0000 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Prime Airport Services Inc. and Subsidiary | U.S.A. | US$ | 99.9714 | 0.0286 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
96.951.280-7 | Transporte Aéreo S.A. | Chile | US$ | 99.9999 | 0.0001 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
96.631.520-2 | Fast Air Almacenes de Carga S.A. | Chile | CLP | 99.8900 | 0.1100 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Laser Cargo S.R.L. | Argentina | ARS | 96.2208 | 3.7792 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Lan Cargo Overseas Limited and Subsidiaries | Bahamas | US$ | 99.9800 | 0.0200 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
96.969.690-8 | Lan Cargo Inversiones S.A. and Subsidiary | Chile | US$ | 99.0000 | 1.0000 | 100.0000 | 0.0000 | 100.0000 | 100.0000 | |||||||||||||||||||||
96.575.810-0 | Inversiones Lan S.A. and Subsidiaries | Chile | US$ | 99.7100 | 0.2900 | 100.0000 | 99.7100 | 0.2900 | 100.0000 | |||||||||||||||||||||
96.847.880-K | Technical Trainning LATAM S.A. | Chile | CLP | 99.8300 | 0.1700 | 100.0000 | 99.8300 | 0.1700 | 100.0000 | |||||||||||||||||||||
Foreign | Latam Finance Limited | Cayman Island | US$ | 100.0000 | 0.0000 | 100.0000 | 100.0000 | 0.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Peuco Finance Limited | Cayman Island | US$ | 100.0000 | 0.0000 | 100.0000 | 100.0000 | 0.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Profesional Airline Services INC. | U.S.A. | US$ | 100.0000 | 0.0000 | 100.0000 | 100.0000 | 0.0000 | 100.0000 | |||||||||||||||||||||
Foreign | Jarletul S.A. | Uruguay | US$ | 99.0000 | 1.0000 | 100.0000 | 99.0000 | 1.0000 | 100.0000 | |||||||||||||||||||||
Foreign | TAM S.A. and Subsidiaries (*) | Brazil | BRL | 63.0901 | 36.9099 | 100.0000 | 63.0901 | 36.9099 | 100.0000 |
(*) | As of December 31, 2019, the indirect participation percentage on TAM S.A. and Subsidiaries is from Holdco I S.A., a company over which LATAM Airlines Group S.A. it has a 99.9983% share on economic rights and 51.04% of political rights. Its percentage arise as a result of the provisional measure No. 863 of the Brazilian government implemented in December 2018 that allows foreign capital to have up to 100% of the property. |
9
b) | Financial Information |
Statement of financial position | Net Income | |||||||||||||||||||||||||||||||||
For the year ended | ||||||||||||||||||||||||||||||||||
As of December 31, 2019 | As of December 31, 2018 | December 31, | ||||||||||||||||||||||||||||||||
2019 | 2018 | |||||||||||||||||||||||||||||||||
Tax No. | Company | Assets | Liabilities | Equity | Assets | Liabilities | Equity | Gain /(loss) | ||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||||
Restated | Restated | |||||||||||||||||||||||||||||||||
96.518.860-6 | Latam Travel Chile S.A. and Subsidiary | - | - | - | 10,841 | 3,909 | 6,932 | - | 2,385 | |||||||||||||||||||||||||
96.969.680-0 | Lan Pax Group S.A. and Subsidiaries (*) | 632,673 | 1,487,248 | (853,624 | ) | 526,017 | 1,281,800 | (751,960 | ) | (26,551 | ) | (48,061 | ) | |||||||||||||||||||||
Foreign | Latam Airlines Perú S.A. | 519,363 | 510,672 | 8,691 | 419,325 | 409,221 | 10,104 | (3,550 | ) | 5,416 | ||||||||||||||||||||||||
93.383.000-4 | Lan Cargo S.A. | 634,852 | 462,666 | 172,186 | 513,367 | 336,715 | 176,652 | (4,157 | ) | (34,322 | ) | |||||||||||||||||||||||
Foreign | Connecta Corporation | 64,110 | 24,023 | 40,087 | 66,593 | 28,183 | 38,410 | 1,677 | 16,923 | |||||||||||||||||||||||||
Foreign | Prime Airport Services Inc. and Subsidiary (*) | 22,068 | 23,102 | (1,034 | ) | 15,817 | 17,654 | (1,837 | ) | 802 | 1,225 | |||||||||||||||||||||||
96.951.280-7 | Transporte Aéreo S.A. | 359,335 | 142,423 | 216,912 | 331,496 | 129,233 | 202,263 | 14,610 | (17,609 | ) | ||||||||||||||||||||||||
96.631.520-2 | Fast Air Almacenes de Carga S.A. | 20,182 | 12,601 | 7,581 | 17,057 | 9,614 | 7,443 | 796 | (3 | ) | ||||||||||||||||||||||||
Foreign | Laser Cargo S.R.L. | (10 | ) | - | (10 | ) | 26 | 13 | 13 | - | (3 | ) | ||||||||||||||||||||||
Foreign | Lan Cargo Overseas Limited and Subsidiaries (*) | 48,929 | 15,228 | 33,450 | 53,326 | 13,040 | 40,028 | (6,579 | ) | 19,121 | ||||||||||||||||||||||||
96.969.690-8 | Lan Cargo Inversiones S.A. and Subsidiary (*) | 65,422 | 78,890 | (12,111 | ) | 181,522 | 192,059 | (9,614 | ) | (2,497 | ) | 497 | ||||||||||||||||||||||
96.575.810-0 | Inversiones Lan S.A. and Subsidiaries (*) | 1,329 | 50 | 1,279 | 1,383 | 50 | 1,333 | (54 | ) | (4,774 | ) | |||||||||||||||||||||||
96.847.880-K | Technical Trainning LATAM S.A. | 2,378 | 1,075 | 1,303 | 2,879 | 1,031 | 1,848 | (282 | ) | 884 | ||||||||||||||||||||||||
Foreign | Latam Finance Limited | 1,362,762 | 1,531,238 | (168,476 | ) | 679,034 | 756,774 | (77,740 | ) | (90,736 | ) | (47,723 | ) | |||||||||||||||||||||
Foreign | Peuco Finance Limited | 664,458 | 664,458 | - | 608,191 | 608,191 | - | - | - | |||||||||||||||||||||||||
Foreign | Profesional Airline Services INC. | 3,509 | 1,950 | 1,559 | 2,430 | 1,967 | 463 | 1,096 | 197 | |||||||||||||||||||||||||
Foreign | Jarletul S.A. | 150 | 860 | (710 | ) | 18 | 125 | (107 | ) | (603 | ) | (107 | ) | |||||||||||||||||||||
Foreign | TAM S.A. and Subsidiaries (*) | 5,090,180 | 3,550,875 | 1,539,305 | 4,420,546 | 3,256,017 | 1,164,529 | 186,140 | 389,072 |
(*) | The Equity reported corresponds to Equity attributable to owners of the parent, it does not include Non-controlling interest. |
Additionally, special purpose entities have been consolidated: 1. Chercán Leasing Limited, created for aircraft advances financing; 2. Guanay Finance Limited, created for the issuance of secured bonds with future credit card payments; 3. Private investment funds; 4. Dia Patagonia Limited, Alma Leasing C.O. Limited, FC Initial Leasing Limited, Vari Leasing Limited, Dia Iguazu Limited, Condor Leasing C.O. Limited, FI Timothy Leasing Limited, Yamasa Sangyo Aircraft LA1 Kumiai, Yamasa Sangyo Aircraft LA2 Kumiai, LS-Aviation No.19 C.O. Limited, LS-Aviation No.20 C.O. Limited, LS-Aviation No.21 C.O. Limited, LS-Aviation No.22 C.O. Limited and LS-Aviation No.23 Co. Limited created for aircraft financing. Those companies have been consolidated as required by IFRS 10.
All controlled entities have been included in the consolidation.
Changes occurred in the consolidation perimeter between January 1, 2018 and December 31, 2019, are detailed below:
(1) | Incorporation or acquisition of companies |
- | On January 22, 2018, Lan Pax Group S.A., purchased 17,717 shares of Laser Cargo SRL. to Andes Airport Service S.A., consequently Lan Pax Group S.A. ownership is 3.77922% and Lan Cargo S.A. with a 96.22078% share of Laser Cargo SRL. |
10
- | On March 13, 2018, the company Jarletul S.A., was create. The company ownership is 99% of LATAM Airlines Group S.A. and a 1% is from Inversiones Lan S. A., and its main activity is a travel agency. |
- | As of December 31, 2018, Inversiones LAN S.A., subsidiary of LATAM Airlines Group S.A., acquired 5,319 shares of Aerovías de Integración Regional Aires S.A. a non-controlling shareholder, consequently, the indirect participation of LATAM Airlines Group S.A. corresponds to 99.2012%. |
- | In April 2019, TAM Linhas Aereas S.A, through a public offering of shares, acquired 27.26% of the shares of Multiplus S.A., owned by minority shareholders. Subsequently, the Company TAM S.A assigned 72,74% of its stake in Multiplus S.A., through a capital increase, to TAM Linhas Aerea S.A.; Because of 100% of the shares remain under the control of TAM Linhas Aereas S.A. a merge with Multiplus S.A. was materialized, leaving Multiplus S.A. from being an independent company on May 31, 2019. As result of the merger by incorporation, the Coalition and Loyalty Program of Multiplus S.A. which was identified as an independent Cash Generating Unit (CGU), and which also represented an operating segment, becomes part, as well as, the other loyalty programs of the group (LATAM Pass and LATAM Fidelidade), of the CGU Air Transport. Additionally, from that moment LATAM has a single operating segment within the Group. |
The value of the acquisition of this transaction was ThUS $ 294,105.
- | By public deed dated November 20, 2019 LATAM Airlines Group S.A. acquires 100% of the shares of LATAM Travel Chile S.A. |
Under the provisions of No. 2 of Art. 103 of Law No. 18,046 on Corporations, for having collected all the shares held by a single shareholder and for having elapsed the period of 10 days without having amended said situation, the company LATAM Travel Chile S.A. It has been fully dissolved on December 1, 2019.
As a result of the dissolution of the company LATAM Travel Chile S.A., the company LATAM Airlines Group S.A. assumes from that date all obligations and rights corresponding to the first.
(2) | Disposal of companies. |
- | On May 7, 2018 LATAM Airlines Group S.A. and its subsidiaries Inversiones LAN S.A. and LAN Pax Group S.A., sold, assigned and transferred to the Spanish companies Acciona Airport Services, S.A. and Acciona Aeropuertos, S.L., 100% of its shares in the subsidiary Andes Airport Services S.A. |
The sale value of Andes Airport Services S.A. it was ThUS$ 39,108
- | On November 30, 2018, Mas Investment Limited, a subsidiary of LATAM Airlines Group S.A., sold to Puente Aéreo Corporación S.A. de C.V. his participation in the companies Aero Transportes Mas de Carga S.A. de C.V. and Promotora Aérea Latino Americana S.A. de C.V. |
The sale value of this transaction was ThUS$ 29,466.
11
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The following describes the principal accounting policies adopted in the preparation of these consolidated financial statements.
2.1. | Basis of Preparation |
These consolidated financial statements of LATAM Airlines Group S.A. have been prepared in accordance with the International Financial Reporting Standards (IFRS) issued by the International Accounting Standards Board ("IASB") and with the interpretations issued by the interpretations committee of the International Financial Reporting Standards (IFRIC).
The consolidated financial statements have been prepared under the historic-cost criterion, although modified by the valuation at fair value of certain financial instruments.
The preparation of the consolidated financial statements in accordance with IFRS requires the use of certain critical accounting estimates. It also requires management to use its judgment in applying the Company’s accounting policies. Note 4 shows the areas that imply a greater degree of judgment or complexity or the areas where the assumptions and estimates are significant to the consolidated financial statements.
The consolidated financial statements have been prepared in accordance with the accounting policies used by the Company for the consolidated financial statements 2018, except for the standards and interpretations adopted as of January 1, 2019.
(a) | Accounting pronouncements with implementation effective from January 1, 2019: |
(i) Standards and amendments | Date of issue | Effective Date: |
IFRS 16: Leases. | january 2016 | 01/01/2019 |
Amendment to IFRS 9: Financial instruments | october 2017 | 01/01/2019 |
Amendment to IAS 28: Investments in associates and joint ventures | october 2017 | 01/01/2019 |
Amendment to IAS 19: Benefits to employees | february 2018 | 01/01/2019 |
(ii) Improvements | ||
Improvements to International Financial Reporting Standards (cycle 2015-2017) IFRS 3: Business combination; IAS 12: Income tax; IFRS 11: Joint agreements and IAS 23 Costs for loans. | december 2017 | 01/01/2019 |
(iii) Interpretations | ||
IFRIC 23: Uncertain tax positions | june 2017 | 01/01/2019 |
The application of these accounting pronouncements as of January 1, 2019, had no significant effects on the consolidated financial statements of the Company; with the exception of those originated by the application of IFRS 16: Leases described as follow.
During the year, the Company has recognized the changes, in the consolidated financial statements, as a result of the adoption of IFRS 16 retrospectively; restating the comparative figures, in accordance with the provisions of IAS 8 Accounting policies, changes in accounting estimates and errors.
12
The impacts of the adoption of IFRS 9 Financial Instruments, IFRS 15 Revenue from contracts with customers and IFRS 16 Leases are as follows:
Consolidated statement of financial position (extract)
a) | As of January 1, 2018: |
As of December 31, | Adoption impact | As of January 1 | Adoption impact | As of January 1, | ||||||||||||||||||||||
Note | 2017 | IFRS 9 | IFRS 15 | 2018 | IFRS 16 | 2018 | ||||||||||||||||||||
ThUS$ | THUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||
Restated | ||||||||||||||||||||||||||
Current assets | ||||||||||||||||||||||||||
Other non-financial assets, current | 12 | 221,188 | - | 54,361 | (4) | 275,549 | (30,771 | )(9) | 244,778 | |||||||||||||||||
Trade debtors and other accounts receivable, current | 7 - 8 | 1,214,050 | (11,105 | )(1) | - | 1,202,945 | - | 1,202,945 | ||||||||||||||||||
Non-current assets | ||||||||||||||||||||||||||
Other non-financial assets, non current | 12 | 220,807 | - | - | 220,807 | (8,604 | )(9) | 212,203 | ||||||||||||||||||
Properties, plants and equipment | 17 | 10,065,335 | - | - | 10,065,335 | 2,865,317 | (9) | 12,930,652 | ||||||||||||||||||
Deferred tax assets | 18 | 364,021 | 89 | (2) | 6,005 | (7) | 370,115 | 449 | (10) | 370,564 | ||||||||||||||||
Current liabilities | ||||||||||||||||||||||||||
Other current financial liabilities | 7-19 | 1,300,949 | - | - | 1,300,949 | 319,030 | (11) | 1,619,979 | ||||||||||||||||||
Trade and other accounts payables | 7-20 | 1,695,202 | - | (22,192 | )(5) | 1,673,010 | (4,398 | )(9) | 1,668,612 | |||||||||||||||||
Other non-financial liabilities, current | 22 | 2,823,963 | - | �� | 77,640 | (6) | 2,901,603 | - | 2,901,603 | |||||||||||||||||
Non-current liabilities | ||||||||||||||||||||||||||
Other non current financial liabilities | 7-19 | 6,605,508 | - | - | 6,605,508 | 2,827,942 | (11) | 9,433,450 | ||||||||||||||||||
Accounts payable commercial and other | 7-24 | 498,832 | - | - | 498,832 | 60,611 | (9) | 559,443 | ||||||||||||||||||
Deferred tax liability | 18 | 949,697 | (1,021 | )(2) | 4,472 | (5) | 953,148 | (75,400 | )(10) | 877,748 | ||||||||||||||||
Equity | ||||||||||||||||||||||||||
Equity attributable to the owners of the parent | ||||||||||||||||||||||||||
Accumulated earnings | 25 | 475,118 | (9,995 | )(3) | 446 | (8) | 465,569 | (506,581 | )(12) | (41,012 | ) | |||||||||||||||
Other reserves | 25 | 554,884 | - | - | 554,884 | 205,877 | (12) | 760,761 | ||||||||||||||||||
Non-controlling interest | 14 | 91,147 | - | - | 91,147 | (690 | )(12) | 90,457 |
13
b) | As of December 31, 2018: |
As of | Adoption | As of | ||||||||||||
December 31, | impact | December 31, | ||||||||||||
Note | 2018 | IFRS 16 | 2018 | |||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||||
Restated | ||||||||||||||
Current assets | ||||||||||||||
Other non-financial assets, current | 12 | 320,977 | (30,501 | )(9) | 290,476 | |||||||||
Non-current assets | ||||||||||||||
Other non-financial assets, non current | 12 | 233,741 | (6,200 | )(9) | 227,541 | |||||||||
Properties, plants and equipment | 17 | 9,953,365 | 2,548,444 | (9) | 12,501,809 | |||||||||
Deferred tax assets | 18 | 273,328 | 201 | (10) | 273,529 | |||||||||
Current liabilities | ||||||||||||||
Other current financial liabilities | 7 - 19 | 1,430,789 | 363,497 | (11) | 1,794,286 | |||||||||
Non-current liabilities | ||||||||||||||
Other non current financial liabilities | 7 - 19 | 5,864,910 | 2,494,552 | (11) | 8,359,462 | |||||||||
Accounts payable commercial and other | 7 - 24 | 483,656 | 45,621 | (9) | 529,277 | |||||||||
Deferred tax liability | 18 | 872,121 | (85,550 | )(10) | 786,571 | |||||||||
Equity | ||||||||||||||
Equity attributable to the owners of the parent | ||||||||||||||
Accumulated earnings | 25 | 597,676 | (378,705 | )(12) | 218,971 | |||||||||
Other reserves | 25 | (76,926 | ) | 72,561 | (12) | (4,365 | ) | |||||||
Non-controlling interest | 14 | 79,940 | (32 | )(12) | 79,908 |
- Effects of adopting IFRS 9
(1) | Expected credit losses: The Company modified the calculation of the impairment provision to comply with the expected credit loss model, established in IFRS 9 Financial Instruments, which replaces the current loss impairment model incurred. To the calculate percentage of credit losses, a risk matrix was used, grouping the portfolio, according to similar characteristics of risk and maturity. This change resulted in the recognition of an increase in the provision for impairment losses of US $ (11.1) million. |
This standard also includes requirements related to the classification and measurement of financial assets and liabilities and an expected credit loss model that replaces the current loss impairment model incurred.
As of January 1, 2018, the calculation of the impairment losses provision are as follows:
Portfolio maturity | ||||||||||||||||||||||||
Up to | Up to | More than | ||||||||||||||||||||||
Up to | 91 to | 181 to | 360 | |||||||||||||||||||||
Up to date | 90 days | 180 days | 360 days | days | Total | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Expected loss rate | 1 | % | 21 | % | 46 | % | 67 | % | 94 | % | 8 | % | ||||||||||||
Gross book value | 1,046,909 | 36,241 | 12,001 | 14,623 | 66,022 | 1,175,796 | ||||||||||||||||||
Impairment provision | (13,570 | ) | (7,774 | ) | (5,499 | ) | (9,803 | ) | (61,787 | ) | (98,433 | ) |
(2) | Deferred tax adjustments originated by the application of IFRS 9. |
(3) | Net effect on accumulated results of the adjustments indicated above. |
14
In addition to the impacts on the consolidated statement of financial position, the application of IFRS 9: Financial Instruments requires the classification of financial instruments according to the business model, to determine the form of measurement of financial instruments, after their initial recognition.
The Company analyzed the business models and classified its financial assets and liabilities according to the following:
Classification IAS 39 | Classification IFRS 9 | |||||||||||||||||||||||||||
Initial | ||||||||||||||||||||||||||||
Loans | Hedge | Held | as fair value | At fair value | ||||||||||||||||||||||||
and | and | for | through profit | Cost | with changes | |||||||||||||||||||||||
Assets | receivables | derivatives | trading | and loss | amortized | in results | Total | |||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||
Balance as of December 31, 2017 | 2,446,864 | 62,867 | 1,915 | 501,890 | - | - | 3,013,536 | |||||||||||||||||||||
Cash and cash equivalents | (1,112,346 | ) | - | - | (29,658 | ) | 1,112,346 | 29,658 | - | |||||||||||||||||||
Other financial assets, current | (23,918 | ) | - | (1,421 | ) | (472,232 | ) | 23,918 | 473,653 | - | ||||||||||||||||||
Trade debtors and other accounts receivable, current | (1,214,050 | ) | - | - | - | 1,214,050 | - | - | ||||||||||||||||||||
Accounts receivable from entities related, current | (2,582 | ) | - | - | - | 2,582 | - | - | ||||||||||||||||||||
Other financial assets, non-current | (87,077 | ) | - | (494 | ) | - | 87,077 | 494 | - | |||||||||||||||||||
Accounts receivable, non-current | (6,891 | ) | - | - | - | 6,891 | - | - | ||||||||||||||||||||
Balance as of January 1, 2018 | - | 62,867 | - | - | 2,446,864 | 503,805 | 3,013,536 |
Classification IAS 39 | Classification IFRS 9 | |||||||||||||||
Others | Held | |||||||||||||||
financial | hedge | Cost | ||||||||||||||
Liabilities | liabilities | derivatives | amortized | Total | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Balance as of December 31, 2017 | 10,086,434 | 14,817 | - | 10,101,251 | ||||||||||||
Other current financial liabilities | (1,288,749 | ) | - | 1,288,749 | - | |||||||||||
Trade accounts payable and other accounts payable, current | (1,695,202 | ) | - | 1,695,202 | - | |||||||||||
Accounts payable to related entities, current | (760 | ) | - | 760 | - | |||||||||||
Other financial liabilities, not current | (6,602,891 | ) | - | 6,602,891 | - | |||||||||||
Accounts payable, not current | (498,832 | ) | - | 498,832 | - | |||||||||||
Balance as of January 1, 2018 (*) | - | 14,817 | 10,086,434 | 10,101,251 |
(*) Balances as of January 1, 2018 do not contain the re-expression effects originated by IFRS 16. - Effects of adopting IFRS 15
(4) Contract costs: The Company has capitalized the costs related to the revenues from air transport of passengers, corresponding to: the commissions charged by the credit card administrators for US$ 22.0 million and the air ticket booking services through the system general distribution (GDS) for US$ 15.6 million. Additionally, there is a reclassification of commissions from travel agencies for US$ 16.8 million, which previously were presented, according IAS 18, net of the liability to fly in other non-financial liabilities.
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(5) Contract liabilities: The Company has adjusted certain concepts that were recorded as obligations with suppliers and customers, which must now be treated as contract liabilities; therefore, they must be deferred until the benefit of the service have been rendered. These concepts are mainly related to the ground transportation service for US $ 15.6 million and traveler’s checks for US $ 6.6 million.
(6) Performance Obligations: The Company analyzed the moment in which the performance obligations identified in the contracts with customers must be recognized in the consolidated result. During this analysis, some concepts were identified which must be deferred until the moment of service provision, mainly related to land transportation services, charges for modifications to the initial contract in the sale of tickets and redeem of some products associated with loyalty programs for US$ 60.8 million. Additionally, there is the reclassification detailed in numeral (4) for US$ 16.8 million.
(7) Deferred tax adjustments originated by the application of IFRS 15.
(8) Net effect on accumulated results of the adjustments indicated above.
Additionally, the Company concluded that, in the rendering of certain services, it acted as agent in the provision of these services, therefore some reclassifications were made in the consolidated income statement to reflect the corresponding commission.
- Effects of adopting IFRS 16
(9) Company recognized under Property, plant and equipment right of use assets for US $ 2,865.3 million as of January 1, 2018 and US $ 2,548.4 as of December 31, 2018, associated with contracts that meet the definition of lease (Note 2.21 & 17).
The Company decrease other financial assets related to advance payments for leases for US $ 39.4 million as of January 1, 2018 and US $ 36.7 as of December 31, 2018, since with the application of the standard these amounts are considered in the initial measurement of the right of use asset. The Company increased the cost of restoration associated with the return of aircraft and engines for US $ 56.2 million as of January 1, 2018 and US $ 45.6 million as of December 31, 2018. With the application of the standard, the net present value of this cost was included in the asset for right of use and its counterpart in the line of accounts payable, current or non-current, depending on the return date of the aircraft or engines.
(10) Deferred taxes: adjustments originated by the application of IFRS 16.
(11) Lease liabilities: The Company recognized within the Other financial liabilities for lease for US $ 3,147.0 million as of January 1, 2018 and US $ 2,858.0 million as of December 31, 2018, associated with contracts that meet the definition of lease (Note 2.21 & 19).
(12) The effect of the recognition of the leases under IFRS 16 generated a decrease in retained earnings of US $ 506.6 million as of January 1, 2018 (US $ 378.7 million as of December 31, 2018). The increase in Other reserves of US $ 205.9 million as of January 1, 2018 (decrease of US $72,5 million as of December 31, 2018), was caused by the Cumulative translation adjustment of those subsidiaries with functional currencies other than the US dollar. The application of IFRS 16 also affected non-controlling interests.
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Impact recognized as a result of the adoption of IFRS 15 and IFRS 16 as of December 31, 2018 are presented in the consolidated income statement:
For the year ended december 31, 2018 | ||||||||||||||||||||||||||||||
Reconciliation Revenue | Adjustments for reconciliation | |||||||||||||||||||||||||||||
Nota | Results under IFRS 15 | Adoption impact IFRS16 | Results under IFRS 15 | Contract costs (4) | Deferred revenues recognition [(5), (6)] | Reclassifications | Results under IAS 18 | |||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||||
Published | Restated | |||||||||||||||||||||||||||||
IFRS 16 | ||||||||||||||||||||||||||||||
Revenue | 26 | 9,895,456 | - | 9,895,456 | - | 48,561 | 31,501 | 9,975,518 | ||||||||||||||||||||||
Cost of sales | (7,962,843 | ) | 189,411 | (7,773,432 | ) | - | (34,986 | ) | - | (7,808,418 | ) | |||||||||||||||||||
Gross margin | 1,932,613 | 189,411 | 2,122,024 | - | 13,575 | 31,501 | 2,167,100 | |||||||||||||||||||||||
Other income | 28 | 472,758 | - | 472,758 | - | - | 42,563 | 515,321 | ||||||||||||||||||||||
Distribution costs | (619,200 | ) | 3,986 | (615,214 | ) | (43 | ) | - | (20,003 | ) | (635,260 | ) | ||||||||||||||||||
Administrative expenses | (721,270 | ) | (15,063 | ) | (736,333 | ) | (806 | ) | - | (54,061 | ) | (791,200 | ) | |||||||||||||||||
Other expenses | (359,781 | ) | 3,531 | (356,250 | ) | - | - | - | (356,250 | ) | ||||||||||||||||||||
Other gains (losses) | 53,499 | - | 53,499 | - | - | - | 53,499 | |||||||||||||||||||||||
Income from operation activities | 758,619 | 181,865 | 940,484 | (849 | ) | 13,575 | - | 953,210 | ||||||||||||||||||||||
Financial income | 53,253 | - | 53,253 | - | - | - | 53,253 | |||||||||||||||||||||||
Financial costs | 27 | (356,269 | ) | (182,868 | ) | (539,137 | ) | - | - | - | (539,137 | ) | ||||||||||||||||||
Foreign exchange gains (losses) | 29 | (157,709 | ) | 119,639 | (38,070 | ) | - | - | - | (38,070 | ) | |||||||||||||||||||
Result of indexation units | (865 | ) | - | (865 | ) | - | - | - | (865 | ) | ||||||||||||||||||||
Income (loss) before taxes | 297,029 | 118,636 | 415,665 | (849 | ) | 13,575 | - | 428,391 | ||||||||||||||||||||||
Income (loss) tax expense / benefit | 18 | (83,782 | ) | 9,903 | (73,879 | ) | (23 | ) | (1,030 | ) | - | (74,932 | ) | |||||||||||||||||
NET INCOME (LOSS) FOR THE YEAR | 213,247 | 128,539 | 341,786 | (872 | ) | 12,545 | - | 353,459 | ||||||||||||||||||||||
Income (loss) attributable to owners of the parent | 181,935 | 127,876 | 309,811 | (872 | ) | 12,545 | - | 321,484 | ||||||||||||||||||||||
Income (loss) attributable to non- controlling interest | 14 | 31,312 | 663 | 31,975 | - | - | - | 31,975 | ||||||||||||||||||||||
Net income (loss) for the period | 213,247 | 128,539 | 341,786 | (872 | ) | 12,545 | - | 353,459 |
In the income statement, with the implementation of the IFRS16 standard, restated were made in the following lines:
- | Cost of sale, distribution costs, administrative expenses: net effect of derecognized of rental cost and recognition of the depreciation of the right of use. |
- | Financial Costs: interest expense corresponding to the lease liability. |
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Impact recognized as a result of the adoption of IFRS 16 for the year ended December 31, 2018 are presented in the consolidated statement of cash flows:
For the year ended | Adoption | For the year ended | ||||||||||
December 31 | impact | December 31, | ||||||||||
2018 | IFRS 16 | 2018 | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
Restated | ||||||||||||
Payments to suppliers for goods and services | (7,331,390 | ) | 556,387 | (1) | (6,775,003 | ) | ||||||
Net cash flows from operating activities | (7,331,390 | ) | 556,387 | (6,775,003 | ) | |||||||
Loans repayments | (1,045,662 | ) | (692,687 | )(2) | (1,738,349 | ) | ||||||
Payments of finance lease liabilities | (692,687 | ) | 692,687 | (2) | - | |||||||
Payments of lease liabilities | - | (373,439 | )(1) | (373,439 | ) | |||||||
Interest paid | (357,355 | ) | (182,948 | )(1) | (540,303 | ) | ||||||
Net cash flows (used in) financing activities | (2,095,704 | ) | (556,387 | ) | (2,652,091 | ) |
(1)Correspond to the reclassification of lease payments, principal to payment of lease liability and interest to interest paid.
(2) Correspond to the reclassification of leases payments previously classified as financial lease.
(b) Accounting pronouncements not yet in force for financial years beginning on January 1, 2019 and which has not been early adopted.
(i) Standards and amendments | Date of issue | Effective Date |
IFRS 17: Insurance contracts | May 2017 | January 1, 2021 |
Amendment to IFRS 10: Consolidated financial statements and IAS 28 Investments in associates and joint ventures. | September 2014 | To be determined |
Amendment to IFRS 3: Business combination | October 2018 | January 1, 2020 |
Amendment to IAS 1: Presentation of financial statements and IAS 8 Accounting Policies, Changes in Accounting Estimates and Errors | October 2018 | January 1, 2020 |
Amendment to IFRS 9: Financial instruments; IAS 39: Financial instruments: Recognition and measurement; Y IFRS 7: Financial instruments: Disclosures | September 2019 | January 1, 2020 |
The management of the Company estimates that the adoption of the standards, amendments and Interpretations described above, will not have a significant impact on the consolidated financial statements of the Company in the application of its first adoption. At the close consolidated financial statements, the Company is analyzing the possible effects of the amendment issued in September 2019 to IFRS 9, IAS 39 and IFRS 7 for the reform of interest rates of reference.
2.2. | Basis of Consolidation |
(a) | Subsidiaries |
Subsidiaries are all the entities (including special-purpose entities) over which the Company has the power to control the financial and operating policies, which are generally accompanied by a holding of more than half of the voting rights. In evaluating whether the Company controls another entity, the existence and effect of potential voting rights that are currently exercisable or convertible at the date of the consolidated financial statements are considered. The subsidiaries are consolidated from the date on which control is passed to the Company and they are excluded from the consolidation on the date they cease to be so controlled. The results and flows are incorporated from the date of acquisition.
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Balances, transactions and unrealized gains on transactions between the Company’s entities are eliminated. Unrealized losses are also eliminated unless the transaction provides evidence of an impairment loss of the asset transferred. When necessary in order to ensure uniformity with the policies adopted by the Company, the accounting policies of the subsidiaries are modified.
To account for and identify the financial information revealed when carrying out a business combination, such as the acquisition of an entity by the Company, is apply the acquisition method provided for in IFRS 3: Business combination.
(b) | Transactions with non-controlling interests |
The Group applies the policy of considering transactions with non-controlling interests, when not related to loss of control, as equity transactions without an effect on income.
(c) | Sales of subsidiaries |
When a subsidiary is sold and a percentage of participation is not retained, the Company derecognizes assets and liabilities of the subsidiary, the non-controlling and other components of equity related to the subsidiary. Any gain or loss resulting from the loss of control is recognized in the consolidated income statement in Other gains (losses).
If LATAM Airlines Group S.A. and Subsidiaries retain an ownership of participation in the sold subsidiary, and does not represent control, this is recognized at fair value on the date that control is lost, the amounts previously recognized in Other comprehensive income are accounted as if the Company had disposed directly from the assets and related liabilities, which can cause these amounts are reclassified to profit or loss. The percentage retained valued at fair value is subsequently accounted using the equity method.
(d) | Investees or associates |
Investees or associates are all entities over which LATAM Airlines Group S.A. and Subsidiaries have significant influence but have no control. This usually arises from holding between 20% and 50% of the voting rights. Investments in associates are booked using the equity method and are initially recognized at their cost.
2.3. | Foreign currency transactions |
(a) | Presentation and functional currencies |
The items included in the financial statements of each of the entities of LATAM Airlines Group S.A. and Subsidiaries are valued using the currency of the main economic environment in which the entity operates (the functional currency). The functional currency of LATAM Airlines Group S.A. is the United States dollar which is also the presentation currency of the consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries.
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(b) | Transactions and balances |
Foreign currency transactions are translated to the functional currency using the exchange rates on the transaction dates. Foreign currency gains and losses resulting from the liquidation of these transactions and from the translation at the closing exchange rates of the monetary assets and liabilities denominated in foreign currency are shown in the consolidated statement of income by function except when deferred in Other comprehensive income as qualifying cash flow hedges.
(c) | Adjustment due to hyperinflation |
After July 1, 2018, the Argentine economy was considered, for purposes of IFRS, hyperinflationary. The financial statements of the subsidiaries whose functional currency is the Argentine Peso have been restated.
The non-monetary items of the statement of financial position as well as the income statement, comprehensive incomes and cash flows of the group’s entities, whose functional currency corresponds to a hyperinflationary economy, are adjusted for inflation and re-expressed in accordance with the variation of the consumer price index (“CPI”), at each presentation date of its financial statements. The re-expression of non-monetary items is made from the date of initial recognition in the statements of financial position and considering that the financial statements are prepared under the historical cost criterion.
Net losses or gains arising from the re-expression of non-monetary items and income and costs are recognized in the consolidated income statement under “Result of indexation units”.
Net gains and losses on the re-expression of opening balances due to the initial application of IAS 29 are recognized in the consolidated retained earnings.
Re-expression due to hyperinflation will be recorded until the period in which the economy of the entity ceases to be considered as a hyperinflationary economy, at that time, the adjustments made by hyperinflation will be part of the cost of non-monetary assets and liabilities.
The comparative amounts in the Consolidated financial statements of the Company are presented in a stable currency and are not adjusted for subsequent changes in the price level or exchange rates.
(d) | Group entities |
The results and the financial situation of the Group’s entities, whose functional currency is different from the presentation currency of the consolidated financial statements, of LATAM Airlines Group S.A., which does not correspond to the currency of a hyperinflationary economy, are converted into the currency of presentation as follows:
(i) Assets and liabilities of each consolidated statement of financial position presented are translated at the closing exchange rate on the consolidated statement of financial position date;
(ii) The revenues and expenses of each income statement account are translated at the exchange rates prevailing on the transaction dates, and
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(iii) All the resultant exchange differences by conversion are shown as a separate component in other comprehensive income.
For those subsidiaries of the group whose functional currency is different from the presentation currency and, moreover, corresponds to the currency of a hyperinflationary economy; its restated results, cash flow and financial situation are converted to the presentation currency at the closing exchange rate on the date of the consolidated financial statements.
The exchange rates used correspond to those fixed in the country where the subsidiary is located, whose functional currency is different to the U.S. dollar.
Adjustments to the Goodwill and fair value arising from the acquisition of a foreign entity are treated as assets and liabilities of the foreign entity and are translated at the closing exchange rate or period informed, restated when the currency came from the functional entity of the foreign entity corresponds to that of a hyperinflationary economy, the adjustments for the restatement of goodwill are recognized in the consolidated equity.
2.4. | Property, plant and equipment |
The land of LATAM Airlines Group S.A. and Subsidiaries, are recognized at cost less any accumulated impairment loss. The rest of the Properties, plants and equipment are recorded, both in their initial recognition and in their subsequent measurement, at their historical cost, restated for inflation when appropriate, less the corresponding depreciation and any loss due to deterioration.
The amounts of advances paid to the aircraft manufacturers are activated by the Company under Construction in progress until they are received.
Subsequent costs (replacement of components, improvements, extensions, etc.) are included in the value of the initial asset or are recognized as a separate asset, only when it is probable that the future economic benefits associated with the elements of property, plant and equipment, they will flow to the Company and the cost of the item can be determined reliably. The value of the replaced component is written off. The rest of the repairs and maintenance are charged to the result of the year in which they are incurred.
The depreciation of the properties, plants and equipment is calculated using the linear method over their estimated technical useful lives; except in the case of certain technical components which are depreciated on the basis of cycles and hours flown.
The residual value and the useful life of the assets are reviewed and adjusted, if necessary, once a year.
When the value of an asset exceeds its estimated recoverable amount, its value is immediately reduced to its recoverable amount (Note 2.8).
Losses and gains from the sale of property, plant and equipment are calculated by comparing the consideration with the book value and are included in the consolidated statement of income.
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2.5. | Intangible assets other than goodwill |
(a) | Airport slots and Loyalty program |
Airport slots and the Coalition and Loyalty program are intangible assets of indefinite useful life and are subject to impairment tests annually as an integral part of each CGU identified by the Company, in accordance with the premises that are applicable, included as follows:
Airport slots – Air transport CGU
Loyalty program – Air transport CGU
(See Note 16)
The airport slots correspond to an administrative authorization to carry out operations of arrival and departure of aircraft at a specific airport, within a specified period.
The Loyalty program corresponds to the system of accumulation and redemption of points that has developed Multiplus S.A., program that is part of TAM Linhas Aereas S.A. (See Note 1).
The Brands, airport Slots and Loyalty program were recognized in fair values determined in accordance with IFRS 3, as a consequence of the business combination with TAM and Subsidiaries.
(b) | Computer software |
Licenses for computer software acquired are capitalized on the basis of the costs incurred in acquiring them and preparing them for using the specific software. These costs are amortized over their estimated useful lives, for which the Company has been defined useful lives between 3 and 10 years.
Expenses related to the development or maintenance of computer software which do not qualify for capitalization, are shown as an expense when incurred. The personnel costs and others cost directly related to the production of unique and identifiable computer software controlled by the Company, are shown as intangible Assets others than Goodwill when they have met all the criteria for capitalization.
(c) | Brands |
The Brands were acquired in the business combination with TAM S.A. And Subsidiaries and recognized at fair value under IFRS. During the year 2016, the estimated useful life of the brands changes from an indefinite useful life to a five-year period, the period in which the value of the brands will be amortized (See Note 15).
2.6. | Goodwill |
Goodwill represents the excess of acquisition cost over the fair value of the Company’s participation in the net identifiable assets of the subsidiary or associate on the acquisition date. Goodwill related to acquisition of subsidiaries is not amortized but tested for impairment annually or each time that there is evidence of impairment. Gains and losses on the sale of an entity include the book amount of the goodwill related to the entity sold.
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2.7. | Borrowing costs |
Interest costs incurred for the construction of any qualified asset are capitalized over the time necessary for completing and preparing the asset for its intended use.
2.8. | Losses for impairment of non-financial assets |
Intangible assets that have an indefinite useful life and developing IT projects are not subject to amortization and are subject to annual tests for impairment losses or if there are indications of impairment. Management conducts an impairment assessment annually or more frequently if events or changes in circumstances indicate potential impairment. An impairment loss is recognized for the amount by which the carrying amount of the cash generating unit exceeds its recoverable amount. The recoverable amount of the cash generating unit is the higher of value in use and fair value less costs to sell. The value in use is determined by management using a discounted cash flow model. For the purpose of assessing impairment losses, assets are grouped at the lowest level for which there are separately identifiable cash flows (cash generating units). Prior impairments of non-financial assets, other than goodwill, are reviewed for possible reversal at each reporting date.
2.9. | Financial assets |
As of January 1, 2018, the Company classifies its financial assets in the following categories: at fair value (either through other comprehensive income, or through gains or losses), and at amortized cost. The classification depends on the business model of the entity to manage the financial assets and the contractual terms of the cash flows.
The group reclassifies debt investments when, and only when, it changes its business model to manage those assets.
In the initial recognition, the Company measures a financial asset at its fair value plus, in the case of a financial asset classified at amortized cost, the transaction costs that are directly attributable to the acquisition of the financial asset. Transaction costs of financial assets accounted for at fair value through profit or loss are recorded as expenses in the income statement.
(a) | Debt instruments |
The subsequent measurement of debt instruments depends on the group’s business model to manage the asset and cash flow characteristics of the asset. The Company has two measurement categories in which the group classifies its debt instruments:
Amortized cost: the assets held for the collection of contractual cash flows where those cash flows represent only payments of principal and interest are measured at amortized cost. A gain or loss on a debt investment that is subsequently measured at amortized cost and is not part of a hedging relationship is recognized in income when the asset is derecognized or impaired. Interest income from these financial assets is included in financial income using the effective interest rate method.
Fair value through profit or loss: assets that do not meet the criteria of amortized cost or FVOCI are measured at fair value through profit or loss. A gain or loss on a debt investment that is subsequently measured at fair value through profit or loss and is not part of a hedging relationship is recognized in profit or loss and is presented net in the income statement within other gains / (losses) in the period in which it arises.
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(b) | Equity instruments |
Changes in the fair value of financial assets at fair value through profit or loss are recognized in other gains / (losses) in the statement of income as appropriate.
The Company evaluates in advance the expected credit losses associated with its debt instruments recorded at amortized cost. The applied impairment methodology depends on whether there has been a significant increase in credit risk.
2.10. | Derivative financial instruments and hedging activities |
Derivatives are recognized, in accordance with IAS 39 for hedge accounting and IFRS 9 for derivatives not qualify as hedge accounting, initially at fair value on the date on which the derivative contract was made and are subsequently valued at their fair value. The method to recognize the resulting loss or gain depends on whether the derivative has been designated as a hedging instrument and, if so, the nature of the item being hedged. The Company designates certain derivatives as:
(a) | Hedge of the fair value of recognized assets (fair value hedge); |
(b) | Hedge of an identified risk associated with a recognized liability or an expected highly- Probable transaction (cash-flow hedge), or |
(c) | Derivatives that do not qualify for hedge accounting. |
The Company documents, at the inception of each transaction, the relationship between the hedging instrument and the hedged item, as well as its objectives for managing risk and the strategy for carrying out various hedging transactions. The Company also documents its assessment, both at the beginning and on an ongoing basis, as to whether the derivatives used in the hedging transactions are highly effective in offsetting the changes in the fair value or cash flows of the items being hedged.
The total fair value of the hedging derivatives is booked as Other non-current financial asset or liability if the remaining maturity of the item hedged is over 12 months, and as an other current financial asset or liability if the remaining term of the item hedged is less than 12 months.
Derivatives not booked as hedges are classified as Other financial assets or liabilities.
(a) | Fair value hedges |
Changes in the fair value of designated derivatives that qualify as fair value hedges are shown in the consolidated statement of income, together with any change in the fair value of the asset or liability hedged that is attributable to the risk being hedged.
(b) | Cash flow hedges |
The effective portion of changes in the fair value of derivatives that are designated and qualify as cash flow hedges is shown in the statement of other comprehensive income. The loss or gain relating to the ineffective portion is recognized immediately in the consolidated statement of income under other gains (losses). Amounts accumulated in equity are reclassified to profit or loss in the periods when the hedged item affects profit or loss.
In case of variable interest-rate hedges, the amounts recognized in the statement of other comprehensive income are reclassified to results within financial costs at the same time the associated debts accrue interest.
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For fuel price hedges, the amounts shown in the statement of other comprehensive income are reclassified to results under the line item Cost of sales to the extent that the fuel subject to the hedge is used.
For foreign currency hedges, the amounts recognized in the statement of other comprehensive income are reclassified to income as deferred revenue resulting from the use of points, are recognized as Income.
When hedging instrument mature, is sold or fails to meet the requirements to be accounted for as hedges, any gain or loss accumulated in the statement of Other comprehensive income until that moment, remains in the statement of other comprehensive income and is reclassified to the consolidated statement of income when the hedged transaction is finally recognized. When it is expected that the hedged transaction is no longer going to occur, the gain or loss accumulated in the statement of other comprehensive income is taken immediately to the consolidated statement of income as “Other gains (losses)”.
(c) | Derivatives not booked as a hedge |
The changes in fair value of any derivative instrument that is not booked as a hedge are shown immediately in the consolidated statement of income in “Other gains (losses)”.
2.11. | Inventories |
Inventories, detailed in Note 10, are shown at the lower of cost and their net realizable value. The cost is determined on the basis of the weighted average cost method (WAC). The net realizable value is the estimated selling price in the normal course of business, less estimated costs necessary to make the sale.
2.12. | Trade and other accounts receivable |
Commercial accounts receivable are initially recognized at their fair value and subsequently at their amortized cost in accordance with the effective rate method, less the provision for impairment according to the model of the expected credit losses. The Company applies the simplified approach permitted by IFRS 9, which requires that expected lifetime losses be recognized upon initial recognition of accounts receivable.
In the event that the Company transfers its rights to any financial asset (generally accounts receivable) to a third party in exchange for a cash payment, the Company evaluates whether all risks and rewards have been transferred, in which case the account receivable is derecognized.
The existence of significant financial difficulties on the part of the debtor, the probability that the debtor goes bankrupt or financial reorganization are considered indicators of a significant increase in credit risk.
The carrying amount of the asset is reduced as the provision account is used and the loss is recognized in the consolidated income statement under “Cost of sales”. When an account receivable is written off, it is regularized against the provision account for the account receivable.
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2.13. | Cash and cash equivalents |
Cash and cash equivalents include cash and bank balances, time deposits in financial institutions, and other short-term and highly liquid investments.
2.14. | Capital |
The common shares are classified as net equity.
Incremental costs directly attributable to the issuance of new shares or options are shown in net equity as a deduction from the proceeds received from the placement of shares.
2.15. | Trade and other accounts payables |
Trade payables and other accounts payable are initially recognized at fair value and subsequently at amortized cost.
2.16. | Interest-bearing loans |
Financial liabilities are shown initially at their fair value, net of the costs incurred in the transaction. Later, these financial liabilities are valued at their amortized cost; any difference between the proceeds obtained (net of the necessary arrangement| costs) and the repayment value, is shown in the consolidated statement of income during the term of the debt, according to the effective interest rate method.
Financial liabilities are classified in current and non-current liabilities according to the contractual payment dates of the nominal principal.
2.17. | Current and deferred taxes |
The tax expense for the period comprises income and deferred taxes.
The current income tax expense is calculated based on tax laws in enacted the date of statement of financial position, in the countries in which the subsidiaries and associates operate and generate taxable income.
Deferred taxes are recognized, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements. However, deferred income tax is not accounted for if it arises from the initial recognition of an assets or a liability in transaction other than a business combination that at the time of the transaction does not affect the accounting or the taxable profit or loss. Deferred tax is determined using the tax rates (and laws) that have been enacted or substantially enacted at the date of the consolidated statements of financial position, and are expected to apply when the related deferred tax asset is realized or the deferred tax liability discharged.
Deferred tax assets are recognized only to the extent it is probable that the future taxable profit will be available against which the temporary differences can be utilized.
The tax (current and deferred) is recognized in statement of income by function, unless it relates to an item recognized in other comprehensive income, directly in equity. In this case the tax is also recognized in other comprehensive income or, directly in the statement of income by function, respectively.
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2.18. | Employee benefits |
(a) | Personnel vacations |
The Company recognizes the expense for personnel vacations on an accrual basis.
(b) | Share-based compensation |
The compensation plans implemented based on the shares of the Company are recognized in the consolidated financial statements in accordance with IFRS 2: Share-based payments, for plans based on the granting of options, the effect of fair value is recorded in equity with a charge to remuneration in a linear manner between the date of grant of said options and the date on which they become irrevocable, for the plans considered as cash settled award the fair value, updated as of the closing date of each reporting period, is recorded as a liability with charge to remuneration.
(c) | Post-employment and other long-term benefits |
Provisions are made for these obligations by applying the method of the projected unit credit method, and considering estimates of future permanence, mortality rates and future wage increases determined on the basis of actuarial calculations. The discount rates are determined by reference to market interest-rate curves. Actuarial gains or losses are shown in other comprehensive income.
(d) | Incentives |
The Company has an annual incentives plan for its personnel for compliance with objectives and individual contribution to the results. The incentives eventually granted consist of a given number or portion of monthly remuneration and the provision is made on the basis of the amount estimated for distribution.
2.19. | Provisions |
Provisions are recognized when:
(i) | The Company has a present legal or implicit obligation as a result of past events; |
(ii) | It is probable that payment is going to be necessary to settle an obligation; and |
(iii) | The amount has been reliably estimated. |
2.20. | Revenue from contracts with customers |
(a) | Transportation of passengers and cargo |
The Company recognizes the sale for the transportation service as a deferred income liability, which is recognized as income when the transportation service has been lent or expired. In the case of air transport services sold by the Company and that will be made by other airlines, the liability is reduced when they are remitted to said airlines. The Company periodically reviews whether it is necessary to make an adjustment to deferred income liabilities, mainly related to returns, changes, among others.
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Compensations granted to clients for changes in the levels of services or billing of additional services such as additional baggage, change of seat, among others, are considered modifications of the initial contract, therefore, they are deferred until the corresponding service is provided.
(b) | Expiration of air tickets |
The Company estimates in a monthly basis the probability of expiration of air tickets, with refund clauses, based on the history of use of the same. Air tickets without refund clause are expired on the date of the flight in case the passenger does not show up.
(c) | Costs associated with the contract |
The costs related to the sale of air tickets are activated and deferred until the corresponding service is provided. These assets are included under Other non-financial assets in the Consolidated Classified Statement of Financial Position.
(d) | Frequent passenger program |
The Company maintains the following loyalty programs: LATAM Pass, LATAM Pass Brasil, whose objective is building customer loyalty through the delivery of miles or points.
Members of these programs accumulate miles when flying with LATAM Airlines Group or any other member airline of the oneworld® program, as well purchasing of products and services from network of non airlines partners.
When the miles and points are exchanged for products and services other than the services provided by the Company, the income is immediately recognized. When the miles are redeemed through air tickets of an airline of LATAM Airlines Group S.A. and subsidiaries, the income is deferred until the transportation service are rendered or expiration for non-use.
In addition, the Company has contracts with certain non-airline companies for the sale of miles or points. These contracts include some performance obligations in addition to the sale of the mile or point, such as marketing, advertising and other benefits. The income associated with these concepts is recognized in the income statement to the extent that the miles are accredited.
Deferred income of loyalty programs is determined based on the estimated stand-alone selling price of unused miles and points awarded to the members of the loyalty programs, reduced for breakage.
The miles and points that the Company estimates will not be exchanged are recognized at the moment of the earn. Management uses statistical models to estimate the breakage based on the latest available information regarding redemption and expiration patterns.
(e) | Dividend income |
Dividend income is recognized when the right to receive payment is established.
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2.21. | Leases |
The Company recognizes contracts that meet the definition of a lease, as a right of use asset and a lease liability on the date when the underlying asset is available for use.
Assets for right of use are measured at cost including the following:
- | The amount of the initial measurement of the lease liability; |
- | Lease payment made at or before commencement date; |
- | Initial direct costs, and |
- | Restoration costs. |
The assets by right of use are recognized in the statement of financial position in Properties, plants and equipment (See Note 17).
Lease liabilities include the net present value of the following payments:
- | Fixed payments including in substance fixed payment. |
- | Variable lease payments that depend on an index or a rate; |
- | The exercise price of a purchase options, if is reasonably certain to exercise that option. |
The Company determines the present value of the lease payments using the implicit rates for the aircraft leasing contracts and for the rest of the underlying assets, uses the incremental borrowing rate.
Lease liabilities are recognized in the statement of financial position under Other financial liabilities, current or non-current (See Note 19).
Interest accrued on financial liabilities is recognized in the consolidated statement of income in “Financial costs”.
Principal and interest are presented in the consolidated cash flow as “Payments of lease liability” and “Interest paid”, respectively, in cash flows use in financing activities.
Payments associated with short-term leases without purchase options and leases of low-value assets are recognized on a straight-line basis in profit or loss at the time of accrual. Those payments are presented in cash flows use in operation activities.
The Company analyzes the financing agreements of aircrafts, mainly considering characteristics such as:
(a) that the Company initially acquired the aircraft or took an important part in the process of direct acquisition with the manufacturers.
(b) Due to the contractual conditions, it is virtually certain that the Company will execute the purchase option of the aircraft at the end of the lease term.
Since these financing agreements are “substantially purchases” and not leases, the related liability is considered as a financial debt classified under IFRS 9 and continue to be presented within the “other financial liabilities” described in Note 19. On the other hand, aircraft are presented in Property, plants and equipment as described in Note 17, as “own aircrafts”.
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The Group qualifies as sale and leaseback transactions, operations which lead to a sale according to IFRS 15. More specifically, a sale is considered as such if there is no repurchase option on the goods at the end of the lease term.
If the sale of the seller-lessee is classified as a sale in accordance with IFRS 15, the underlying asset is derecognized and an asset is recognized for the right to use equal to the retained part of the net carrying amount of the asset.
If the sale by the seller-lessee is not qualified as a sale in accordance with IFRS 15, the assets transferred are maintained in the financial statements and a financial liability is recognized equal to the sale price (received from the buyer-lessor).
2.22. | Non-current assets or disposal groups classified as held for sale |
Non-current assets (or disposal groups) classified as assets held for sale are shown at the lesser of their book value and the fair value less costs to sell.
2.23. | Maintenance |
The costs incurred for scheduled heavy maintenance of the aircraft’s fuselage and engines are capitalized and depreciated until the next maintenance. The depreciation rate is determined on technical grounds, according to the use of the aircraft expressed in terms of cycles and flight hours.
In case of aircraft include in property, plant and equipment, these maintenance cost are capitalized as Property, plant and equipment, while in the case of aircraft on right of use, a liability is accrued based on the use of the main components is recognized, since a contractual obligation with the lessor to return the aircraft on agreed terms of maintenance levels exists. These are recognized as Cost of sales.
Additionally, some contracts that comply with the definition of lease establish the obligation of the lessee to make deposits to the lessor as a guarantee of compliance with maintenance and return conditions. These deposits, often called maintenance reserves, accumulate until a major maintenance is performed, once made, the recovery is requested to the lessor. At the end of the contract period, there is comparison between the reserves that have been paid and required return conditions, and compensation between the parties are made if applicable.
The unscheduled maintenance of aircraft and engines, as well as minor maintenance, are charged to results as incurred.
2.24. | Environmental costs |
Disbursements related to environmental protection are charged to results when incurred.
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NOTE 3 - FINANCIAL RISK MANAGEMENT
3.1. | Financial risk factors |
The Company is exposed to different financial risks: (a) market risk, (b) credit risk, and (c) liquidity risk. The program overall risk management of the Company aims to minimize the adverse effects of financial risks affecting the company.
(a) | Market risk |
Due to the nature of its operations, the Company is exposed to market factors such as: (i) fuel-price risk, (ii) exchange -rate risk (FX), and (iii) interest -rate risk.
The Company has developed policies and procedures for managing market risk, which aim to identify, quantify, monitor and mitigate the adverse effects of changes in market factors mentioned above.
For this, the Administration monitors the evolution of price levels, exchange rates and interest rates, and quantifies their risk exposures (Value at Risk), and develops and implements hedging strategies.
(i) | Fuel-price risk: |
Exposition:
For the execution of its operations the Company purchases a fuel called Jet Fuel grade 54 USGC, which is subject to the fluctuations of international fuel prices.
Mitigation:
To cover the risk exposure fuel, the Company operates with derivative instruments (swaps and options) whose underlying assets may be different from Jet Fuel, being possible use West Texas Intermediate (“WTI”) crude, Brent (“BRENT”) crude and distillate Heating Oil (“HO”), which have a high correlation with Jet Fuel and greater liquidity.
Fuel Hedging Results:
During the period ended december 31, 2019, the Company recognized losses of US$ 23.1 million for fuel coverage net of premium. During the same period of 2018, the Company recognized gains of US$ 29.7 million for the same concept.
As of december 31, 2019, the market value of fuel positions amounted to US$ 48.5 million (positive). At the end of december 2018, this market value was US$ 15.8 million (negative).
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The following tables show the level of hedge for different periods:
Maturities | ||||||||||||||||||||
Positions as of December 31, 2019 (*) | Q120 | Q220 | Q320 | Q420 | Total | |||||||||||||||
Percentage of coverage over the expected volume of consumption | 65 | % | 61 | % | 20 | % | 19 | % | 41 | % |
(*) | The volume shown in the table considers all the hedging instruments (swaps and options). |
Maturities | ||||||||||||||||||||
Positions as of December 31, 2018 (*) | Q119 | Q219 | Q319 | Q419 | Total | |||||||||||||||
Percentage of coverage over the expected volume of consumption | 66 | % | 58 | % | 40 | % | 15 | % | 45 | % |
(*) | The volume shown in the table considers all the hedging instruments (swaps and options). |
Sensitivity analysis
A drop in fuel price positively affects the Company through a reduction in costs. However, also negatively affects contracted positions as these are acquired to protect the Company against the risk of a rise in price. The policy therefore is to maintain a hedge-free percentage in order to be competitive in the event of a drop in price.
The current hedge positions they are booked as cash flow hedge contracts, so a variation in the fuel price has an impact on the Company’s net equity.
The following table shows the sensitivity analysis of the financial instruments according to reasonable changes in the fuel price and their effect on equity. The term of the projection was defined until the end of the last current fuel hedge contract, being the last business day of the third quarter of 2020.
The calculations were made considering a parallel movement of US$ 5 per barrel in the curve of the JET crude futures benchmark price at the end of December 2019 and the end of December 2018.
Positions as of december 31, 2019 | Positions as of december 31, 2018 | |||||||
Benchmark price | effect on equity | effect on equity | ||||||
(US$ per barrel) | (millions of US$) | (millions of US$) | ||||||
+5 | +15.4 | +7.4 | ||||||
-5 | -34.5 | -5.5 |
Given the structure of fuel coverage during 2019, considers a hedge-free portion, a vertical drop of 5 dollars in the JET reference price (considered as the monthly average), would have meant an approximate impact US $ 121.8 million of lower fuel costs. For the same period, a vertical rise of US$ 5 in the JET reference price (considered as the monthly average) would have meant an impact of approximately US $ 114.2 million of higher fuel costs.
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(ii) | Foreign exchange rate risk: |
Exposition:
The functional and presentation currency of the financial statements of the Parent Company is the US dollar, so that the risk of the Transactional and Conversion exchange rate arises mainly from the Company’s business, strategic and accounting operating activities that are expressed in a monetary unit other than the functional currency.
The subsidiaries of LATAM are also exposed to foreign exchange risk whose impact affects the Company’s Consolidated Income.
The largest operational exposure to LATAM’s exchange risk comes from the concentration of businesses in Brazil, which are mostly denominated in Brazilian Real (BRL), and are actively managed by the company.
At a lower concentration, the Company is also exposed to the fluctuation of other currencies, such as: Euro, Pound sterling, Australian dollar, Colombian peso, Chilean peso, Argentine peso, Paraguayan Guarani, Mexican peso, Peruvian Sol and New Zealand dollar.
Mitigation:
The Company mitigates currency risk exposures by contracting derivative instruments or through natural hedges or execution of internal operations.
Exchange Rate Hedging Results (FX):
With the objective of reducing exposure to the exchange rate risk in the operational cash flows of 2019, and securing the operating margin, LATAM makes hedges using FX derivatives.
As of december 31, 2019, the market value of FX derivative positions amounted to US $ 0.04 million (negative). At the end of December 2018, the Company did not maintain derivatives of current FX hedges.
During the period endeddecember 31, 2019, the Company recognized gains of US $ 1.9 million for FX coverage net of premiums. During the same period of 2018, the Company recognized gains of US$ 18.3 million.
As of december 31, 2019, the Company has contracted FX derivatives for US $ 15 million for BRL. At the end of december 2018, the Company did not maintain current FX derivatives.
During 2018 the company contracted FX derivatives which were not registered under hedge accounting. As of december 31, 2019, the amount recognized in results amounts to US $ 6.2 million (negative) net of premiums.
Sensitivity analysis:
A depreciation of the R$/US$ exchange rate, negatively affects the Company’s operating cash flows, however, also positively affects the value of the positions of derivatives contracted.
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FX derivatives are recorded as cash flow hedge contracts; therefore, a variation in the exchange rate has an impact on the market value of the derivatives, the changes of which affect the Company’s net equity.
The following table shows the sensitization of FX derivative instruments according to reasonable changes in the exchange rate and its effect on equity. The projection period was defined until the end of the last coverage contract in force, with the last business day of the first quarter of the year 2020:
Appreciation (depreciation)(*) | Effect at december 31, 2019 | Effect at december 31, 2018 | |||||
of R$ | Millions of US$ | Millions of US$ | |||||
-10% | -0.6 | - | |||||
+10% | +1.1 | - |
(*) | Appreciation (depreciation) of US$ regard to the covered currencies. |
During 2018 and 2019, the Company contracted swap currency derivatives for debt coverage issued the same year for a notional UF 8.7 million and UF 5.0 million, respectively. As of December 31, 2019, the market value of the currency swaps derivative positions amounted to US $ 22.7 million (negative). At the end of December 2018, this market value was US $ 15.1 million (positive).
In the case of TAM S.A, whose functional currency is the Brazilian real, a large part of its liabilities is expressed in US dollars. Therefore, when converting financial assets and liabilities, from dollar to real, they have an impact on the result of TAM S.A., which is consolidated in the Company’s Income Statement.
In order to reduce the impact on the Company’s result caused by appreciations or depreciations of R $ / US $, the Company has executed internal operations to reduce the net exposure in US $ for TAM S.A.
The following table shows the variation of financial performance to appreciate or depreciate 10% exchange rate R$/US$:
Appreciation (depreciation)(*) | Effect at december 31, 2019 | Effect at december 31, 2018 | |||||
of R$/US$(*) | Millions of US$ | Millions of US$ | |||||
-10% | +9.5 | +39.8 | |||||
+10% | -9.5 | -39.8 |
(*) | Appreciation (depreciation) of US$ regard to the covered currencies. |
Effects of exchange rate derivatives in the Financial Statements
The profit or losses caused by changes in the fair value of hedging instruments are segregated between intrinsic value and temporary value. The intrinsic value is the actual percentage of cash flow covered, initially shown in equity and later transferred to income, while the hedge transaction is recorded in income. The temporary value corresponds to the ineffective portion of cash flow hedge which is recognized in the financial results of the Company (Note 19).
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Due to the functional currency of TAM S.A. and Subsidiaries is the Brazilian real, the Company presents the effects of the exchange rate fluctuations in Other comprehensive income by converting the Statement of financial position and Income statement of TAM S.A. and Subsidiaries from their functional currency to the U.S. dollar, which is the presentation currency of the consolidated financial statement of LATAM Airlines Group S.A. and Subsidiaries. The Goodwill generated in the Business combination is recognized as an asset of TAM S.A. and Subsidiaries in Brazilian real whose conversion to U.S. dollar also produces effects in other comprehensive income.
The following table shows the change in Other comprehensive income recognized in Total equity in the case of appreciate or depreciate 10% the exchange rate R$/US$:
Appreciation (depreciation) | Effect at december 31, 2019 | Effect at december 31, 2018 | ||||||
of R$/US$ | Millions of US$ | Millions of US$ | ||||||
-10% | +402.48 | +384.73 | ||||||
+10% | -329.29 | -314.78 |
(iii) | Interest -rate risk: |
Exposition:
The Company is exposed to fluctuations in interest rates affecting the markets future cash flows of the assets, and current and future financial liabilities.
The Company is exposed in one portion to the variations of London Inter-Bank Offer Rate (“LIBOR”) and other interest rates of less relevance are Brazilian Interbank Deposit Certificate (“IDC”).
Mitigation:
In order to reduce the risk of an eventual rise in interest rates, the Company has signed interest-rate swap and call option contracts. Currently a 62% (60% at December 31, 2018) of the debt is fixed to fluctuations in interest rate.
Rate Hedging Results:
As of december 31, 2019, the market value of the derivative positions of interest rates amounted to US $ 2.6 million (positive). At the end of December 2018, this market value was US $ 2.2 million (negative).
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Sensitivity analysis:
The following table shows the sensitivity of changes in financial obligations that are not hedged against interest-rate variations. These changes are considered reasonably possible, based on current market conditions each date.
Increase (decrease) futures curve in libor 3 months | Positions as of december 31, 2019 effect on profit or loss before tax (millions of US$) | Positions as of december 31, 2018 effect on profit or loss before tax (millions of US$) | ||||||
+100 basis points | -27.60 | -29.62 | ||||||
-100 basis points | +27.60 | +29.62 |
Much of the current rate derivatives are registered for as hedges of cash flow, therefore, a variation in the exchange rate has an impact on the market value of derivatives, whose changes impact on the Company’s net equity.
The calculations were made increasing (decreasing) vertically 100 basis points of the three-month Libor futures curve, being both reasonably possible scenarios according to historical market conditions.
Increase (decrease) futures curve in libor 3 months | Positions as of december 31, 2019 effect on equity (millions of US$) | Positions as of december 31, 2018 effect on equity (millions of US$) | ||||||
+100 basis points | +13.62 | +0.70 | ||||||
-100 basis points | -14.71 | -0.71 |
The assumptions of sensitivity calculation must assume that forward curves of interest rates do not necessarily reflect the real value of the compensation flows. Moreover, the structure of interest rates is dynamic over time.
During the periods presented, the Company has no registered amounts by ineffectiveness in consolidated statement of income for this kind of hedging.
(b) | Credit risk |
Credit risk occurs when the counterparty to a financial agreement or instrument fails to discharge an obligation due or financial instrument, leading to a loss in market value of a financial instrument (only financial assets, not liabilities).
The Company is exposed to credit risk due to its operative and financial activities, including deposits with banks and financial institutions, investments in other kinds of instruments, exchange-rate transactions and the contracting of derivative instruments or options.
To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities in Brazil with travel agents).
As a way to mitigate credit risk related to financial activities, the Company requires that the counterparty to the financial activities remain at least investment grade by major Risk Assessment Agencies. Additionally, the Company has established maximum limits for investments which are monitored regularly.
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(i) | Financial activities |
Cash surpluses that remain after the financing of assets necessary for the operation are invested according to credit limits approved by the Company’s Board, mainly in time deposits with different financial institutions, private investment funds, short-term mutual funds, and easily-liquidated corporate and sovereign bonds with short remaining maturities. These investments are booked as Cash and cash equivalents and other current financial assets.
In order to reduce counterparty risk and to ensure that the risk assumed is known and managed by the Company, investments are diversified among different banking institutions (both local and international). The Company evaluates the credit standing of each counterparty and the levels of investment, based on (i) their credit rating, (ii) the equity size of the counterparty, and (iii) investment limits according to the Company’s level of liquidity. According to these three parameters, the Company chooses the most restrictive parameter of the previous three and based on this, establishes limits for operations with each counterparty.
The Company has no guarantees to mitigate this exposure.
(ii) | Operational activities |
The Company has four large sales “clusters”: travel agencies, cargo agents, airlines and credit-card administrators. The first three are governed by International Air Transport Association, international (“IATA”) organization comprising most of the airlines that represent over 90% of scheduled commercial traffic and one of its main objectives is to regulate the financial transactions between airlines and travel agents and cargo. When an agency or airline does not pay their debt, they are excluded from operating with IATA’s member airlines. In the case of credit-card administrators, they are fully guaranteed by 100% by the issuing institutions.
The exposure consists of the term granted, which fluctuates between 1 and 45 days.
One of the tools the Company uses for reducing credit risk is to participate in global entities related to the industry, such as IATA, Business Sales Processing (“BSP”), Cargo Account Settlement Systems (“CASS”), IATA Clearing House (“ICH”) and banks (credit cards). These institutions fulfill the role of collectors and distributors between airlines and travel and cargo agencies. In the case of the Clearing House, it acts as an offsetting entity between airlines for the services provided between them. A reduction in term and implementation of guarantees has been achieved through these entities. Currently the sales invoicing of TAM Linhas Aéreas S.A. related with travel agents and cargo agents for domestic transportation in Brazil is done directly by TAM Linhas Aéreas S.A.
Credit quality of financial assets
The external credit evaluation system used by the Company is provided by IATA. Internal systems are also used for particular evaluations or specific markets based on trade reports available on the local market. The internal classification system is complementary to the external one, i.e. for agencies or airlines not members of IATA, the internal demands are greater.
To reduce the credit risk associated with operational activities, the Company has established credit limits to abridge the exposure of their debtors which are monitored permanently (mainly in case of operational activities of TAM Linhas Aéreas S.A. with travel agents). The bad-debt rate in the principal countries where the Company has a presence is insignificant.
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(c) | Liquidity risk |
Liquidity risk represents the risk that the Company has no sufficient funds to meet its obligations.
Because of the cyclical nature of the business, the operation, and its investment and financing needs related to the acquisition of new aircraft and renewal of its fleet, plus the financing needs, the Company requires liquid funds, defined as cash and cash equivalents plus other short term financial assets, to meet its payment obligations. The liquid funds, the future cash generation and the capacity to obtain additional funding, through bond issuance and banking loans, will allow the Company to obtain sufficient alternatives to face its investment and financing future commitments.
At december 31, 2019is US$ 1,459 million (US$ 1,404 million at december 31, 2018), invested in short term instruments through financial high credit rating levels entities.
In addition to the balance of liquid funds, the Company has access to short-term credit lines. As of december 31, 2019, LATAM has credit lines for working capital that are not committed to several banks and additionally has an unused committed line of US$ 600 million (US$ 600 million as of December 31, 2018) subject to availability of collateral.
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Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2019
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.
More than | More than | More than | ||||||||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | More than | ||||||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | Effective | Nominal | ||||||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | Amortization | rate | rate | |||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | ||||||||||||||||||||||||||||||||||||||||
Loans to exporters | ||||||||||||||||||||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | US$ | 24,387 | 76,256 | - | - | - | 100,643 | 99,000 | At Expiration | 3.29 | 3.29 | |||||||||||||||||||||||||||||||||||
97.003.000-K | BANCO DO BRASIL | Chile | US$ | 151,489 | 50,758 | - | - | - | 202,247 | 200,000 | At Expiration | 2.93 | 2.93 | |||||||||||||||||||||||||||||||||||
76.100.458-1 | HSBC | Chile | US$ | 12,098 | - | - | - | - | 12,098 | 12,000 | At Expiration | 3.25 | 3.25 | |||||||||||||||||||||||||||||||||||
76.100.458-1 | BLADEX | Chile | US$ | - | 29,277 | - | - | - | 29,277 | 29,000 | At Expiration | 2.82 | 2.82 | |||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||||||
97.023.000-9 | CORPBANCA | Chile | UF | 5,336 | 10,544 | - | - | - | 15,880 | 15,615 | Quarterly | 3.35 | 3.35 | |||||||||||||||||||||||||||||||||||
76.362.099-9 | BTG PACTUAL CHILE | Chile | UF | 484 | 1,451 | 63,872 | - | - | 65,807 | 62,769 | At Expiration | 3.10 | 3.10 | |||||||||||||||||||||||||||||||||||
0-E | SANTANDER | Spain | US$ | 1,514 | 4,809 | 141,719 | - | - | 148,042 | 137,860 | Quarterly | 3.62 | 4.61 | |||||||||||||||||||||||||||||||||||
Obligations with the public | ||||||||||||||||||||||||||||||||||||||||||||||||
97.030.000-7 | BANCO ESTADO | Chile | UF | - | 24,702 | 208,681 | 32,228 | 410,774 | 676,385 | 518,032 | At Expiration | 4.81 | 4.81 | |||||||||||||||||||||||||||||||||||
0-E | BANK OF NEW YORK | U.S.A. | US$ | 28,000 | 76,125 | 208,250 | 884,188 | 884,000 | 2,080,563 | 1,500,000 | At Expiration | 7.16 | 6.94 | |||||||||||||||||||||||||||||||||||
Guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 11,657 | 50,428 | 124,106 | 124,167 | 302,092 | 612,450 | 513,941 | Quarterly / Semiannual | 3.81 | 3.81 | |||||||||||||||||||||||||||||||||||
0-E | WILMINGTON TRUST COMPANY | U.S.A. | US$ | 31,733 | 94,096 | 244,836 | 237,815 | 438,659 | 1,047,139 | 866,223 | Quarterly | 4.45 | 4.45 | |||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 5,765 | 17,296 | 46,120 | 46,117 | 42,175 | 157,473 | 143,475 | Quarterly | 3.76 | 2.68 | |||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 13,365 | 40,159 | 99,556 | 86,984 | 79,724 | 319,788 | 282,906 | Quarterly | 3.82 | 3.82 | |||||||||||||||||||||||||||||||||||
0-E | MUFG | U.S.A. | US$ | 5,552 | 27,068 | 73,726 | 73,914 | 209,621 | 389,881 | 322,660 | Quarterly | 3.43 | 3.43 | |||||||||||||||||||||||||||||||||||
0-E | INVESTEC | England | US$ | 1,980 | 11,164 | 26,153 | 11,071 | - | 50,368 | 44,087 | Semiannual | 6.35 | 6.35 | |||||||||||||||||||||||||||||||||||
Other guaranteed obligation | ||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 2,326 | 6,740 | 260,259 | - | - | 269,325 | 253,692 | At Expiration | 3.74 | 3.74 | |||||||||||||||||||||||||||||||||||
0-E | MUFG | U.S.A. | US$ | 26,607 | 78,955 | 198,783 | 46,131 | - | 350,476 | 328,023 | Quarterly | 3.54 | 3.54 | |||||||||||||||||||||||||||||||||||
Financial lease | ||||||||||||||||||||||||||||||||||||||||||||||||
0-E | ING | U.S.A. | US$ | 4,025 | 8,108 | - | - | - | 12,133 | 11,806 | Quarterly | 5.71 | 5.01 | |||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 4,994 | 15,026 | 6,671 | - | - | 26,691 | 26,091 | Quarterly | 3.15 | 2.52 | |||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 19,412 | 56,148 | 117,881 | 16,653 | - | 210,094 | 200,907 | Quarterly | 3.39 | 2.80 | |||||||||||||||||||||||||||||||||||
0-E | PEFCO | U.S.A. | US$ | 1,950 | 1,950 | - | - | - | 3,900 | 3,827 | Quarterly | 5.65 | 5.03 | |||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 9,353 | 25,211 | 28,663 | 22,502 | 10,354 | 96,083 | 87,729 | Quarterly | 3.85 | 3.72 | |||||||||||||||||||||||||||||||||||
0-E | WELLS FARGO | U.S.A. | US$ | 35,251 | 105,691 | 261,181 | 203,232 | 14,382 | 619,737 | 591,684 | Quarterly | 2.67 | 1.98 | |||||||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 6,145 | 18,394 | 47,911 | 3,158 | - | 75,608 | 72,551 | Quarterly | 3.00 | 2.46 | |||||||||||||||||||||||||||||||||||
0-E | RRPF ENGINE | England | US$ | 1,152 | 3,432 | 8,967 | 8,679 | 568 | 22,798 | 19,643 | Monthly | 4.01 | 4.01 | |||||||||||||||||||||||||||||||||||
0-E | APPLE BANK | U.S.A. | US$ | 1,661 | 4,977 | 13,259 | 7,380 | - | 27,277 | 25,708 | Quarterly | 3.33 | 2.73 | |||||||||||||||||||||||||||||||||||
0-E | BTMU | U.S.A. | US$ | 3,367 | 10,081 | 26,827 | 14,153 | - | 54,428 | 51,340 | Quarterly | 3.33 | 2.73 | |||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 759 | 2,299 | 2,330 | - | - | 5,388 | 5,154 | Quarterly | 4.41 | 4.41 | |||||||||||||||||||||||||||||||||||
0-E | KFW IPEX-BANK | Germany | US$ | 1,804 | 3,607 | - | - | - | 5,411 | 5,328 | Quarterly | 3.55 | 3.55 | |||||||||||||||||||||||||||||||||||
0-E | AIRBUS FINANCIAL | U.S.A. | US$ | 2,038 | 5,746 | - | - | - | 7,784 | 7,664 | Monthly | 3.31 | 3.31 | |||||||||||||||||||||||||||||||||||
0-E | US BANK | U.S.A. | US$ | 18,328 | 54,864 | 145,364 | 140,555 | 17,681 | 376,792 | 349,127 | Quarterly | 4.01 | 2.82 | |||||||||||||||||||||||||||||||||||
0-E | PK AIRFINANCE | U.S.A. | US$ | 2,652 | 8,136 | 18,194 | - | - | 28,982 | 28,087 | Monthly | 3.45 | 3.45 | |||||||||||||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK (*) | U.S.A. | US$ | 26,111 | 78,742 | - | - | - | 104,853 | 101,026 | Quarterly | 6.00 | 6.00 | |||||||||||||||||||||||||||||||||||
Hedge derivative | ||||||||||||||||||||||||||||||||||||||||||||||||
- | OTHERS | - | US$ | - | 11,582 | 18,641 | 13,530 | - | 43,753 | 16,972 | - | 0.00 | 0.00 | |||||||||||||||||||||||||||||||||||
Total | 461,295 | 1,013,822 | 2,391,950 | 1,972,457 | 2,410,030 | 8,249,554 | 6,933,927 |
(*) | Bonus securitized with the future flows of credit card sales in the United States and Canada. |
39
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2019
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | than | ||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | Effective | Nominal | ||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | Amortization | rate | rate | |||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | ||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||
0-E | NCM | Holland | US$ | 173 | 499 | 722 | - | - | 1,394 | 1,289 | Monthly | 6.01 | 6.01 | |||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 4,140 | 7,965 | 77,028 | - | - | 89,133 | 86,256 | Quarterly / Semiannual | 6.29 | 6.29 | |||||||||||||||||||||||||||||||
0-E | WACAPOU LEASING S.A. | Luxembourg | US$ | 835 | 2,450 | 3,277 | - | - | 6,562 | 6,280 | Quarterly | 4.32 | 4.32 | |||||||||||||||||||||||||||||||
0-E | SOCIÉTÉ GÉNÉRALE MILAN BRANCH | Italy | US$ | 11,286 | 151,047 | - | - | - | 162,333 | 169,931 | Quarterly | 5.39 | 5.39 | |||||||||||||||||||||||||||||||
0-E | GA Telesis LLC | U.S.A. | US$ | 677 | 1,753 | 4,675 | 4,675 | 10,480 | 22,260 | 13,495 | Monthly | 14.72 | 14.72 | |||||||||||||||||||||||||||||||
Total | 17,111 | 163,714 | 85,702 | 4,675 | 10,480 | 281,682 | 277,251 |
40
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2019
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
More than | More than | More than | ||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | More than | ||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | ||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | ||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||||||||
Lease Liability | ||||||||||||||||||||||||||||||||||
- | AIRCRAFT | OTHERS | US$ | 146,036 | 417,929 | 1,002,564 | 877,353 | 1,357,910 | 3,801,792 | 3,042,231 | ||||||||||||||||||||||||
- | OTHER ASSETS | OTHERS | US$ | 3,017 | 8,649 | 21,381 | 19,815 | 16,314 | 69,176 | 53,931 | ||||||||||||||||||||||||
CLP | 160 | 478 | 531 | - | - | 1,169 | 1,195 | |||||||||||||||||||||||||||
UF | 2,713 | 4,736 | 5,789 | 1,373 | 2,956 | 17,567 | 17,145 | |||||||||||||||||||||||||||
COP | 71 | 161 | 37 | 2 | - | 271 | 259 | |||||||||||||||||||||||||||
EUR | 163 | 387 | 592 | 122 | - | 1,264 | 1,175 | |||||||||||||||||||||||||||
GBP | 16 | 10 | - | - | - | 26 | 24 | |||||||||||||||||||||||||||
MXN | 37 | 93 | 245 | 10 | - | 385 | 359 | |||||||||||||||||||||||||||
PEN | 95 | 129 | 83 | 16 | - | 323 | 306 | |||||||||||||||||||||||||||
Other currencies | 2,770 | 8,370 | 8,508 | 43,104 | - | 62,752 | 55,532 | |||||||||||||||||||||||||||
Trade and other accounts payables | ||||||||||||||||||||||||||||||||||
- | OTHERS | OTHERS | US$ | 371,527 | 13,993 | - | - | - | 385,520 | 385,520 | ||||||||||||||||||||||||
CLP | 220,383 | 905 | - | - | - | 221,288 | 221,288 | |||||||||||||||||||||||||||
BRL | 486,082 | 320 | - | - | - | 486,402 | 486,402 | |||||||||||||||||||||||||||
Other currencies | 576,378 | 1,716 | - | - | - | 578,094 | 578,094 | |||||||||||||||||||||||||||
Accounts payable to related parties currents | ||||||||||||||||||||||||||||||||||
78.591.370-1 | Bethia S.A. yFiliales | Chile | CLP | 53 | - | - | - | - | 53 | 53 | ||||||||||||||||||||||||
Foreing | Patagonia Seafarms INC | U.S.A. | CLP | 3 | - | - | - | - | 3 | 3 | ||||||||||||||||||||||||
Total | 1,809,504 | 457,876 | 1,039,730 | 941,795 | 1,377,180 | 5,626,085 | 4,843,517 | |||||||||||||||||||||||||||
Total consolidated | 2,287,910 | 1,635,412 | 3,517,382 | 2,918,927 | 3,797,690 | 14,157,321 | 12,054,695 |
41
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2018 Restated
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2 Chile.
More than | More than | More than | ||||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | More than | ||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | Effective | Nominal | ||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | Amortization | rate | rate | |||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | ||||||||||||||||||||||||||||||||||||
Loans to exporters | ||||||||||||||||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | US$ | 38,625 | 76,275 | - | - | - | 114,900 | 113,000 | At Expiration | 3.36 | 3.36 | |||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | UF | - | 52,490 | - | - | - | 52,490 | 50,785 | At Expiration | 3.31 | 3.31 | |||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 23,070 | - | - | - | - | 23,070 | 23,000 | At Expiration | 3.90 | 3.90 | |||||||||||||||||||||||||||||||
97.003.000-K | BANCO DO BRASIL | Chile | US$ | 201,884 | - | - | - | - | 201,884 | 200,000 | At Expiration | 3.64 | 3.64 | |||||||||||||||||||||||||||||||
97.951.000-4 | HSBC | Chile | US$ | 12,094 | - | - | - | - | 12,094 | 12,000 | At Expiration | 3.14 | 3.14 | |||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||
97.023.000-9 | CORPBANCA | Chile | UF | 5,778 | 17,086 | 16,662 | - | - | 39,526 | 38,231 | Quarterly | 3.35 | 3.35 | |||||||||||||||||||||||||||||||
0-E | BLADEX | U.S.A. | US$ | - | 15,766 | - | - | - | 15,766 | 15,000 | Semiannual | 6.74 | 6.74 | |||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 1,347 | 587 | 102,521 | - | - | 104,455 | 102,521 | Quarterly | 5.60 | 5.60 | |||||||||||||||||||||||||||||||
76.362.099-9 | BTG | Chile | UF | 510 | 1,531 | 69,435 | - | - | 71,476 | 65,862 | At Expiration | 3.10 | 3.10 | |||||||||||||||||||||||||||||||
Obligations with the public | ||||||||||||||||||||||||||||||||||||||||||||
0-E | BANK OF NEW YORK | U.S.A. | US$ | - | 84,375 | 614,375 | 96,250 | 724,063 | 1,519,063 | 1,200,000 | At Expiration | 7.44 | 7.03 | |||||||||||||||||||||||||||||||
97.030.000-7 | ESTADO | Chile | UF | - | 18,985 | 37,970 | 196,970 | 213,114 | 467,039 | 345,182 | At Expiration | 5.50 | 5.50 | |||||||||||||||||||||||||||||||
Guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 743 | 2,201 | 5,718 | 2,086 | - | 10,748 | 10,080 | Quarterly | 3.23 | 3.23 | |||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 14,741 | 61,973 | 152,826 | 145,252 | 250,387 | 625,179 | 511,698 | Quarterly | 4.55 | 4.55 | |||||||||||||||||||||||||||||||
0-E | WILMINGTON TRUST COMPANY | U.S.A. | US$ | 31,336 | 96,304 | 248,720 | 289,251 | 509,168 | 1,174,779 | 952,758 | Quarterly | 4.47 | 4.47 | |||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 12,757 | 38,398 | 102,062 | 77,710 | 65,232 | 296,159 | 269,365 | Quarterly | 3.82 | 2.93 | |||||||||||||||||||||||||||||||
0-E | US BANK | U.S.A. | US$ | 18,406 | 55,112 | 146,045 | 144,670 | 86,076 | 450,309 | 411,684 | Quarterly | 4.00 | 2.82 | |||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 14,027 | 42,132 | 111,528 | 92,228 | 124,910 | 384,825 | 324,524 | Quarterly | 4.69 | 4.69 | |||||||||||||||||||||||||||||||
0-E | PK AirFinance | U.S.A. | US$ | 2,490 | 7,663 | 25,610 | 3,153 | - | 38,916 | 37,615 | Monthly | 4.15 | 4.14 | |||||||||||||||||||||||||||||||
0-E | INVESTEC | England | US$ | 2,004 | 11,579 | 26,874 | 24,367 | - | 64,824 | 54,014 | Semiannual | 7.17 | 7.17 | |||||||||||||||||||||||||||||||
Other guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 2,576 | 8,380 | 273,122 | - | - | 284,078 | 253,692 | At Expiration | 4.11 | 4.11 | |||||||||||||||||||||||||||||||
0-E | DVB BANK SE | Germany | US$ | 28,087 | 83,260 | 213,177 | 122,674 | 20,274 | 467,472 | 422,065 | Quarterly | 4.42 | 4.42 | |||||||||||||||||||||||||||||||
Financial lease | ||||||||||||||||||||||||||||||||||||||||||||
0-E | ING | U.S.A. | US$ | 4,025 | 12,075 | 12,134 | - | - | 28,234 | 26,831 | Quarterly | 5.70 | 5.01 | |||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 7,618 | 21,994 | 27,811 | 1,684 | - | 59,107 | 56,403 | Quarterly | 3.66 | 3.31 | |||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 14,870 | 44,570 | 83,389 | 42,178 | - | 185,007 | 172,158 | Quarterly | 4.40 | 3.80 | |||||||||||||||||||||||||||||||
0-E | PEFCO | U.S.A. | US$ | 5,771 | 13,541 | 3,899 | - | - | 23,211 | 22,407 | Quarterly | 5.64 | 5.02 | |||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 8,467 | 25,214 | 26,933 | 1,641 | - | 62,255 | 59,567 | Quarterly | 3.90 | 3.58 | |||||||||||||||||||||||||||||||
0-E | WELLS FARGO | U.S.A. | US$ | 35,458 | 106,397 | 282,923 | 239,168 | 99,232 | 763,178 | 719,338 | Quarterly | 2.77 | 2.09 | |||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 6,340 | 19,025 | 49,945 | 26,779 | - | 102,089 | 95,022 | Quarterly | 3.68 | 3.14 | |||||||||||||||||||||||||||||||
0-E | RRPF ENGINE | England | US$ | 1,167 | 3,480 | 9,103 | 8,826 | 4,870 | 27,446 | 23,012 | Monthly | 4.01 | 4.01 | |||||||||||||||||||||||||||||||
0-E | APPLE BANK | U.S.A. | US$ | 1,711 | 5,175 | 13,640 | 13,394 | 760 | 34,680 | 31,544 | Quarterly | 3.93 | 3.33 | |||||||||||||||||||||||||||||||
0-E | BTMU | U.S.A. | US$ | 3,489 | 10,485 | 27,605 | 27,062 | 775 | 69,416 | 63,189 | Quarterly | 4.06 | 3.46 | |||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 4,242 | 9,870 | 9,815 | 563 | - | 24,490 | 23,161 | Quarterly | 4.28 | 4.12 | |||||||||||||||||||||||||||||||
0-E | KFW IPEX-BANK | Germany | US$ | 1,764 | 5,328 | 5,378 | - | - | 12,470 | 12,215 | Quarterly | 4.20 | 4.19 | |||||||||||||||||||||||||||||||
0-E | AIRBUS FINANCIAL | U.S.A. | US$ | 2,074 | 6,197 | 7,840 | - | - | 16,111 | 15,417 | Monthly | 4.19 | 4.19 | |||||||||||||||||||||||||||||||
0.00 | ||||||||||||||||||||||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK (*) | U.S.A. | US$ | 25,705 | 77,703 | 103,341 | - | - | 206,749 | 196,211 | Quarterly | 6.00 | 6.00 | |||||||||||||||||||||||||||||||
0-E | Boeing | U.S.A. | US$ | 559 | 1,425 | 55,728 | - | - | 57,712 | 55,727 | At Expiration | 4.01 | 4.01 | |||||||||||||||||||||||||||||||
Hedge derivative | ||||||||||||||||||||||||||||||||||||||||||||
- | OTHERS | - | US$ | 1,224 | 2,484 | 681 | - | - | 4,389 | 4,021 | - | 0.00 | 0.00 | |||||||||||||||||||||||||||||||
Total | 534,959 | 1,039,060 | 2,866,810 | 1,555,906 | 2,098,861 | 8,095,596 | 6,989,299 |
(*) | Bonus securitized with the future flows of credit card sales in the United States and Canada. |
42
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2018 Restated
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | than | ||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | Effective | Nominal | ||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | Amortization | rate | rate | |||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | ||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||
0-E | NEDERLANDSCHE | |||||||||||||||||||||||||||||||||||||||||||
NCM | Holland | US$ | 175 | 499 | 1,332 | 55 | - | 2,061 | 1,851 | Monthly | 6.01 | 6.01 | ||||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 4,195 | 7,935 | 46,780 | 41,872 | - | 100,782 | 95,789 | Quarterly / Semiannual | 6.87 | 6.87 | |||||||||||||||||||||||||||||||
0-E | WACAPOU LEASING S.A. | Luxembourg | US$ | 839 | 2,433 | 6,542 | - | - | 9,814 | 9,226 | Quarterly | 4.81 | 4.81 | |||||||||||||||||||||||||||||||
0-E | SOCIÉTÉ GÉNÉRALE MILAN BRANCH | Italy | US$ | 11,536 | 32,312 | 161,778 | - | - | 205,626 | 208,224 | Quarterly | 5.88 | 5.82 | |||||||||||||||||||||||||||||||
0-E | GA Telesis LLC | U.S.A. | US$ | 680 | 1,753 | 4,675 | 4,675 | 11,318 | 23,101 | 13,202 | Monthly | 15.62 | 15.62 | |||||||||||||||||||||||||||||||
Total | 17,425 | 44,932 | 221,107 | 46,602 | 11,318 | 341,384 | 328,292 |
43
Class of liability for the analysis of liquidity risk ordered by date of maturity as of December 31, 2018 Restated
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
More than | More than | More than | ||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | More than | ||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | Nominal | ||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | Total | value | ||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||||||||||||
Leases Liability | ||||||||||||||||||||||||||||||||||||||
- | AIRCRAFT | OTHERS | US$ | 140,780 | 420,561 | 1,015,495 | 785,417 | 1,298,585 | 3,660,838 | 2,721,352 | ||||||||||||||||||||||||||||
- | OTHER ASSETS | OTHERS | US$ | 4,968 | 14,536 | 25,689 | 20,029 | 21,138 | 86,360 | 86,360 | ||||||||||||||||||||||||||||
CLP | 57 | 170 | 1 | - | - | 228 | 228 | |||||||||||||||||||||||||||||||
UF | 1,683 | 2,565 | 667 | 34 | - | 4,949 | 4,949 | |||||||||||||||||||||||||||||||
COP | 304 | 731 | 366 | 21 | - | 1,422 | 1,422 | |||||||||||||||||||||||||||||||
EUR | 311 | 431 | 215 | - | - | 957 | 957 | |||||||||||||||||||||||||||||||
GBP | 45 | 128 | 36 | - | - | 209 | 209 | |||||||||||||||||||||||||||||||
MXN | 33 | 92 | 235 | 115 | - | 475 | 475 | |||||||||||||||||||||||||||||||
PEN | 183 | 409 | 114 | - | - | 706 | 706 | |||||||||||||||||||||||||||||||
Trade and other accounts payables | ||||||||||||||||||||||||||||||||||||||
- | OTHERS | OTHERS | US$ | 720,718 | 9,979 | - | - | - | 730,697 | 730,697 | ||||||||||||||||||||||||||||
CLP | 74,566 | 16,493 | - | - | - | 91,059 | 91,059 | |||||||||||||||||||||||||||||||
BRL | 309,552 | 66 | - | - | - | 309,618 | 309,618 | |||||||||||||||||||||||||||||||
Other currencies | 252,116 | 3,406 | - | - | - | 255,522 | 255,522 | |||||||||||||||||||||||||||||||
Accounts payable to related parties currents | ||||||||||||||||||||||||||||||||||||||
Foreign | Inversora Aeronáutica Argentina S.A. | Qatar | Argentina | ARS | 15 | - | - | - | - | 15 | 15 | |||||||||||||||||||||||||||
78.591.370-1 | Bethia S.A. y Filiales | Chile | CLP | 365 | - | - | - | - | 365 | 365 | ||||||||||||||||||||||||||||
Foreign | TAM Aviação Executiva e Taxi Aéreo S.A. | Chile | Brazil | BRL | 2 | - | - | - | - | 2 | 2 | |||||||||||||||||||||||||||
Total | 1,505,698 | 469,567 | 1,042,818 | 805,616 | 1,319,723 | 5,143,422 | 4,203,936 | |||||||||||||||||||||||||||||||
Total consolidated | 2,058,082 | 1,553,559 | 4,130,735 | 2,408,124 | 3,429,902 | 13,580,402 | 11,521,527 |
44
The Company has fuel, interest rate and exchange rate hedging strategies involving derivatives contracts with different financial institutions. The Company has margin facilities with each financial institution in order to regulate the mutual exposure produced by changes in the market valuation of the derivatives.
At the end of 2018, the Company had delivered US$ 5.0 million in guarantees for derivative margins, corresponding to cash and standby letters of credit. As of December 31, 2019, US$ 23.7 million were delivered in guarantees corresponding to cash and standby letters of credit. The increase was due to: i) the expiration of hedge contracts, ii) acquisition of new hedge contracts, and iii) changes in fuel prices, changes in exchange rates and interest rates.
3.2. | Capital risk management |
The Company’s objectives, with respect to the management of capital, are (i) to comply with the restrictions of minimum equity and (ii) to maintain an optimal capital structure.
The Company monitors its contractual obligations and the regulatory limitations in the different countries where the entities of the group are domiciled to assure they meet the limit of minimum net equity, where the most restrictive limitation is to maintain a positive net equity.
Additionally, the Company periodically monitors the short and long term cash flow projections to assure the Company has adequate sources of funding to generate the cash requirement to face its investment and funding future commitments.
The Company international credit rating is the consequence of the Company capacity to face its long terms financing commitments. As of December 31, 2019 the Company has an international long term credit rating of BB- with stable outlook by Standard & Poor’s, a BB- rating with stable outlook by Fitch Ratings and a Ba3 rating with stable outlook by Moody’s.
3.3. | Estimates of fair value. |
At december 31, 2019, the Company maintained financial instruments that should be recorded at fair value. These are grouped into two categories:
1. | Hedge Instruments: |
This category includes the following instruments:
- | Interest rate derivative contracts, |
- | Fuel derivative contracts, |
- | Currency derivative contracts. |
2. | Financial Investments: |
This category includes the following instruments:
- | Investments in short-term Mutual Funds (cash equivalent) |
- | Private investment funds. |
45
The Company has classified the fair value measurement using a hierarchy that reflects the level of information used in the assessment. This hierarchy consists of 3 levels (I) fair value based on quoted prices in active markets for identical assets or liabilities, (II) fair value calculated through valuation methods based on inputs other than quoted prices included within level 1 that are observable for the asset or liability, either directly (that is, as prices) or indirectly (that is, derived from prices) and (III) fair value based on inputs for the asset or liability that are not based on observable market data.
The fair value of financial instruments traded in active markets, such as investments acquired for trading, is based on quoted market prices at the close of the period using the current price of the buyer. The fair value of financial assets not traded in active markets (derivative contracts) is determined using valuation techniques that maximize use of available market information.
Valuation techniques generally used by the Company are quoted market prices of similar instruments and / or estimating the present value of future cash flows using forward price curves of the market at period end.
The following table shows the classification of financial instruments at fair value, depending on the level of information used in the assessment:
As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||||||||||||||||||
Fair value measurements using values | Fair value measurements using values | |||||||||||||||||||||||||||||||
considered as | considered as | |||||||||||||||||||||||||||||||
Fair value | Level I | Level II | Level III | Fair value | Level I | Level II | Level III | |||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||
Assets | ||||||||||||||||||||||||||||||||
Cash and cash equivalents | 222,094 | 222,094 | - | - | 43,653 | 43,653 | - | - | ||||||||||||||||||||||||
Short-term mutual funds | 222,094 | 222,094 | - | - | 43,653 | 43,653 | - | - | ||||||||||||||||||||||||
Other financial assets, current | 471,797 | 386,688 | 85,109 | - | 366,573 | 343,218 | 23,355 | - | ||||||||||||||||||||||||
Fair value interest rate derivatives | 27,044 | - | 27,044 | - | 19,460 | - | 19,460 | - | ||||||||||||||||||||||||
Fair value of fuel derivatives | 48,542 | - | 48,542 | - | - | - | - | - | ||||||||||||||||||||||||
Fair value of foreign currency derivative | 586 | - | 586 | - | 3,895 | - | 3,895 | - | ||||||||||||||||||||||||
Accrued interest since the last payment date Swap of currencies | 3 | - | 3 | - | - | - | - | - | ||||||||||||||||||||||||
Derivative not recognized as a hedge | - | - | - | - | 19,396 | 19,396 | - | - | ||||||||||||||||||||||||
Private investment funds | 386,669 | 386,669 | - | - | 322,428 | 322,428 | - | - | ||||||||||||||||||||||||
Certificate of Deposit (CBD) | 8,934 | - | 8,934 | - | - | - | - | - | ||||||||||||||||||||||||
Domestic and foreign bonds | 19 | 19 | - | - | 1,394 | 1,394 | - | - | ||||||||||||||||||||||||
Liabilities | ||||||||||||||||||||||||||||||||
�� | ||||||||||||||||||||||||||||||||
Other financial liabilities, current | 50,372 | - | 50,372 | - | 33,633 | 7,712 | 25,921 | - | ||||||||||||||||||||||||
Fair value of interest rate derivatives | 302 | - | 302 | - | 335 | - | 335 | - | ||||||||||||||||||||||||
Fair value of fuel derivatives | - | - | - | - | 15,678 | - | 15,678 | - | ||||||||||||||||||||||||
Fair value of foreign currency derivatives | 48,347 | - | 48,347 | - | 7,587 | - | 7,587 | - | ||||||||||||||||||||||||
Interest accrued since the last payment date of Currency Swap | 1,723 | - | 1,723 | - | 2,321 | - | 2,321 | - | ||||||||||||||||||||||||
Other financial liabilities, non current | - | - | - | - | 7,712 | 7,712 | - | - | ||||||||||||||||||||||||
Fair value of interest rate derivatives | - | - | - | - | 340 | - | 340 | - | ||||||||||||||||||||||||
Interest accrued since the last date of Swap interest rates | - | - | - | - | 340 | - | 340 | - |
46
Additionally, at December 31, 2019, the Company has financial instruments which are not recorded at fair value. In order to meet the disclosure requirements of fair values, the Company has valued these instruments as shown in the table below:
As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||
Book | Fair | Book | Fair | |||||||||||||
value | value | value | value | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Restated | Restated | |||||||||||||||
Cash and cash equivalents | 850,486 | 850,486 | 1,037,989 | 1,037,989 | ||||||||||||
Cash on hand | 4,982 | 4,982 | 8,974 | 8,974 | ||||||||||||
Bank balance | 329,633 | 329,633 | 331,218 | 331,218 | ||||||||||||
Overnight | 350,080 | 350,080 | 282,164 | 282,164 | ||||||||||||
Time deposits | 165,791 | 165,791 | 415,633 | 415,633 | ||||||||||||
Other financial assets, current | - | - | 17,411 | 17,411 | ||||||||||||
Other financial assets | - | - | 17,411 | 17,411 | ||||||||||||
Trade debtors, other accounts receivable and | ||||||||||||||||
Current accounts receivable | 1,244,348 | 1,244,348 | 1,162,582 | 1,162,582 | ||||||||||||
Accounts receivable from entities related, current | 19,645 | 19,645 | 2,931 | 2,931 | ||||||||||||
Other financial assets, not current | 46,907 | 46,907 | 58,700 | 58,700 | ||||||||||||
Accounts receivable, non-current | 4,725 | 4,725 | �� | 5,381 | 5,381 | |||||||||||
Other current financial liabilities | 1,835,288 | 2,019,068 | 1,397,156 | 1,942,332 | ||||||||||||
Accounts payable for trade and other accounts payable, current | 2,220,500 | 2,220,500 | 1,674,303 | 1,674,303 | ||||||||||||
Accounts payable to entities related, current | 56 | 56 | 382 | 382 | ||||||||||||
Other financial liabilities, not current | 8,530,418 | 8,846,418 | 5,864,570 | 8,387,939 | ||||||||||||
Accounts payable, not current | 619,110 | 619,110 | 483,656 | 483,656 |
The book values of accounts receivable and payable are assumed to approximate their fair values, due to their short-term nature. In the case of cash on hand, bank balances, overnight, time deposits and accounts payable, non-current, fair value approximates their carrying values.
The fair value of other financial liabilities is estimated by discounting the future contractual cash flows at the current market interest rate for similar financial instruments (Level II). In the case of Other financial assets, the valuation was performed according to market prices at period end. The book value of Other financial liabilities, current or non-current, do not include lease liabilities.
NOTE 4 - ACCOUNTING ESTIMATES AND JUDGMENTS
The Company has used estimates to value and record some of the assets, liabilities, income, expenses and commitments. Basically, these estimates refer to:
(a) | Evaluation of possible losses due to impairment of goodwill and intangible assets with indefinite useful life |
As of december 31, 2019, goodwill amount to ThUS$ 2,209,576 (ThUS$ 2,294,072 as of december 31, 2018), while the intangible assets comprise the Airport Slots for ThUS$ 845,959 (ThUS$ 828,969 as of december 31, 2018) and Loyalty Program for ThUS$ 263,806 (ThUS$ 274,420 as of december 31, 2018).
47
Management conducts an impairment test annually or more frequently if events or changes in circumstances indicate potential impairment. An impairment loss is recognized for the amount by which the carrying amount of the cash generating unit (CGU) exceeds its recoverable amount. For this evaluation, the Company had identified two CGUs, “Air transport” and “Multiplus coalition and loyalty program”, until December 31, 2018. After the merger of Multiplus (see Note 1), administrator of the Multiplus coalition and loyalty program, the Company has determined air transport as a single CGU. The classification of intangible assets of indefinite useful life in the CGUs, before and after the merger of Multiplus S.A. are as follow:
Coalition and loyalty | ||||||||||||||||
Air Transport CGU | Program Multiplus CGU | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31 | December 31, | December 31 | December 31, | |||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Goodwill | 2,209,576 | 1,845,136 | - | 448,936 | ||||||||||||
Airport Slots | 845,959 | 828,969 | - | - | ||||||||||||
Loyalty program | 263,806 | - | - | 274,420 |
Management’s value-in-use calculations included significant judgments and assumptions relating to revenue growth rates, exchange rates, discount rate, inflation rates, fuel price. The estimation of these assumptions requires significant judgment by the management, as these variables feature inherent uncertainty; however, the assumptions used are consistent with Company’s internal planning. Therefore, management evaluates and updates the estimates on an annual basis, in light of conditions that affect these variables. The main assumptions used as well as the corresponding sensitivity analyses are showed in Note 16.
(b) | Useful life, residual value, and impairment of property, plant, and equipment |
The depreciation of assets is calculated based on the linear model, except for certain technical components depreciated on cycles and hours flown. These useful lives are reviewed on an annual basis according with the Company’s future economic benefits associated with them.
Changes in circumstances such as: technological advances, business model, planned use of assets or capital strategy may render the useful life different to the lifespan estimated. When it is determined that the useful life of property, plant, and equipment must be reduced, as may occur in line with changes in planned usage of assets, the difference between the net book value and estimated recoverable value is depreciated, in accordance with the revised remaining useful life.
Residual values are estimated in accordance with the market value that these assets will have at the end of their useful life. The assets’ residual values and useful lives are reviewed, and adjusted if appropriate, once a year. An asset’s carrying amount is written down immediately to its recoverable amount if the asset’s carrying amount is greater than its estimated recoverable amount (Note 2.8).
(c) | Recoverability of deferred tax assets |
Management records deferred taxes on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts reported in the consolidated financial statements. Deferred tax assets are recognized only to the extent it is probable that the future taxable profit will be available against which the temporary differences can be utilized.
48
Management applied significant judgment in assessing the recoverability of deferred tax assets. In determining the amount of deferred tax assets to be recognized, management considered historical profitability, projected future taxable profit (including assumptions related the revenue growth rates, exchange rates, discount rate and fuel price which are in line with those used in the impairment analysis of the group's cash generating unit) and the expected timing of the reversals of existing temporary differences.
As of December 31, 2019, the Company has recognized deferred tax assets of ThUS$ 235,583 (ThUS$ 273,529 as of December 31, 2018) and has ceased to recognize deferred tax assets on tax losses of ThUS$ 110,933 (ThUS$ 137,761 December 31, 2018) (Note 18).
(d) | Air tickets sold that will not be finally used. |
The Company records the anticipated sale of air tickets as deferred income. Ordinary income from the sale of tickets is recognized in the income statement when the passenger transport service is provided or expired for non-use. The Company evaluates monthly the probability of expiration of air tickets, with return clauses, based on the history of use of air tickets. A change in this probability could generate an impact on revenue in the year in which the change occurs and in future years. As of December 31, 2019 the deferred income associated with the air tickets sold amounts to ThUS $ 1,511,991. - (ThUS $ 1,299,304 as of December 31, 2018). A hypothetical change of one percentage point in passenger behavior with respect to use would result in an impact of up to ThUS $ 6,000 per month.
(e) | Valuation of miles and points awarded to holders of loyalty programs, pending use. |
As of December 31, 2019, the deferred income associated with the LATAM Pass loyalty program amounts to ThUS$ 1,332,173 (ThUS$ 1,324,635 as of December 31, 2018). A hypothetical change of one percentage point in the probability of exchange of miles would result in an impact of ThUS$ 31,565 in the results of 2019 (ThUS$ 27,726 in 2018). Deferred income associated with the LATAM Pass Brasil loyalty program (See Note 22) amounts to ThUS$ 354,847 as of December 31, 2019 (ThUS$ 293,831 as of December 31, 2018). A hypothetical change of two percentage points in the probability of exchange of points would result in an impact of ThUS$ 12,501 in the results of 2019 (ThUS$ 13,140 in 2018).
Management used statistical models to estimate the miles and point awarded that will not be redeemed, by the programs members (breakage) which involved significant judgments and assumptions relating the historical redemption and expiration activity and forecasted redemption and expiration patterns.
For LATAM Pass Brazil, the expiration occurs after a fixed period from the time of the accumulation. Model is built by the management considering historical expiration rates, to costumers exchange behaviors and relevant segmentations.
For LATAM Pass there are rules that allow members to renew their miles, so the management in conjunction with an external specialist develop a predictive model of non-use miles, which allows to generate non-use rates on the basis of historical information, based on behavior of the accumulation, use and expiration of the miles.
49
(f) | Provisions needs, and their valuation when required |
Known contingencies are recognized when: The Company has a present legal or constructive obligation as a result of past events; it is probable that an outflow of resources will be required to settle the obligation and the amount has been reliably estimated. The Company applies professional judgment, experience, and knowledge to use available information to determine these values, in light of the specific characteristics of known risks. This process facilitates the early assessment and valuation of potential risks in individual cases or in the development of contingent eventualities.
(g) | Leases |
(i) | Discount rate |
The discount rate used to calculate the lease debt corresponds, for each aircraft, to the implicit interest rate induced by the contractual elements and residual market values. The implied rate of the contract is the discount rate that gives the aggregated present value of the minimum lease payments and the unguaranteed residual value. This present value should be equal to the sum of the fair value of the leased asset and any initial direct costs of the lessor.
For those leases other than aircraft, we use our estimated incremental borrowing rate, which is derived from information available at the lease commencement date, in determining the present value of lease payments. We consider to our recent debt issuances as well as publicly available data for instruments with similar characteristics when calculating our incremental borrowing rates.
A 100 basis point decrease in our estimate of the rate at January 1, 2019 (the date the adoption of the standard) would increase our lease liability by approximately US$ 105 million.
(ii) | Lease term |
In determining the lease term, there are considers all facts and circumstances that create an economic incentive to exercise an extension option, or not exercise a termination option. Extension options (or periods after termination options) are only included in the lease term if the lease is reasonably certain to be extended (or not terminated). The assessment is reviewed if a significant event or a significant change in circumstances occurs which affects this assessment and that is within the control of the lessee.
(h) | Investment in subsidiary (TAM) |
The management has applied its judgment in determining that LATAM Airlines Group S.A. controls TAM S.A. and Subsidiaries, for accounting purposes, and has therefore consolidated the financial statements.
The grounds for this decision are that LATAM issued ordinary shares in exchange for the majority of circulating ordinary and preferential shares in TAM, except for those TAM shareholders who did not accept the exchange, which were subject to a squeeze out, entitling LATAM to substantially all economic benefits generated by the LATAM Group, and thus exposing it to substantially all risks relating to the operations of TAM. This exchange aligns the economic interests of LATAM and all of its shareholders, including the controlling shareholders of TAM, thus ensuring that the shareholders and directors of TAM shall have no incentive to exercise their rights in a manner that would be beneficial to TAM but detrimental to LATAM. Furthermore, all significant actions necessary of the operation of the airlines require votes in favor by the controlling shareholders of both LATAM and TAM.
50
Since the integration of LAN and TAM operations, the most critical airline operations in Brazil have been managed by the CEO of TAM while global activities have been managed by the CEO of LATAM, who is in charge of the operation of the LATAM Group as a whole and reports to the LATAM Board.
The CEO of LATAM also evaluates the performance of LATAM Group executives and, together with the LATAM Board, determines compensation. Although Brazilian law currently imposes restrictions on the percentages of voting rights that may be held by foreign investors, LATAM believes that the economic basis of these agreements meets the requirements of accounting standards in force, and that the consolidation of the operations of LAN and LATAM is appropriate.
These estimates were made based on the best information available relating to the matters analyzed.
In any case, it is possible that events that may take place in the future could lead to their modification in future reporting periods, which would be made in a prospective manner.
NOTE 5 - SEGMENTAL INFORMATION
As of December 31, 2019, the Company considers that it has a single operating segment, that of Air Transport. This segment corresponds to the route network for air transport and is based on the way in which the business is managed, according to the centralized nature of its operations, the ability to open and close routes, as well as reassignment (airplanes, crew, personnel, etc.) within the network, which implies a functional interrelation between all of them, making them inseparable. This segment definition is one of the most common worldwide in the airline industry.
Until June 2019, the Company presented two operating segments, the one corresponding to Air transport and the Multiplus coalition and loyalty program segment, discussed in Note 1, the Company Multiplus S.A. Administrator of the Coalition and Loyalty Program Multiplus merged into TAM Linhas Aereas S.A., ceasing to be an entity with independent administration. The Multiplus coalition and Loyalty program, which was defined as an operating segment, due to this independent administration, became part of the Air Transport segment together with the LATAM Pass and LATAM fidelidades programs.
The company has restated the information corresponding to December 31, 2018 for the presentation of a single segment of information.
51
For the year ended | ||||||||
Air | ||||||||
Transportation | ||||||||
At December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
Income from ordinary activities from external customers (*) | 10,070,063 | 9,895,456 | ||||||
Passenger | 9,005,629 | 8,708,988 | ||||||
Freight | 1,064,434 | 1,186,468 | ||||||
Income from ordinary activities from transactions with other operating segments | - | - | ||||||
Other operating income | 360,864 | 472,758 | ||||||
Interest income | 26,283 | 53,253 | ||||||
Interest expense | (589,934 | ) | (539,137 | ) | ||||
Total net interest expense | (563,651 | ) | (485,884 | ) | ||||
Depreciation and amortization | (1,469,976 | ) | (1,372,628 | ) | ||||
Material non-cash items other than depreciation and amortization | (130,011 | ) | (104,123 | ) | ||||
Disposal of fixed assets and inventory losses | (60,893 | ) | (46,351 | ) | ||||
Doubtful accounts | (21,558 | ) | (18,837 | ) | ||||
Exchange differences | (32,571 | ) | (38,070 | ) | ||||
Result of indexation units | (14,989 | ) | (865 | ) | ||||
Income (loss) attributable to owners of the parents | 190,430 | 309,811 | ||||||
Expenses for income tax | 53,697 | (73,879 | ) | |||||
Segment profit / (loss) | 195,613 | 341,786 | ||||||
Assets of segment | 21,087,806 | 20,078,722 | ||||||
Segment liabilities | 17,958,629 | 16,638,121 | ||||||
Amount of non-current asset additions | 2,658,541 | 1,090,177 | ||||||
Property, plant and equipment | 2,519,305 | 995,085 | ||||||
Intangibles other than goodwill | 139,236 | 95,092 | ||||||
Purchase of non-monetary assets of segment | 1,416,794 | 756,913 |
(*) The Company does not have any interest income that should be recognized as income from ordinary activities by interest.
For the year ended | ||||||||
Air | ||||||||
Transportation | ||||||||
At December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
(2) | ||||||||
Net cash flows from | ||||||||
Purchases of property, plant and equipment | 1,276,621 | 660,707 | ||||||
Additions associated with maintenance | 453,827 | 375,634 | ||||||
Other additions | 822,794 | 285,073 | ||||||
Purchases of intangible assets | 140,173 | 96,206 | ||||||
Net cash flows from (used in) operating activities | 2,826,667 | 2,073,316 | ||||||
Net cash flow from (used in) investing activities | (1,419,207 | ) | (358,368 | ) | ||||
Net cash flows from (used in) financing activities | (1,343,521 | ) | (1,608,597 | ) |
The information by segments as of December 31, 2018, which included the Multiplus Coalition and Loyalty Program segment has been restated to present its incorporation into the Air Transport segment. This restatement is presented in the following table:
52
For the year ended | ||||||||||||||||
Air | Segment | Air | ||||||||||||||
Transportation | Adjustment | Eliminations | Transportation | |||||||||||||
At December 31, | At December 31, | At December 31, | At December 31, | |||||||||||||
2018 | 2018 | 2018 | 2018 | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Previously reported | Restated | |||||||||||||||
Income from ordinary activities from external customers (*) | 9,887,090 | 60,020 | (51,654 | ) | 9,895,456 | |||||||||||
Passenger | 8,700,622 | 60,020 | (51,654 | ) | 8,708,988 | |||||||||||
Freight | 1,186,468 | - | - | 1,186,468 | ||||||||||||
Other operating income | 346,315 | 126,443 | - | 472,758 | ||||||||||||
Interest income | 27,181 | 26,072 | - | 53,253 | ||||||||||||
Interest expense | (539,137 | ) | - | - | (539,137 | ) | ||||||||||
Total net interest expense | (511,956 | ) | 26,072 | - | (485,884 | ) | ||||||||||
Depreciation and amortization | (1,365,809 | ) | (6,819 | ) | - | (1,372,628 | ) | |||||||||
Material non-cash items other than depreciation and amortization | (104,038 | ) | (85 | ) | - | (104,123 | ) | |||||||||
Disposal of fixed assets and inventory losses | (46,351 | ) | - | - | (46,351 | ) | ||||||||||
Doubtful accounts | (18,741 | ) | (96 | ) | - | (18,837 | ) | |||||||||
Exchange differences | (38,081 | ) | 11 | - | (38,070 | ) | ||||||||||
Result of indexation units | (865 | ) | - | - | (865 | ) | ||||||||||
Income (loss) attributable to owners of the parents | 200,209 | 109,602 | - | 309,811 | ||||||||||||
Expenses for income tax | 121,155 | (47,276 | ) | - | 73,879 | |||||||||||
Segment profit / (loss) | 287,206 | 54,580 | - | 341,786 | ||||||||||||
Assets of segment | 18,943,127 | 1,145,942 | (10,347 | ) | 20,078,722 | |||||||||||
Segment liabilities | 16,212,905 | 449,347 | (24,131 | ) | 16,638,121 | |||||||||||
Amount of non-current asset additions | 1,090,177 | - | - | 1,090,177 | ||||||||||||
Property, plant and equipment | 995,085 | - | - | 995,085 | ||||||||||||
Intangibles other than goodwill | 95,092 | - | - | 95,092 | ||||||||||||
Purchase of non-monetary assets of segment | 756,913 | - | - | 756,913 |
(*) The Company does not have any interest income that should be recognized as income from ordinary activities by interest.
For the year ended | ||||||||||||||||
Air | Segment | Air | ||||||||||||||
Transportation | adjustment | Eliminations | Transportation | |||||||||||||
At December 31, | At December 31, | At December 31, | At December 31, | |||||||||||||
2018 | 2018 | 2018 | 2018 | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Previously reported | Restated | |||||||||||||||
Net cash flows from | ||||||||||||||||
Purchases of property, plant and equipment | 660,631 | 76 | - | 660,707 | ||||||||||||
Additions associated with maintenance | 375,634 | - | - | 375,634 | ||||||||||||
Other additions | 284,997 | 76 | - | 285,073 | ||||||||||||
Purchases of intangible assets (***) | 85,628 | 10,578 | - | 96,206 | ||||||||||||
Net cash flows from (used in) operating activities | 1,950,532 | 111,161 | 11,623 | 2,073,316 | ||||||||||||
Net cash flow from (used in) investing activities | (348,346 | ) | (10,022 | ) | - | (358,368 | ) | |||||||||
Net cash flows from (used in) financing activities | (1,512,898 | ) | (95,699 | ) | - | (1,608,597 | ) |
(***) The Company does not have cash flows from purchases of intangible assets associated with maintenance.
53
The Company’s revenues by geographic area are as follows:
For the year ended | ||||||||
At December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Peru | 801,965 | 705,133 | ||||||
Argentina | 584,959 | 989,883 | ||||||
U.S.A. | 1,004,238 | 985,919 | ||||||
Europe | 726,165 | 782,197 | ||||||
Colombia | 380,449 | 372,794 | ||||||
Brazil | 3,949,797 | 3,433,877 | ||||||
Ecuador | 203,334 | 203,842 | ||||||
Chile | 1,546,960 | 1,591,313 | ||||||
Asia Pacific and rest of Latin America | 872,196 | 830,498 | ||||||
Income from ordinary activities | 10,070,063 | 9,895,456 | ||||||
Other operating income | 360,864 | 472,758 |
The Company allocates revenues by geographic area based on the point of sale of the passenger ticket or cargo. Assets are composed primarily of aircraft and aeronautical equipment, which are used throughout the different countries, so it is not possible to assign a geographic area.
The Company has no customers that individually represent more than 10% of sales.
NOTE 6 - CASH AND CASH EQUIVALENTS
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Cash on hand | 4,982 | 8,974 | ||||||
Bank balances | 329,632 | 331,218 | ||||||
Overnight | 350,080 | 282,164 | ||||||
Total Cash | 684,694 | 622,356 | ||||||
Cash equivalents | ||||||||
Time deposits | 165,791 | 415,633 | ||||||
Mutual funds | 222,094 | 43,653 | ||||||
Total cash equivalents | 387,885 | 459,286 | ||||||
Total cash and cash equivalents | 1,072,579 | 1,081,642 |
54
Cash and cash equivalents are denominated in the following currencies:
As of | As of | |||||||
Currency | December 31, | December 31, | ||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Argentine peso | 16,579 | 17,786 | ||||||
Brazilian real | 197,354 | 131,760 | ||||||
Chilean peso | 50,521 | 415,713 | ||||||
Colombian peso | 48,191 | 10,843 | ||||||
Euro | 21,927 | 20,339 | ||||||
US Dollar | 667,785 | 394,215 | ||||||
Other currencies | 70,222 | 90,986 | ||||||
Total | 1,072,579 | 1,081,642 |
NOTE 7 - FINANCIAL INSTRUMENTS
7.1. | Financial instruments by category |
As of December 31, 2019
Assets | Measured at | At fair value | ||||||||||||||
amortized | with changes | Hedge | ||||||||||||||
cost | in results | derivatives | Total | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Cash and cash equivalents | 850,485 | 222,094 | - | 1,072,579 | ||||||||||||
Other financial assets, current (*) | 36,660 | 386,669 | 76,175 | 499,504 | ||||||||||||
Trade and others | ||||||||||||||||
accounts receivable, current | 1,244,348 | - | - | 1,244,348 | ||||||||||||
Accounts receivable from | ||||||||||||||||
related entities, current | 19,645 | - | - | 19,645 | ||||||||||||
Other financial assets, | ||||||||||||||||
non current | 46,907 | - | - | 46,907 | ||||||||||||
Accounts receivable, non current | 4,725 | - | - | 4,725 | ||||||||||||
Total | 2,202,770 | 608,763 | 76,175 | 2,887,708 |
Liabilities | Measured at | |||||||||||
amortized | Hedge | |||||||||||
cost | derivatives | Total | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
Other financial liabilities, current | 1,835,288 | 50,372 | 1,885,660 | |||||||||
Trade and others accounts payable, current | 2,222,874 | - | 2,222,874 | |||||||||
Accounts payable to related entities, current | 56 | - | 56 | |||||||||
Other financial liabilities, non-current | 8,530,396 | 22 | 8,530,418 | |||||||||
Accounts payable, non-current | 619,110 | - | 619,110 | |||||||||
Total | 13,207,724 | 50,394 | 13,258,118 |
(*) The value presented as fair value with changes in the result, corresponds mainly to private investment funds, and as measured at amortized cost they correspond to guarantees delivered.
55
As of December 31, 2018 (Restated)
Measured at | At fair value | |||||||||||||||
amortized | with changes | Hedge | ||||||||||||||
Assets | cost | in results | derivatives | Total | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Cash and cash equivalents | 1,037,989 | 43,653 | - | 1,081,642 | ||||||||||||
Other financial assets, current (*) | 16,203 | 344,426 | �� | 23,355 | 383,984 | |||||||||||
Trade and othersaccounts receivable, current | 1,162,582 | - | - | 1,162,582 | ||||||||||||
Accounts receivable from related entities, current | 2,931 | - | - | 2,931 | ||||||||||||
Other financial assets, non current | 58,700 | - | - | 58,700 | ||||||||||||
Accounts receivable, non current | 5,381 | - | - | 5,381 | ||||||||||||
Total | 2,283,786 | 388,079 | 23,355 | 2,695,220 |
Measured at | At fair value | |||||||||||||||
amortized | with changes | Hedge | ||||||||||||||
Liabilities | cost | in results | derivatives | Total | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Restated | Restated | Restated | ||||||||||||||
Other financial liabilities, current (*) | 1,760,653 | 7,712 | 25,921 | 1,794,286 | ||||||||||||
Trade and others accounts payable, current accounts payables, current | 1,674,303 | - | - | 1,674,303 | ||||||||||||
Accounts payable to related entities, current | 382 | - | - | 382 | ||||||||||||
Other financial liabilities, non current | 8,359,122 | - | 340 | 8,359,462 | ||||||||||||
Accounts payable, non-current | 529,277 | - | - | 529,277 | ||||||||||||
Total | 12,323,737 | 7,712 | 26,261 | 12,357,710 |
(*) | The value presented as initial designation as fair value through profit and loss, corresponds mainly to private investment funds; and as measured at amortized cost they correspond to the guarantees granted. |
56
7.2. | Financial instruments by currency |
As of | As of | |||||||
December 31, | December 31, | |||||||
a) Assets | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
Cash and cash equivalents | 1,072,579 | 1,081,642 | ||||||
Argentine peso | 16,579 | 17,786 | ||||||
Brazilian real | 197,354 | 131,760 | ||||||
Chilean peso | 50,521 | 415,713 | ||||||
Colombian peso | 48,191 | 10,843 | ||||||
Euro | 21,927 | 20,339 | ||||||
US Dollar | 667,785 | 394,215 | ||||||
Other currencies | 70,222 | 90,986 | ||||||
Other financial assets (current and non-current) | 546,411 | 442,684 | ||||||
Argentine peso | 94 | 152 | ||||||
Brazilian real | 417,477 | 327,110 | ||||||
Chilean peso | 26,073 | 25,972 | ||||||
Colombian peso | 522 | 1,748 | ||||||
Euro | 1,525 | 7,438 | ||||||
US Dollar | 97,988 | 78,121 | ||||||
Other currencies | 2,732 | 2,143 | ||||||
Trade and other accounts receivable, current | 1,244,348 | 1,162,582 | ||||||
Argentine peso | 47,079 | 82,893 | ||||||
Brazilian real | 537,221 | 511,171 | ||||||
Chilean peso | 126,821 | 113,168 | ||||||
Colombian peso | 2,288 | 7,259 | ||||||
Euro | 32,711 | 49,044 | ||||||
US Dollar | 436,774 | 110,312 | ||||||
Other currencies (*) | 61,454 | 288,735 | ||||||
Accounts receivable, non-current | 4,725 | 5,381 | ||||||
Brazilian real | 3 | 3 | ||||||
Chilean peso | 4,722 | 5,378 | ||||||
Accounts receivable from related entities, current | 19,645 | 2,931 | ||||||
Brazilian real | - | 293 | ||||||
Chilean peso | 42 | 200 | ||||||
US Dollar | 19,603 | 2,438 | ||||||
Total assets | 2,887,708 | 2,695,220 | ||||||
Argentine peso | 63,752 | 100,831 | ||||||
Brazilian real | 1,152,055 | 970,337 | ||||||
Chilean peso | 208,179 | 560,431 | ||||||
Colombian peso | 51,001 | 19,850 | ||||||
Euro | 56,163 | 76,821 | ||||||
US Dollar | 1,222,150 | 585,086 | ||||||
Other currencies | 134,408 | 381,864 |
(*) | See the composition of the other currencies in Note 8 Trade, other accounts receivable and non-current accounts receivable. |
b) | Liabilities |
Liabilities information is detailed in the table within Note 3 Financial risk management.
57
NOTE 8 - TRADE AND OTHER ACCOUNTS RECEIVABLE CURRENT, AND NON-CURRENT ACCOUNTS RECEIVABLE
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
Trade accounts receivable | 1,073,599 | 1,077,561 | ||||||
Other accounts receivable | 275,876 | 188,393 | ||||||
Total trade and other accounts receivable | 1,349,475 | 1,265,954 | ||||||
Less: Expected credit loss | (100,402 | ) | (97,991 | ) | ||||
Total net trade and accounts receivable | 1,249,073 | 1,167,963 | ||||||
Less: non-current portion – accounts receivable | (4,725 | ) | (5,381 | ) | ||||
Trade and other accounts receivable, current | 1,244,348 | 1,162,582 |
The fair value of trade and other accounts receivable does not differ significantly from the book value.
To determine the expected credit losses, the Company groups accounts receivable for passenger and cargo transportation; depending on the characteristics of shared credit risk and maturity.
As of December 31, 2019 | As December 31, 2018 | |||||||||||||||||||||||
Expected | Gross book | Impairment loss | Expected | Gross book | Impairment loss | |||||||||||||||||||
Portfolio maturity | loss rate (1) | value (2) | Provision | loss rate (1) | value (2) | Provision | ||||||||||||||||||
% | ThUS$ | ThUS$ | % | ThUS$ | ThUS$ | |||||||||||||||||||
Up to date | 2 | % | 875,889 | (16,433 | ) | 3 | % | 888,930 | (23,933 | ) | ||||||||||||||
From 1 to 90 days | 8 | % | 56,537 | (4,253 | ) | 5 | % | 91,387 | (5,014 | ) | ||||||||||||||
From 91 to 180 days | 28 | % | 16,922 | (4,747 | ) | 45 | % | 11,085 | (4,983 | ) | ||||||||||||||
From 181 to 360 days | 39 | % | 47,865 | (18,459 | ) | 65 | % | 15,078 | (9,864 | ) | ||||||||||||||
more of 360 days | 74 | % | 76,386 | (56,510 | ) | 76 | % | 71,081 | (54,197 | ) | ||||||||||||||
Total | 9 | % | 1,073,599 | (100,402 | ) | 9 | % | 1,077,561 | (97,991 | ) |
(1) | Corresponds to the expected average rate. |
(2) | the gross book value represents the maximum growth risk value of trade accounts receivable. |
58
Currency balances that make up the Trade and other accounts receivable and non-current accounts receivable are the following:
As of | As of | |||||||
December 31, | December 31, | |||||||
Currency | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Argentine Peso | 47,079 | 82,893 | ||||||
Brazilian Real | 537,224 | 511,174 | ||||||
Chilean Peso | 131,543 | 118,546 | ||||||
Colombian peso | 2,288 | 7,259 | ||||||
Euro | 32,711 | 49,044 | ||||||
US Dollar | 436,774 | 110,312 | ||||||
Other currency (*) | 61,454 | 288,735 | ||||||
Total | 1,249,073 | 1,167,963 | ||||||
(*) Other currencies | ||||||||
Australian Dollar | 20,964 | 100,733 | ||||||
Chinese Yuan | 2,145 | 5,106 | ||||||
Danish Krone | 54 | 475 | ||||||
Pound Sterling | 7,428 | 18,129 | ||||||
Indian Rupee | 37 | 7,163 | ||||||
Japanese Yen | 1,222 | 56,589 | ||||||
Norwegian Kroner | 14 | 283 | ||||||
Swiss Franc | 535 | 5,046 | ||||||
Korean Won | 8,172 | 31,381 | ||||||
New Taiwanese Dollar | 1,117 | 6,180 | ||||||
Other currencies | 19,766 | 57,650 | ||||||
Total | 61,454 | 288,735 |
The movements of the provision for impairment losses of the Trade Debtors and other accounts receivable are as follows:
Adoption | ||||||||||||||||||||
Opening | adjustment | (Increase) | Closing | |||||||||||||||||
Periods | balance | IFRS 9 (*) | Write-offs | Decrease | balance | |||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||
From January 1 to December 31, 2018 | (87,909 | ) | (10,524 | ) | 8,620 | (8,178 | ) | (97,991 | ) | |||||||||||
From January 1 to December 31, 2019 | (97,991 | ) | - | 12,569 | (14,980 | ) | (100,402 | ) |
(*) | Adjustment to the balance as of December 31, 2017 registered in retained earnings as of 01.01.2018 for the adoption of IFRS 9. |
Once pre-judicial and judicial collection efforts are exhausted, the assets are written off against the allowance. The Company only uses the allowance method rather than direct write-off, to ensure control.
The historical and current renegotiations are not very relevant, and the policy is to analyze case by case to classify them according to the existence of risk, determining if their reclassification corresponds to pre-judicial collection accounts.
59
The maximum credit-risk exposure at the date of presentation of the information is the fair value of each one of the categories of accounts receivable indicated above.
As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||||||||||
Gross exposure | Gross | Exposure net | Gross exposure | Gross | Exposure net | |||||||||||||||||||
according to | impaired | of risk | according to | Impaired | of risk | |||||||||||||||||||
balance | exposure | concentrations | balance | exposure | concentrations | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Trade accounts receivable | 1,073,599 | (100,402 | ) | 973,197 | 1,077,561 | (97,991 | ) | 979,570 | ||||||||||||||||
Other accounts receivable | 275,876 | - | 275,876 | 188,393 | - | 188,393 |
There are no relevant guarantees covering credit risk and these are valued when they are settled; no materially significant direct guarantees exist. Existing guarantees, if appropriate, are made through IATA.
NOTE 9 - ACCOUNTS RECEIVABLE FROM/PAYABLE TO RELATED ENTITIES
(a) | Accounts Receivable |
As of | As of | |||||||||||||||
Country | December 31, | December 31, | ||||||||||||||
Tax No. | Related party | Relationship | of origin | Currency | 2019 | 2018 | ||||||||||
ThUS$ | ThUS$ | |||||||||||||||
Foreign | Qatar Airways | Indirect shareholder | Qatar | US$ | 19,400 | 1,907 | ||||||||||
78.591.370-1 | Bethia S.A. and Subsidiaries | Related director | Chile | CLP | - | 988 | ||||||||||
Foreign | Delta Air Lines Inc. | Shareholder | U.S.A. | USD | 205 | - | ||||||||||
87.752.000-5 | Granja Marina Tornagaleones S.A. | Common shareholder | Chile | CLP | 36 | 31 | ||||||||||
96.782.530-1 | Inmobiliaria e Inversiones Asturias S.A. | Related director | Chile | CLP | 1 | - | ||||||||||
76.335.600-0 | Parque de Chile S.A. | Related director | Chile | CLP | 2 | - | ||||||||||
96.810.370-9 | Inversiones Costa Verde Ltda. y CPA. | Related director | Chile | CLP | 1 | 5 | ||||||||||
Total current assets | 19,645 | 2,931 |
(b) | Accounts payable |
As of | As of | |||||||||||||||
Country | December 31, | December 31, | ||||||||||||||
Tax No. | Related party | Relationship | of origin | Currency | 2019 | 2018 | ||||||||||
ThUS$ | ThUS$ | |||||||||||||||
78.591.370-1 | Bethia S.A. and Subsidiaries | Related director | Chile | CLP | 53 | 365 | ||||||||||
Foreign | Inversora Aeronáutica Argentina S.A. | Related director | Argentina | ARS | - | 15 | ||||||||||
Foreign | Patagonia Seafarms INC | Related director | U.S.A. | USD | 3 | - | ||||||||||
Foreign | TAM Aviação Executiva e | |||||||||||||||
Taxi Aéreo S.A. | Common shareholder | Brasil | BRL | - | 2 | |||||||||||
Total current liabilities | 56 | 382 |
60
Transactions between related parties have been carried out on free-trade conditions between interested and duly-informed parties. The transaction times are between 30 and 45 days, and the nature of settlement of the transactions is monetary.
NOTE 10 - INVENTORIES
The composition of Inventories is as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Technical stock | 315,286 | 233,276 | ||||||
Non-technical stock | 38,946 | 46,068 | ||||||
Total | 354,232 | 279,344 |
The items included in this heading are spare parts and materials that will be used mainly in consumption in in-flight and maintenance services provided to the Company and third parties, which are valued at average cost, net of provision for obsolescence, as per the following detail:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Provision for obsolescence Technical stock | 21,193 | 20,500 | ||||||
Provision for obsolescence Non-technical stock | 11,610 | 4,621 | ||||||
Total | 32,803 | 25,121 |
The resulting amounts do not exceed the respective net realization values.
For the period ended December 31, 2019, the Company recorded ThUS$ 133,286 (ThUS$ 120,214 for the period ended December 31, 2018) in results, mainly related to on-board consumption and maintenance, which is part of the Cost of sales.
61
NOTE 11 - OTHER FINANCIAL ASSETS
The composition of other financial assets is as follows:
Current Assets | Non-current assets | Total Assets | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
(a) Other financial assets | ||||||||||||||||||||||||
Private investment funds | 386,669 | 322,428 | - | - | 386,669 | 322,428 | ||||||||||||||||||
Deposits in guarantee (aircraft) | 8,934 | 9,610 | 28,599 | 37,636 | 37,533 | 47,246 | ||||||||||||||||||
Guarantees for margins of derivatives | 21,200 | 661 | - | - | 21,200 | 661 | ||||||||||||||||||
Other investments | - | - | 494 | 494 | 494 | 494 | ||||||||||||||||||
Domestic and foreign bonds | 19 | 1,394 | - | - | 19 | 1,394 | ||||||||||||||||||
Other guarantees given | 6,507 | 7,140 | 15,138 | 20,570 | 21,645 | 27,710 | ||||||||||||||||||
Subtotal of other financial assets | 423,329 | 341,233 | 44,231 | 58,700 | 467,560 | 399,933 | ||||||||||||||||||
(b) Hedging derivate asset | ||||||||||||||||||||||||
Accrued Interest since the last payment date | ||||||||||||||||||||||||
Cross currency swap of currencies | 3 | - | - | - | 3 | - | ||||||||||||||||||
Fair value of interest rate derivatives | 27,044 | 19,460 | 2,676 | - | 29,720 | 19,460 | ||||||||||||||||||
Fair value of foreign currency derivatives | 586 | 3,895 | - | - | 586 | 3,895 | ||||||||||||||||||
Fair value of fuel price derivatives | 48,542 | - | - | - | 48,542 | - | ||||||||||||||||||
Subtotal of derivate assets | 76,175 | 23,355 | 2,676 | - | 78,851 | 23,355 | ||||||||||||||||||
(c) Derivatives not recognized as a hedge | ||||||||||||||||||||||||
Foreign currency derivatives not recognized as a hedge | - | 19,396 | - | - | - | 19,396 | ||||||||||||||||||
Subtotal of derivatives not recognized as a hedge | - | 19,396 | - | - | - | 19,396 | ||||||||||||||||||
Total Other Financial Assets | 499,504 | 383,984 | 46,907 | 58,700 | 546,411 | 442,684 |
The different derivative hedging contracts maintained by the Company at the end of each fiscal year are described in Note 19.
62
NOTE 12 - OTHER NON-FINANCIAL ASSETS
The composition of other non-financial assets is as follows:
Current assets | Non-current assets | Total Assets | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||
(a) Advance payments | ||||||||||||||||||||||||
Aircraft insurance and other | 11,179 | 16,483 | 523 | - | 11,702 | 16,483 | ||||||||||||||||||
Others | 15,167 | 20,105 | 1,832 | 4,460 | 16,999 | 24,565 | ||||||||||||||||||
Subtotal advance payments | 26,346 | 36,588 | 2,355 | 4,460 | 28,701 | 41,048 | ||||||||||||||||||
(b) Contract assets (1) | ||||||||||||||||||||||||
GDS costs | 16,593 | 14,708 | - | - | 16,593 | 14,708 | ||||||||||||||||||
Credit card commissions | 23,437 | 21,614 | - | - | 23,437 | 21,614 | ||||||||||||||||||
Travel agencies commissions | 16,546 | 12,635 | - | - | 16,546 | 12,635 | ||||||||||||||||||
Subtotal advance payments | 56,576 | 48,957 | - | - | 56,576 | 48,957 | ||||||||||||||||||
(c) Other assets | ||||||||||||||||||||||||
Aircraft maintenance reserve (2) | 27,987 | 831 | 17,844 | 51,836 | 45,831 | 52,667 | ||||||||||||||||||
Sales tax | 167,987 | 187,410 | 34,680 | 38,186 | 202,667 | 225,596 | ||||||||||||||||||
Other taxes | 34,295 | 15,255 | - | - | 34,295 | 15,255 | ||||||||||||||||||
Contributions to Société Internationale de Télécommunications Aéronautiques ("SITA") | 258 | 258 | 739 | 739 | 997 | 997 | ||||||||||||||||||
Judicial deposits | - | - | 149,310 | 132,267 | 149,310 | 132,267 | ||||||||||||||||||
Others | - | 1,177 | - | 53 | - | 1,230 | ||||||||||||||||||
Subtotal other assets | 230,527 | 204,931 | 202,573 | 223,081 | 433,100 | 428,012 | ||||||||||||||||||
Total Other Non - Financial Assets | 313,449 | 290,476 | 204,928 | 227,541 | 518,377 | 518,017 |
(1) Movement of Contracts assets:
Adjustments by the | Difference | |||||||||||||||||||||||
Initial | application | by | Final | |||||||||||||||||||||
balance | Activation | IFRS 15 | conversion | Amortization | balance | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
From January 1 to December 31, 2018 | - | 180,171 | 54,361 | (5,019 | ) | (180,556 | ) | 48,957 | ||||||||||||||||
From January 1 to December 31, 2019 | 48,957 | 166,300 | - | (4,950 | ) | (153,731 | ) | 56,576 |
(2) Aircraft maintenance reserves reflect prepayment deposits made by the group to lessors of certain aircraft under operating lease agreements in order to ensure that funds are available to support the scheduled heavy maintenance of the aircraft.
These amounts are calculated based on performance measures, such as flight hours or cycles, are paid periodically (usually monthly) and are contractually required to be repaid to the lessee upon the completion of the required maintenance of the leased aircraft. At the end of the lease term, any unused maintenance reserves are either returned to the Company in cash or used to offset amounts that we may owe the lessor as a maintenance adjustment.
In some cases, (five lease agreements), if the maintenance cost incurred by LATAM is less than the corresponding maintenance reserves, the lessor is entitled to retain those excess amounts at the time the heavy maintenance is performed. The Company periodically reviews its maintenance reserves for each of its leased aircraft to ensure that they will be recovered and recognizes an expense if any such amounts are less than probable of being returned. The cost of aircraft maintenance in the last years has been higher than the related maintenance reserves for all aircraft.
63
As of December 31, 2019, maintenance reserves amount to ThUS$ 45,831 (ThUS$ 52,667 as of December 31, 2018), corresponding to 8 aircraft that maintain remaining balances, which will be settled in the next maintenance or return.
Aircraft maintenance reserves are classified as current or non-current depending on the dates when the related maintenance is expected to be performed (Note 2.23).
NOTE 13 - NON-CURRENT ASSETS AND DISPOSAL GROUP CLASSIFIED AS HELD FOR SALE
Non-current assets and disposal group classifieds as held for sale at December 31, 2019 and December 31, 2018, are detailed below:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Current assets | ||||||||
Aircraft | 482,806 | 265 | ||||||
Engines and rotables | 1,943 | 5,299 | ||||||
Other | 401 | 204 | ||||||
Total | 485,150 | 5,768 |
The balances are presented at the lower of book value and fair value less cost to sell. The fair value of these assets was determined based on quoted prices in active markets for similar assets or liabilities. This is a level II measurement as per the fair value hierarchy set out in Note 3.3 (2). There were no transfers between levels for recurring fair value measurements during the year.
a) | Assets reclassified from Property, plant and equipment to Non-current assets or groups of assets for disposal classified as held for sale. |
During 2019, four Airbus A350, aircraft two Boeing 767, were reclassified from Property, plants and equipment to Non-current assets or groups of assets for disposal classified as held for sale.
Additionally, during 2019, the sale of one motor spare Boeing 767 and one Boeing 767 aircraft were materialized. As a result of the above, during 2019, adjustments for US $ 2 million of expense were recognized to record these assets at their net realizable value.
64
The detail of the fleet classified as non-current assets and disposal group classified as held for sale is as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
Aircraft | 2019 | 2018 | ||||||
Boeing 767 | 1 | - | ||||||
Airbus A350 | 4 | - | ||||||
ATR42-300 | - | 1 | ||||||
Total | 5 | 1 |
NOTE 14 - INVESTMENTS IN SUBSIDIARIES
(a) | Investments in subsidiaries |
The Company has investments in companies recognized as investments in subsidiaries. All the companies defined as subsidiaries have been consolidated within the financial statements of LATAM Airlines Group S.A. and Subsidiaries. The consolidation also includes special-purpose entities.
Detail of significant subsidiaries:
Ownership | ||||||||||||
As of | As of | |||||||||||
Country of | Functional | December 31, | December 31, | |||||||||
Name of significant subsidiary | incorporation | currency | 2019 | 2018 | ||||||||
% | % | |||||||||||
Latam Airlines Perú S.A. | Peru | US$ | 70.00000 | 70.00000 | ||||||||
Lan Cargo S.A. | Chile | US$ | 99.89395 | 99.89803 | ||||||||
Lan Argentina S.A. | Argentina | ARS | 99.98370 | 99.86560 | ||||||||
Transporte Aéreo S.A. | Chile | US$ | 100.00000 | 100.00000 | ||||||||
Latam Airlines Ecuador S.A. | Ecuador | US$ | 100.00000 | 100.00000 | ||||||||
Aerovías de Integración Regional, AIRES S.A. | Colombia | COP | 99.19414 | 99.19061 | ||||||||
TAM S.A. | Brazil | BRL | 99.99938 | 99.99938 |
The consolidated subsidiaries do not have significant restrictions for transferring funds to controller.
65
Summary financial information of significant subsidiaries
Statement of financial position as of December 31, 2019 | Income for the year ended December 31, 2019 | |||||||||||||||||||||||||||||||
Name of significant subsidiary | Total Assets | Current Assets | Non-current Assets | Total Liabilities | Current Liabilities | Non-current Liabilities | Revenue | Net Income | ||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||
Latam Airlines Perú S.A. | 519,363 | 481,592 | 37,771 | 510,672 | 508,541 | 2,131 | 1,186,668 | (1,739 | ) | |||||||||||||||||||||||
Lan Cargo S.A. | 634,852 | 334,725 | 300,127 | 462,666 | 398,872 | 63,794 | 274,774 | (4,157 | ) | |||||||||||||||||||||||
Lan Argentina S.A. | 262,049 | 255,641 | 6,408 | 89,070 | 86,912 | 2,158 | 218,989 | (133,408 | ) | |||||||||||||||||||||||
Transporte Aéreo S.A. | 359,335 | 101,128 | 258,207 | 142,423 | 46,383 | 96,040 | 315,105 | 14,610 | ||||||||||||||||||||||||
Latam Airlines Ecuador S.A. | 99,019 | 95,187 | 3,832 | 97,198 | 86,810 | 10,388 | 229,797 | (3,411 | ) | |||||||||||||||||||||||
Aerovías de Integración Regional, AIRES S.A. | 187,001 | 135,344 | 51,657 | 78,990 | 70,643 | 8,347 | 291,235 | (3,009 | ) | |||||||||||||||||||||||
TAM S.A. (*) | 5,036,864 | 2,580,665 | 2,456,199 | 3,497,559 | 2,556,280 | 941,279 | 5,013,293 | 185,720 |
Statement of financial position as of December 31, 2018 | Income for the year ended December 31, 2018 | |||||||||||||||||||||||||||||||
Name of significant subsidiary | Total Assets | Current Assets | Non-current Assets | Total Liabilities | Current Liabilities | Non-current Liabilities | Revenue | Net Income | ||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||
Restated | Restated | |||||||||||||||||||||||||||||||
Latam Airlines Perú S.A. | 419,325 | 379,490 | 39,835 | 409,221 | 406,159 | 3,062 | 871,860 | 2,732 | ||||||||||||||||||||||||
Lan Cargo S.A. | 513,367 | 243,499 | 269,868 | 336,715 | 292,399 | 44,316 | 190,997 | (34,322 | ) | |||||||||||||||||||||||
Lan Argentina S.A. | 243,230 | 235,919 | 7,311 | 239,234 | 236,786 | 2,448 | 154,878 | (132,538 | ) | |||||||||||||||||||||||
Transporte Aéreo S.A. | 331,496 | 72,597 | 258,899 | 129,233 | 28,277 | 100,956 | 231,221 | (17,609 | ) | |||||||||||||||||||||||
Latam Airlines Ecuador S.A. | 108,735 | 96,564 | 12,171 | 98,238 | 89,921 | 8,317 | 174,821 | 4,354 | ||||||||||||||||||||||||
Aerovías de Integración Regional, AIRES S.A. | 116,352 | 55,865 | 60,487 | 77,984 | 69,150 | 8,834 | 215,366 | (6,396 | ) | |||||||||||||||||||||||
TAM S.A. (*) | 4,420,546 | 2,007,830 | 2,412,716 | 3,256,017 | 1,832,796 | 1,423,221 | 3,434,453 | 358,616 |
66
(b) | Non-controlling |
Equity | Tax No. | Country of origin | As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | ||||||||||||||
% | % | ThUS$ | ThUS$ | |||||||||||||||||
Restated | ||||||||||||||||||||
Latam Airlines Perú S.A | 0-E | Peru | 30.00000 | 30.00000 | 2,609 | 3,032 | ||||||||||||||
Lan Cargo S.A. and Subsidiaries | 93.383.000-4 | Chile | 0.10196 | 0.10196 | 369 | (101 | ) | |||||||||||||
Inversora Cordillera S.A. and Subsidiaries | 0-E | Argentina | 0.01630 | 0.13940 | (6,276 | ) | 8,684 | |||||||||||||
Lan Argentina S.A. | 0-E | Argentina | 0.02890 | 0.02890 | 50 | (472 | ) | |||||||||||||
Americonsult de Guatemala S.A. | 0-E | Guatemala | 0.87000 | 1.00000 | 1 | 1 | ||||||||||||||
Americonsult S.A. and Subsidiaries | 0-E | Mexico | 0.20000 | 0.20000 | (7 | ) | 1 | |||||||||||||
Americonsult Costa Rica S.A. | 0-E | Costa Rica | 0.20000 | 1.00000 | 2 | 11 | ||||||||||||||
Linea Aérea Carguera de Colombiana S.A. | 0-E | Colombia | 10.00000 | 10.00000 | (755 | ) | (462 | ) | ||||||||||||
Aerolíneas Regionales de Integración Aires S.A. | 0-E | Colombia | 0.79880 | 0.79880 | 899 | 378 | ||||||||||||||
Transportes Aereos del Mercosur S.A. | 0-E | Paraguay | 5.02000 | 5.02000 | 1,503 | 1,740 | ||||||||||||||
Multiplus S.A.(*) | 0-E | Brazil | - | 27.26000 | - | 67,096 | ||||||||||||||
Total | (1,605 | ) | 79,908 |
For the year ended | For the year ended | |||||||||||||||||||
Incomes | Tax No. | Country of origin | December 31, 2019 | December 31, 2018 | December 31, 2019 | December 31, 2018 | ||||||||||||||
% | % | ThUS$ | ThUS$ | |||||||||||||||||
Latam Airlines Perú S.A | 0-E | Peru | 30.00000 | 30.00000 | (1,065 | ) | 1,673 | |||||||||||||
Lan Cargo S.A. and Subsidiaries | 93.383.000-4 | Chile | 0.10196 | 0.10196 | 19 | (406 | ) | |||||||||||||
Promotora Aerea Latinoamericana S.A. and Subsidiaries | 0-E | Mexico | - | - | - | - | ||||||||||||||
Inversora Cordillera S.A. and Subsidiaries | 0-E | Argentina | 0.01630 | 0.13940 | 359 | 66 | ||||||||||||||
Lan Argentina S.A. | 0-E | Argentina | 0.02890 | 0.02890 | 48 | 39 | ||||||||||||||
Americonsult S.A. and Subsidiaries | 0-E | Mexico | 0.20000 | 0.20000 | (7 | ) | 2 | |||||||||||||
Linea Aérea Carguera de Colombiana S.A. | 0-E | Colombia | 10.00000 | 10.00000 | (293 | ) | 58 | |||||||||||||
Aerolíneas Regionales de Integración Aires S.A. | 0-E | Colombia | 0.79880 | 0.79880 | (24 | ) | 87 | |||||||||||||
Transportes Aereos del Mercosur S.A. | 0-E | Paraguay | 5.02000 | 5.02000 | 420 | 717 | ||||||||||||||
Multiplus S.A.(*) | 0-E | Brazil | - | 27.26000 | 5,726 | 29,739 | ||||||||||||||
Total | 5,183 | 31,975 |
(*) | See Note 1 letter (b) |
67
NOTE 15 - INTANGIBLE ASSETS OTHER THAN GOODWILL
The details of intangible assets are as follows:
Classes of intangible assets | Classes of intangible assets | |||||||||||||||
(net) | (gross) | |||||||||||||||
As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Airport slots | 845,959 | 828,969 | 845,959 | 828,969 | ||||||||||||
Loyalty program | 263,806 | 274,420 | 263,806 | 274,420 | ||||||||||||
Computer software | 220,993 | 156,038 | 656,699 | 529,009 | ||||||||||||
Developing software | 99,193 | 151,853 | 99,193 | 151,853 | ||||||||||||
Trademarks (1) | 17,959 | 29,361 | 51,326 | 53,391 | ||||||||||||
Other assets | 331 | 431 | 1,315 | 1,325 | ||||||||||||
Total | 1,448,241 | 1,441,072 | 1,918,298 | 1,838,967 |
Movement in Intangible assets other than goodwill:
Computer software Net | Developing software | Airport slots (2) | Trademarks and loyalty program (1) ( 2) | Total | ||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||
Opening balance as of January 1, 2018 | 160,970 | 123,415 | 964,513 | 368,349 | 1,617,247 | |||||||||||||||
Additions | 791 | 94,301 | - | - | 95,092 | |||||||||||||||
Withdrawals | (403 | ) | (125 | ) | - | - | (528 | ) | ||||||||||||
Transfer software | 59,771 | (61,087 | ) | - | - | (1,316 | ) | |||||||||||||
Foreign exchange | (10,231 | ) | (4,651 | ) | (135,544 | ) | (53,522 | ) | (203,948 | ) | ||||||||||
Amortization | (54,549 | ) | - | - | (11,046 | ) | (65,595 | ) | ||||||||||||
Adjustment application IAS 29 by hyperinflation Argentina | 120 | - | - | - | 120 | |||||||||||||||
Closing balance as of December 31, 2018 | 156,469 | 151,853 | 828,969 | 303,781 | 1,441,072 | |||||||||||||||
Opening balance as of January 1, 2019 | 156,469 | 151,853 | 828,969 | 303,781 | 1,441,072 | |||||||||||||||
Additions | 278 | 91,371 | 47,587 | - | 139,236 | |||||||||||||||
Withdrawals | (270 | ) | (1,123 | ) | - | - | (1,393 | ) | ||||||||||||
Transfer software | 136,935 | (140,102 | ) | - | - | (3,167 | ) | |||||||||||||
Foreign exchange | (1,981 | ) | (2,806 | ) | (30,597 | ) | (11,612 | ) | (46,996 | ) | ||||||||||
Amortization | (70,107 | ) | - | - | (10,404 | ) | (80,511 | ) | ||||||||||||
Closing balance as of December 31, 2019 | 221,324 | 99,193 | 845,959 | 281,765 | 1,448,241 |
1) | In 2016, the Company resolved to adopt a unique name and identity, and announced that the group's brand will be LATAM, which united all the companies under a single image. |
The estimate of the new useful life is 5 years, equivalent to the period necessary to complete the change of image.
2) | See Note 2.5 |
The amortization of each period is recognized in the consolidated income statement in the administrative expenses. The cumulative amortization of computer programs and brands as of December 31, 2019, amounts to ThUS $ 470,057 (ThUS $ 397,895 as of December 31, 2018).
68
NOTE 16 – GOODWILL
Goodwill as of December 31, 2019, amounts to ThUS $ 2,209,576 (ThUS $ 2,294,072 as of December 31, 2018). The goodwill movement, separated by CGU, includes the following:
Movement of Goodwill, separated by CGU:
Air Transport | Coalition and loyalty program Multiplus | Total | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
Opening balance as of January 1, 2018 | 2,146,692 | 525,858 | 2,672,550 | |||||||||
Increase (decrease) due to exchange rate differences | (300,203 | ) | (76,922 | ) | (377,125 | ) | ||||||
Adjustment IAS 29, hyperinflation Argentina | 335 | - | 335 | |||||||||
Others | (1,688 | ) | - | (1,688 | ) | |||||||
Closing balance as of December 31, 2018 | 1,845,136 | 448,936 | 2,294,072 | |||||||||
Opening balance as of January 1, 2019 | 1,845,136 | 448,936 | 2,294,072 | |||||||||
Increase (decrease) due to exchange rate differences | (67,133 | ) | (17,363 | ) | (84,496 | ) | ||||||
Transfer from Multiplus S.A. (see nota 1) | 431,573 | (431,573 | ) | - | ||||||||
Closing balance as of December 31, 2019 | 2,209,576 | - | 2,209,576 |
As of December 31, 2019, the Company maintains only the CGU “Air Transport”, due to the merger of Multiplus S.A. in TAM Linhas Aereas (see Note 1), and changes in the management structure.
The CGU “Air transport” considers the transport of passengers and cargo, both in the domestic markets of Chile, Peru, Argentina, Colombia, Ecuador and Brazil, as well as in a series of regional and international routes in America, Europe and Oceania.
The recoverable amount of the CGU has been determined based on the value in use calculations which require the use of assumptions. These calculations use cash flow projections covering a 5 year period which is based on the financial budgets approved by management. Cash flows beyond the 5 year period are extrapolated using the estimated revenue growth rates and average volumes, which do not exceed the average long-term revenue growth rates.
Management’s cash flow projections included significant judgements and assumptions related to annual revenue growth rates, discount rate, inflation rates, the exchange rate and price of fuel. The annual revenue growth rate is based on past performance and management’s expectations of market development in each of the countries in which it operates. The discount rates used, for the CGU "Air transport", are in determined in US dollars, after taxes, and reflect specific risks related to the relevant countries of each of the operations. Inflation rates and exchange rates are based on the data available from the countries and the information provided by the Central Bank of the various countries where it operates, and the price of fuel is determined based on estimated levels of production, the competitive environment of the market in which they operate and their commercial strategy.
69
As of December 31, 2019 the recoverable values were determined using the following assumptions presented below:
Air transportation CGU | ||||
Annual growth rate (Terminal) | % | 1.0 - 2.0 | ||
Exchange rate (1) | R$/US$ | 4.0 - 4.9 | ||
Discount rate based on the weighted average cost of capital (WACC) | % | 7.50 - 8.50 | ||
Fuel Price from futures price curves commodities markets | US$/barrel | 79 - 80 |
(1) | In line with the expectations of the Central Bank of Brazil |
The result of the impairment test, which includes a sensitivity analysis of its main variables, showed that the estimated recoverable amount exceeded the carrying amount of the cash generating unit, and therefore no impairment was detected.
The calculation of the recoverable value of the CGU is most sensitive to annual revenue growth rates, discount and exchange rates. The sensitivity analysis included the individual impact of the variations of the critical estimates when determining the recoverable amounts, namely:
Increase Minimum WACC | Decrease Maximum terminal growth rate | |||||||
% | % | |||||||
Air transportation CGU | 8.5 | 1.0 |
In none of the previous cases there was an impairment of the cash generating unit.
70
NOTE 17 - PROPERTY, PLANT AND EQUIPMENT
The composition by category of Property, plant and equipment is as follows:
Gross Book Value | Accumulated depreciation | Net Book Value | ||||||||||||||||||||||
As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Restated | Restated | Restated | ||||||||||||||||||||||
Construction in progress (1) | 372,589 | 630,320 | - | - | 372,589 | 630,320 | ||||||||||||||||||
Land | 48,406 | 45,424 | - | - | 48,406 | 45,424 | ||||||||||||||||||
Buildings | 133,488 | 179,907 | (58,626 | ) | (67,342 | ) | 74,862 | 112,565 | ||||||||||||||||
Plant and equipment | 13,993,044 | 13,333,837 | (4,630,001 | ) | (4,361,337 | ) | 9,363,043 | 8,972,500 | ||||||||||||||||
Own aircraft | 13,268,562 | 12,595,223 | (4,421,211 | ) | (4,096,975 | ) | 8,847,351 | 8,498,248 | ||||||||||||||||
Other (2) | 724,482 | 738,614 | (208,790 | ) | (264,362 | ) | 515,692 | 474,252 | ||||||||||||||||
Machinery | 33,658 | 34,253 | (28,441 | ) | (27,659 | ) | 5,217 | 6,594 | ||||||||||||||||
Information technology equipment | 161,992 | 160,936 | (141,216 | ) | (138,372 | ) | 20,776 | 22,564 | ||||||||||||||||
Fixed installations and accessories | 171,469 | 182,629 | (111,635 | ) | (111,620 | ) | 59,834 | 71,009 | ||||||||||||||||
Motor vehicles | 67,060 | 69,653 | (60,327 | ) | (60,531 | ) | 6,733 | 9,122 | ||||||||||||||||
Leasehold improvements | 234,249 | 211,322 | (135,789 | ) | (128,055 | ) | 98,460 | 83,267 | ||||||||||||||||
Right of use | 5,693,553 | 4,987,953 | (2,823,855 | ) | (2,439,509 | ) | 2,869,698 | 2,548,444 | ||||||||||||||||
Aircraft | 5,438,404 | 4,761,529 | (2,669,864 | ) | (2,305,195 | ) | 2,768,540 | 2,456,334 | ||||||||||||||||
Other assets | 255,149 | 226,424 | (153,991 | ) | (134,314 | ) | 101,158 | 92,110 | ||||||||||||||||
Total | 20,909,508 | 19,836,234 | (7,989,890 | ) | (7,334,425 | ) | 12,919,618 | 12,501,809 |
(1) | As of December 31, 2019, includes advances paid to aircraft manufacturers for ThUS$ 348,148 (ThUS$ 612,236 as of December 31, 2018) |
(2) | Consider mainly rotables and tools. |
71
a) | Movement in the different categories of Property, plant and equipment: |
Construction in progress | Land | Buildings net | Plant and equipment net | Information technology equipment net | Fixed installations & accessories net | Motor vehicles net | Leasehold improvements net | Rights of use net | Property, Plant and equipment net | |||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||||||||
Opening balance as of January 1, 2018 Restated | 556,822 | 49,780 | 124,548 | 9,138,591 | 30,156 | 80,777 | 436 | 84,225 | 2,865,317 | 12,930,652 | ||||||||||||||||||||||||||||||
Additions | 7,927 | - | - | 635,367 | 4,995 | 64 | 24 | 20,410 | 326,298 | 995,085 | ||||||||||||||||||||||||||||||
Disposals | - | (8 | ) | (1,412 | ) | (4,747 | ) | (30 | ) | (74 | ) | (14 | ) | - | - | (6,285 | ) | |||||||||||||||||||||||
Retirements | (80 | ) | - | (19 | ) | (63,774 | ) | (92 | ) | (27 | ) | - | (4 | ) | - | (63,996 | ) | |||||||||||||||||||||||
Depreciation expenses | - | - | (6,219 | ) | (705,577 | ) | (11,677 | ) | (12,538 | ) | (146 | ) | (27,766 | ) | (391,138 | ) | (1,155,061 | ) | ||||||||||||||||||||||
Foreign exchange | (714 | ) | (4,348 | ) | (4,244 | ) | (94,488 | ) | (1,819 | ) | (8,499 | ) | (28 | ) | (2,351 | ) | (13,751 | ) | (130,242 | ) | ||||||||||||||||||||
Other increases (decreases) | 65,992 | - | (89 | ) | 78,341 | 732 | 10,195 | 273 | 8,753 | (238,282 | ) | (74,085 | ) | |||||||||||||||||||||||||||
Adjustment application IAS 29 | 373 | - | - | 3,869 | 299 | 1,111 | 89 | - | - | 5,741 | ||||||||||||||||||||||||||||||
Changes, total | 73,498 | (4,356 | ) | (11,983 | ) | (151,009 | ) | (7,592 | ) | (9,768 | ) | 198 | (958 | ) | (316,873 | ) | (428,843 | ) | ||||||||||||||||||||||
Closing balance as of December 31, 2018 Restated | 630,320 | 45,424 | 112,565 | 8,987,582 | 22,564 | 71,009 | 634 | 83,267 | 2,548,444 | 12,501,809 | ||||||||||||||||||||||||||||||
Opening balance as of January 1, 2019 (Restated ) | 630,320 | 45,424 | 112,565 | 8,987,582 | 22,564 | 71,009 | 634 | 83,267 | 2,548,444 | 12,501,809 | ||||||||||||||||||||||||||||||
Additions | 21,884 | 7,950 | - | 1,694,640 | 6,580 | 26 | 73 | 34,988 | 753,164 | 2,519,305 | ||||||||||||||||||||||||||||||
Disposals | - | (28 | ) | (47 | ) | (23,945 | ) | (13 | ) | (75 | ) | (11 | ) | - | - | (24,119 | ) | |||||||||||||||||||||||
Retirements | (20 | ) | - | - | (64,838 | ) | (85 | ) | (77 | ) | - | (362 | ) | - | (65,382 | ) | ||||||||||||||||||||||||
Depreciation expenses | - | - | (5,768 | ) | (776,225 | ) | (8,574 | ) | (11,945 | ) | (94 | ) | (19,001 | ) | (400,384 | ) | (1,221,991 | ) | ||||||||||||||||||||||
Foreign exchange | (1,340 | ) | (1,103 | ) | (914 | ) | (24,615 | ) | (234 | ) | (2,007 | ) | (125 | ) | (432 | ) | (4,561 | ) | (35,331 | ) | ||||||||||||||||||||
Other increases (decreases) | (278,255 | ) | (3,837 | ) | (30,974 | ) | (418,083 | ) | 538 | 2,903 | - | - | (26,965 | ) | (754,673 | ) | ||||||||||||||||||||||||
Changes, total | (257,731 | ) | 2,982 | (37,703 | ) | 386,934 | (1,788 | ) | (11,175 | ) | (157 | ) | 15,193 | 321,254 | 417,809 | |||||||||||||||||||||||||
Closing balance as of December 31, 2019 | 372,589 | 48,406 | 74,862 | 9,374,516 | 20,776 | 59,834 | 477 | 98,460 | 2,869,698 | 12,919,618 |
72
(b) | Composition of the fleet: |
Aircraft included | Aircraft included | |||||||||||||||||||||||||
in Property, | as Rights | Total | ||||||||||||||||||||||||
plant and equipment | of use assets | fleet | ||||||||||||||||||||||||
Aircraft | Model | As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | As of December 31, 2019 | As of December 31, 2018 | |||||||||||||||||||
Boeing 767 | 300ER | 28 | 33 | 2 | 2 | 30 | 35 | |||||||||||||||||||
Boeing 767 | 300F | 11 | (1) | 9 | (1) | 1 | 1 | 12 | (1) | 10 | (1) | |||||||||||||||
Boeing 777 | 300ER | 4 | 4 | 6 | 6 | 10 | 10 | |||||||||||||||||||
Boeing 777 | 200ER | - | - | - | 2 | - | 2 | |||||||||||||||||||
Boeing 787 | 800 | 6 | 6 | 4 | 4 | 10 | 10 | |||||||||||||||||||
Boeing 787 | 900 | 6 | 4 | 10 | 10 | 16 | 14 | |||||||||||||||||||
Airbus A319 | 100 | 37 | 37 | 9 | 9 | 46 | 46 | |||||||||||||||||||
Airbus A320 | 200 | 96 | (2) | 97 | (2) | 46 | 34 | 142 | (2) | 131 | (2) | |||||||||||||||
Airbus A320 | NEO | 7 | 1 | 6 | 3 | 13 | 4 | |||||||||||||||||||
Airbus A321 | 200 | 30 | 30 | 19 | 19 | 49 | 49 | |||||||||||||||||||
Airbus A350 | 900 | 2 | 5 | 7 | (3) | 4 | (3) | 9 | (3) | 9 | ||||||||||||||||
Total | 227 | 226 | 110 | 94 | 337 | 320 |
(1) | One aircraft leased to Aerotransportes Mas de Carga S.A. de C.V. |
(2) | Three aircraft leased to Salam Air and two to Sundair |
(3) | Four aircraft leased to Qatar Airways, which are in assets by right of use. |
(c) | Method used for the depreciation of Property, plant and equipment: |
Useful life (years) | ||||||
Method | minimum | maximum | ||||
Buildings | Straight line without residual value | 20 | 50 | |||
Plant and equipment | Straight line with residual value of 20% in the short-haul fleet and 36% in the long-haul fleet. (*) | 5 | 30 | |||
Information technology equipment | Straight line without residual value | 5 | 10 | |||
Fixed installations and accessories | Straight line without residual value | 10 | 10 | |||
Motor vehicle | Straight line without residual value | 10 | 10 | |||
Leasehold improvements | Straight line without residual value | 5 | 8 | |||
Assets for rights of use | Straight line without residual value | 1 | 25 |
(*) Except in the case of the Boeing 767 300ER and Boeing 767 300F fleets that consider a lower residual value due to the extension of their useful life to 22 and 30 years respectively. Additionally, certain technical components are depreciated based on cycles and hours flown.
The aircraft with remarketing clause (**) under modality of financial leasing, which are depreciated according to the duration of their contracts, between 12 and 18 years. Its residual values are estimated according to market value at the end of such contracts.
(**) Aircraft with remarketing clause are those that are required to sell at the end of the contract.
In the year 2019, the charge to income for the depreciation of the year, which is included in the consolidated statement of income, amounts to ThUS $ 1,221,991 and ThUS $ 1,155,061 for the same period of the year 2018; those amounts include depreciation of assets for right of use, for ThUS $ 400,384 and ThUS $ 391,138, respectively). This expense is recognized in the cost of sales and administrative expenses of the consolidated statement of income.
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(d) | Additional information regarding Property, plant and equipment: |
(i) | Property, plant and equipment pledged as guarantee: |
Description of Property, plant and equipment pledged as guarantee:
As of | As of | |||||||||||||||||||
December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | |||||||||||||||||||
Guarantee agent (1) | Creditor company | Fleet | Existing Debt | Book Value | Existing Debt | Book Value | ||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||
Wilmington Trust Company | MUFG | Airbus A319 | 74,713 | 256,937 | 96,057 | 234,329 | ||||||||||||||
Airbus A320 | 70,644 | 256,651 | 98,903 | 220,390 | ||||||||||||||||
Boeing 767 | 61,728 | 196,244 | 82,793 | 206,868 | ||||||||||||||||
Boeing 787 | 120,938 | 127,283 | 144,312 | 133,388 | ||||||||||||||||
Airbus A321 | 353,774 | 452,107 | 389,080 | 477,778 | ||||||||||||||||
Boeing 787 | 332,131 | 374,998 | 365,375 | 398,510 | ||||||||||||||||
Aircraft and engines | Airbus A350 | 180,320 | 192,620 | 198,301 | 204,860 | |||||||||||||||
Boeing 787 | 143,475 | 191,804 | 162,378 | 204,961 | ||||||||||||||||
Banco Santander S.A. | Aircraft and engines | Airbus A320 | - | - | 172,474 | 275,511 | ||||||||||||||
Airbus A321 | - | - | 25,661 | 41,957 | ||||||||||||||||
BNP Paribas | Aircraft and engines | Airbus A319 | - | - | 9,693 | 19,113 | ||||||||||||||
BNP Paribas | Airbus A319 | - | - | 17,009 | 26,407 | |||||||||||||||
Credit Agricole | Airbus A319 | - | - | 11,154 | 31,865 | |||||||||||||||
Airbus A320 | 85,986 | 95,148 | 134,328 | 132,301 | ||||||||||||||||
Airbus A321 / A350 | 83,281 | 67,882 | 22,439 | 24,939 | ||||||||||||||||
Boeing 767 | 10,404 | 35,226 | 21,830 | 43,568 | ||||||||||||||||
Aircraft and engines | Boeing 787 | 74,023 | 36,594 | 74,023 | 42,228 | |||||||||||||||
Wells Fargo | Aircraft and engines | Airbus A320 | - | - | 196,540 | 285,877 | ||||||||||||||
Bank Of Utah | Aircraft and engines (2) | Airbus A320 / A350 | 296,441 | 378,462 | 502,006 | 630,065 | ||||||||||||||
Boeing 787 | 217,500 | 259,934 | - | - | ||||||||||||||||
Aircraft and engines (2) | Airbus A320 / A350 | 44,088 | - | 54,014 | - | |||||||||||||||
Aircraft and engines | ||||||||||||||||||||
Natixis | Airbus A321 | 282,927 | 384,224 | 324,524 | 410,771 | |||||||||||||||
Citibank N.A. | Aircraft and engines | Airbus A320 | - | - | 78,049 | 132,296 | ||||||||||||||
Airbus A321 | - | - | 28,938 | 70,333 | ||||||||||||||||
UMB Bank | Aircraft and engines | Airbus A320 | 106,250 | 149,607 | - | - | ||||||||||||||
MUFG Bank | Aircraft and engines | Airbus A320 | 216,411 | 310,311 | - | - | ||||||||||||||
PK AirFinance US, Inc. | Aircraft and engines | Airbus A320 | - | - | 37,615 | 52,435 | ||||||||||||||
Banco BBVA | Land and buildings (3) | - | - | 50,785 | 64,500 | |||||||||||||||
Total direct guarantee | 2,755,034 | 3,766,032 | 3,298,281 | 4,365,250 |
(1) | For syndicated loans, is the Guarantee Agent that, represent different creditors. |
(2) | As of December 31, 2019, three A350 aircraft are classified under Non-current assets or groups of assets for disposal as held for sale. |
(3) | Corresponds to a debt classified under item loans to exporters (see Note 19). |
The amounts of the current debt are presented at their nominal value. The book value corresponds to the goods granted as collateral.
Additionally, there are indirect guarantees associated with assets registered in properties, plants and equipment whose total debt as of December 31, 2019, amounts to ThUS$ 1,762,611 (ThUS$ 1,633,504 as of December 31, 2018). The book value of the assets with indirect guarantees as of December 31, 2019, amounts to ThUS$ 3,866,237 (ThUS$ 3,258,950 as of December 31, 2018).
74
As of December 31, 2019, the Company keeps valid letters of credit related to assets by right of use according to the following detail:
Creditor Guarantee | Debtor | Type | Value ThUS$ | Release date | ||||||
GE Capital Aviation Services Limited | Lan Cargo S.A. | One letter of credit | 1,100 | Nov 30, 2020 | ||||||
Avolon Aerospace AOE 62 Limited | Latam Airlines Group S.A. | Three letter of credit | 2,167 | Sep 30, 2020 | ||||||
Bank of Utah | Latam Airlines Group S.A. | One letter of credit | 2,000 | Mar 24, 2020 | ||||||
GE Capital Aviation Services Ltd. | Latam Airlines Group S.A. | Three letter of credit | 14,327 | Jan 20, 2020 | ||||||
ORIX Aviation Systems Limited | Latam Airlines Group S.A. | Four letter of credit | 10,034 | Sep 26, 2020 | ||||||
Sky High XXIV Leasing Company | Latam Airlines Group S.A. | Eight letter of credit | 6,831 | Aug 05, 2020 | ||||||
Merlin Aviation Leasing (Ireland) 18 Limited | Tam Linhas Aéreas S.A. | One letter of credit | 3,852 | Mar 15, 2020 | ||||||
Shapphire Leasing (AOE) Limited | Tam Linhas Aéreas S.A. | One letter of credit | 7,500 | Oct 19, 2020 | ||||||
Wells Fargo Bank | Latam Airlines Group S.A. | Nine letter of credit | 15,160 | Mar 13, 2020 | ||||||
Banc Of America | Latam Airlines Group S.A. | Three letter of credit | 1,044 | Jul 7, 2020 | ||||||
Macquaire Aircraft Leasing Services | Latam Airlines Group S.A. | Five letter of credit | 2,582 | Aug 1, 2020 | ||||||
TC Skyward Aviation US Inc | Tam Linhas Aéreas S.A. | One letter of credit | 13,100 | Oct 6, 2020 | ||||||
RB Comercial Properties 49 Empreendimentos Imobiliarios LTDA | Tam Linhas Aéreas S.A. | One letter of credit | 35,974 | Apr 29, 2020 | ||||||
115,671 |
(ii) | Commitments and others |
Fully depreciated assets and commitments for future purchases are as follows:
As of December 31, 2019 | As of December 31, 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Gross book value of fully depreciated property, plant and equipment still in use | 261,792 | 192,606 | ||||||
Commitments for the acquisition of aircraft (*)(**) | 7,390,000 | 14,400,000 |
(*) | According to the manufacturer’s price list. |
(**) | The current commitments do not consider 10 Airbus aircraft of the A350 family, included in a sales contract with Delta Air Lines, Inc. |
Purchase commitment of aircraft
Year of delivery | ||||||||||||||||||||||||
Manufacturer | 2020 | 2021 | 2022 | 2023 | 2024-2026 | Total | ||||||||||||||||||
Airbus S.A.S. (*) | 3 | 10 | 11 | 9 | 11 | 44 | ||||||||||||||||||
A320-NEO Family | 3 | 10 | 11 | 9 | 9 | 42 | ||||||||||||||||||
A350 Family | - | - | - | - | 2 | 2 | ||||||||||||||||||
The Boeing Company | 2 | 2 | - | 2 | - | 6 | ||||||||||||||||||
Boeing 787-9 | 2 | 2 | - | 2 | - | 6 | ||||||||||||||||||
Total | 5 | 12 | 11 | 11 | 11 | 50 |
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(*) During the third quarter of 2019 the company signed a sale contract with Delta Air Lines, Inc. for 14 Airbus A350 family aircraft, 10 were within the current aircraft purchase commitments and 4 that were already in PPE were classified as assets held for sale as of December 31, 2019.
As of December 31, 2019, as a result of the different aircraft purchase contracts and agreements signed with Airbus SAS, there are remaining to receive 42 Airbus aircraft of the A320 family, with deliveries between 2020 and 2024, and 2 Airbus aircraft of the A350 family with dates delivery for between 2026. The approximate amount, according to manufacturer’s list prices, is ThUS$ 5,640,000.
As of December 31, 2019, as a result of the different aircraft purchase contracts signed with The Boeing Company, there are remaining 6 Boeing 787 Dreamliner aircraft, with delivery dates between 2020 and 2023. The approximate amount, according to manufacturer’s list prices, is ThUS$ 1,750,000.
(iii) | Capitalized interest costs with respect to Property, plant and equipment. |
For the year ended | ||||||||||
December 31, | ||||||||||
2019 | 2018 | |||||||||
Average rate of capitalization of capitalized interest costs | % | 4.72 | 4.64 | |||||||
Costs of capitalized interest | ThUS$ | 1,444 | 13,007 |
NOTE 18 - CURRENT AND DEFERRED TAXES
In the period ended December 31, 2019, the income tax provision was calculated for such period, applying the partially integrated taxation system and a rate of 27%, in accordance with the Law No. 20,780 published in the Official Journal of the Republic of Chile on September 29, 2014.
Deferred taxes are recognized, on the temporary differences arising between the tax bases of assets and liabilities and their carrying amounts in the consolidated financial statements.
No deferred tax has been recorded for permanent difference, since they are caused by transactions that are recorded in the financial statements and that will not have impact on income taxes.
76
(a) | Current taxes |
(a.1) | The composition of the current tax assets is the following: |
Current assets | Non-current assets | Total assets | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Provisional monthly payments (advances) | 10,968 | 48,480 | - | - | 10,968 | 48,480 | ||||||||||||||||||
Other recoverable credits | 18,353 | 20,654 | - | 757 | 18,353 | 21,411 | ||||||||||||||||||
Total assets by current tax | 29,321 | 69,134 | - | 757 | 29,321 | 69,891 |
(a.2) | The composition of the current tax liabilities are as follows: |
Current liabilities | Non-current liabilities | Total liabilities | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Income tax provision | 11,925 | 3,738 | - | - | 11,925 | 3,738 | ||||||||||||||||||
Total liabilities by current tax | 11,925 | 3,738 | - | - | 11,925 | 3,738 |
(b) | Deferred taxes |
The balances of deferred tax are the following:
Assets | Liabilities | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
Concept | 2019 | 2018 | 2019 | 2018 | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Restated | Restated | |||||||||||||||
Properties, Plants and equipment | 186,311 | 150,831 | 1,700,215 | 1,733,327 | ||||||||||||
Assets by right of use | 42,011 | 202 | (91,470 | ) | (85,550 | ) | ||||||||||
Amortization | (903 | ) | (983 | ) | 52,233 | 55,880 | ||||||||||
Provisions | (139,346 | ) | (38,303 | ) | (182,913 | ) | (75,631 | ) | ||||||||
Revaluation of financial instruments | 422 | 445 | (9,857 | ) | 458 | |||||||||||
Tax losses | 155,539 | 170,980 | (1,200,729 | ) | (1,198,170 | ) | ||||||||||
Intangibles | - | - | 349,082 | 351,238 | ||||||||||||
Others | (8,451 | ) | (9,643 | ) | 242 | 5,019 | ||||||||||
Total | 235,583 | 273,529 | 616,803 | 786,571 |
The balance of deferred tax assets and liabilities are composed primarily of temporary differences to be reversed in the long term.
77
Movements of Deferred tax assets and liabilities
(a) | From January 1 to December 31, 2018 Restated (Unaudited) |
Opening | Recognized in | Recognized in | Exchange | Ending | ||||||||||||||||
balance | consolidated | comprehensive | rate | balance | ||||||||||||||||
Assets/(liabilities) | income | income | variation | Asset (liability) | ||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||
Property, plant and equipment | (1,568,764 | ) | (19,735 | ) | - | 6,003 | (1,582,496 | ) | ||||||||||||
Assets for right of use | 75,849 | 9,903 | - | - | 85,752 | |||||||||||||||
Amortization | (54,820 | ) | (3,735 | ) | - | 1,692 | (56,863 | ) | ||||||||||||
Provisions | (10,461 | ) | 92,804 | 1,566 | (46,581 | ) | 37,328 | |||||||||||||
Revaluation of financial instruments | 3,750 | (2,326 | ) | (269 | ) | (1,168 | ) | (13 | ) | |||||||||||
Tax losses | 1,479,560 | (98,154 | ) | - | (12,256 | ) | 1,369,150 | |||||||||||||
Intangibles | (406,536 | ) | 20,000 | - | 35,298 | (351,238 | ) | |||||||||||||
Others | (28,405 | ) | 5,439 | - | 8,304 | (14,662 | ) | |||||||||||||
Total | (509,827 | ) | 4,196 | 1,297 | (8,708 | ) | (513,042 | ) |
(b) | From January 1 to December 31, 2019 |
Opening | Recognized in | Recognized in | Exchange | Ending | ||||||||||||||||
balance | consolidated | comprehensive | rate | balance | ||||||||||||||||
Assets/(liabilities) | income | income | variation | Asset (liability) | ||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||
Property, plant and equipment | (1,582,496 | ) | 67,237 | - | 1,355 | (1,513,904 | ) | |||||||||||||
Assets for right of use | 85,752 | 47,729 | - | - | 133,481 | |||||||||||||||
Amortization | (56,863 | ) | 3,345 | - | 382 | (53,136 | ) | |||||||||||||
Provisions | 37,328 | 13,881 | 2,873 | (10,515 | ) | 43,567 | ||||||||||||||
Revaluation of financial instruments | (13 | ) | 10,142 | 414 | (264 | ) | 10,279 | |||||||||||||
Tax losses | 1,369,150 | (10,116 | ) | - | (2,766 | ) | 1,356,268 | |||||||||||||
Intangibles | (351,238 | ) | (11,718 | ) | - | 13,874 | (349,082 | ) | ||||||||||||
Others | (14,662 | ) | 5,844 | - | 125 | (8,693 | ) | |||||||||||||
Total | (513,042 | ) | 126,344 | 3,287 | 2,191 | (381,220 | ) |
Deferred tax assets not recognized:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Tax losses | 110,933 | 137,761 | ||||||
Total Deferred tax assets not recognized | 110,933 | 137,761 |
Deferred tax assets on tax losses are recognized only to the extent that it is probable that future taxable profit will be available against which the temporary differences can be utilized. As a result, as of December 31, 2019, the Company no longer recognizes deferred tax assets for ThUS $ 110.933 (ThUS $ 137,761 as of December 31, 2018) with respect to losses of ThUS $ 338,679 (ThUS $ 447,150 at December 31, 2018).
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Deferred tax expense and current income taxes:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Current tax expense | ||||||||
Current tax expense | 72,999 | 77,713 | ||||||
Adjustment to previous period’s current tax | (352 | ) | 362 | |||||
Total current tax expense, net | 72,647 | 78,075 | ||||||
Deferred tax expense | ||||||||
Deferred expense for taxes related to the creation and reversal of temporary differences | (126,344 | ) | (4,196 | ) | ||||
Total deferred tax expense, net | (126,344 | ) | (4,196 | ) | ||||
Income tax expense | (53,697 | ) | 73,879 |
Composition of income tax expense (income):
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Current tax expense, net, foreign | 76,806 | 65,850 | ||||||
Current tax expense, net, Chile | (4,159 | ) | 12,225 | |||||
Total current tax expense, net | 72,647 | 78,075 | ||||||
Deferred tax expense, net, foreign | 37,294 | 58,271 | ||||||
Deferred tax expense, net, Chile | (163,638 | ) | (62,467 | ) | ||||
Deferred tax expense, net, total | (126,344 | ) | (4,196 | ) | ||||
Income tax expense | (53,697 | ) | 73,879 |
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Profit before tax by the legal tax rate in Chile (27% at December 31, 2019 and 2018)
For the year ended | For the year ended | |||||||||||||||
December 31, | December 31, | |||||||||||||||
2019 | 2018 | 2019 | 2018 | |||||||||||||
ThUS$ | ThUS$ | % | % | |||||||||||||
Tax expense using the legal rate | 38,318 | 112,230 | 27.00 | 27.00 | ||||||||||||
Tax effect by change in tax rate | - | 5,587 | - | 1.34 | ||||||||||||
Tax effect of rates in other jurisdictions | 20,082 | 15,905 | 14.15 | 3.83 | ||||||||||||
Tax effect of non-taxable operating revenues | (13,125 | ) | (3,076 | ) | (9.25 | ) | (0.74 | ) | ||||||||
Tax effect of disallowable expenses | 66,257 | 61,295 | 46.69 | 14.75 | ||||||||||||
Tax effect of due to the non-use of tax losses | - | 46,492 | - | 11.18 | ||||||||||||
Other increases (decreases) in legal tax charge | (165,229 | ) | (164,554 | ) | (116.43 | ) | (39.59 | ) | ||||||||
Total adjustments to tax expense using the legal rate | (92,015 | ) | (38,351 | ) | (64.84 | ) | (9.23 | ) | ||||||||
Tax expense using the effective rate | (53,697 | ) | 73,879 | (37.84 | ) | 17.77 |
Other increases (decreases) in legal tax charges for US $ 165.2 million (US $ 164.6 million as of December 31, 2018) mainly include the effect of the reduction of the deferred tax liability of US $ 145.9 million (US $ 172.9 to 31 December 2018) that occurs at the early termination the aircraft financing that were on leasing with special purpose vehicle outside Chile; and other adjustments for permanent differences in other group companies for US $ 19.3 million (US $ 8.3 as of December 31, 2018).
Deferred taxes related to items charged to net equity:
For the period ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Aggregate deferred taxation of components of other comprehensive income | 3,287 | 1,297 |
NOTE 19 - OTHER FINANCIAL LIABILITIES
The composition of other financial liabilities is as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
Current | ||||||||
(a) Interest bearing loans | 1,421,261 | 1,397,156 | ||||||
(b) Lease Liability | 414,027 | 363,497 | ||||||
(c) Hedge derivatives | 50,372 | 25,921 | ||||||
(d) Derivative non classified as hedge accounting | - | 7,712 | ||||||
Total current | 1,885,660 | 1,794,286 | ||||||
Non-current | ||||||||
(a) Interest bearing loans | 5,772,266 | 5,864,570 | ||||||
(b) Lease Liability | 2,758,130 | 2,494,552 | ||||||
(b) Hedge derivatives | 22 | 340 | ||||||
Total non-current | 8,530,418 | 8,359,462 |
80
(a) | Interest bearing loans |
Obligations with credit institutions and debt instruments:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Current | ||||||||
Loans to exporters | 341,475 | 400,721 | ||||||
Bank loans | 16,534 | 37,743 | ||||||
Guaranteed obligations (4) | 237,951 | 324,976 | ||||||
Other guaranteed obligations | 97,730 | 97,143 | ||||||
Subtotal bank loans | 693,690 | 860,583 | ||||||
Obligation with the public | 32,061 | 14,643 | ||||||
Financial leases (4) | 594,249 | 425,100 | ||||||
Other loans | 101,261 | 96,830 | ||||||
Total current | 1,421,261 | 1,397,156 | ||||||
Non-current | ||||||||
Bank loans | 200,721 | 184,998 | ||||||
Guaranteed obligations (4) | 1,919,376 | 2,209,045 | ||||||
Other guaranteed obligations | 482,702 | 576,309 | ||||||
Subtotal bank loans | 2,602,799 | 2,970,352 | ||||||
Obligation with the public (1)(2)(3) | 2,032,873 | 1,538,436 | ||||||
Financial leases (4) | 1,136,594 | 1,199,754 | ||||||
Other loans | - | 156,028 | ||||||
Total non-current | 5,772,266 | 5,864,570 | ||||||
Total obligations with financial institutions | 7,193,527 | 7,261,726 |
(1) On February 11, 2019, LATAM Finance Limited, a company incorporated in the Cayman Islands with limited liability and exclusively owned by LATAM Airlines Group SA, has issued on the international market, pursuant to Rule 144-A and Regulation S of the securities laws of the United States of America, unsecured long-term bonds for a nominal amount of US $ 600,000,000 at an annual interest rate of 7.00%. The bonds were placed at an issue price of 99.309% with respect to its even value. The bonds have semiannual interest payments and amortization of all capital at maturity and maturity date on March 1, 2026, unless they will be redeemed early according to their terms. As reported to the market, the issuance and placement was intended to finance general corporate purposes.
(2) On June 6, 2019, LATAM Airlines Group S.A. has issued in the local market (Santiago Stock Exchange) long-term unsecured bonds called Series E (BLATM-E), which correspond to the first series of bonds charged to the line registered in the Registro de Comisión para el Mercado Financiero (“CMF”) under the number Nº 921 dated November 26, 2018 for a total of UF 9,000,000.
The total amount issued was UF 5,000,000 with an expiration date on April 15, 2029 and a 3.60% annual coupon rate with semiannual interest payments. The placement rate was 2.73%, equivalent to an amount of ThUS$ 215,093.
The funds from the issuance were allocated 50% to the refinancing of liabilities, 30% for the financing of investments and 20% for general corporate purposes.
81
(3) On July 11, 2019, LATAM Finance Limited, a company incorporated in the Cayman Islands with limited liability and exclusive property of LATAM Airlines Group SA, issued a re-opening of the LATAM 2026 bond, issued on February 11 of 2019, for US $ 200,000,000. This re-opening had a placement rate of 5.979%.
Simultaneously, dated July 11, 2019, LATAM Airlines Group S.A. announced an offer for the repurchase of up to US $ 300 million of the unsecured LATAM 2020 bond, which was issued on June 9, 2015 for an amount of US $ 500 million at a coupon rate of 7.25% and due in June 2020. Offer repurchase price was 103.8 cents per dollar of nominal amount for the bonds offered until July 24, 2019, after this date and until August 7, 2019, the offered repurchase price was reduced to 100.8 cents for dollar at the expiration of the offer, a total of US $ 238,412,000 of the bonds were redeemed, of which US $ 238,162,000 arrived on or before July 24, 2019 and US $ 250,000 after that date.
The net proceeds obtained from the re-opening of the LATAM 2026 bond was used to pay a portion of the public offer of the LATAM 2020 bond. The remainder of the public offer was paid in cash.
On December 17, 2019, LATAM Airlines Group S.A. The repurchase of the remainder (US $ 262 million) of the unsecured bond LATAM2020 ended, which, added to the repurchase of July 11, 2019, ends the entire balance of the bond. The repurchase was carried out through the buy-back mechanism called “Make-Whole,” which is a right of the bond issuer to repurchase the entire outstanding balance of debt based on a price that is calculated using government treasury bonds. of the United States with maturity close to that of the bond and adding a spread. The repurchase price was 102,45 cents per dollar of nominal bond amount.
(4) In the year ended December 31, 2019, the Company sold its participation in 8 permanent establishments. As a result of the above, the classification of financial liabilities associated with 41 aircraft of guaranteed obligations became financial leases.
Currency balances that make the interest bearing loans:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
Currency | ThUS$ | ThUS$ | ||||||
Chilean peso (U.F.) | 611,542 | 500,398 | ||||||
US Dollar | 6,581,985 | 6,761,328 | ||||||
Total | 7,193,527 | 7,261,726 |
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Interest-bearing loans due in installments to December 31, 2019
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
Nominal values | Accounting values | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
More than | More than | More than | More | More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
90 days | one to | three to | than | Total | 90 days | one to | three to | than | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||||
Creditor | Up to | to one | three | five | five | nominal | Up to | to one | three | five | five | accounting | Effective | Nominal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | 90 days | year | years | years | years | value | 90days | year | years | years | years | value | Amortization | rate | rate | ||||||||||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Loans to exporters | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | US$ | 24,000 | 75,000 | - | - | - | 99,000 | 24,910 | 75,000 | - | - | - | 99,910 | At Expiration | 3.29 | 3.29 | ||||||||||||||||||||||||||||||||||||||||||||||
97.003.000-K | BANCO DO BRASIL | Chile | UF | 150,000 | 50,000 | - | - | - | 200,000 | 150,257 | 50,283 | - | - | - | 200,540 | At Expiration | 2.93 | 2.93 | ||||||||||||||||||||||||||||||||||||||||||||||
97.951.000-4 | HSBC | Chile | US$ | 12,000 | - | - | - | - | 12,000 | 12,016 | - | - | - | - | 12,016 | At Expiration | 3.25 | 3.25 | ||||||||||||||||||||||||||||||||||||||||||||||
76.100.458-1 | BLADEX | Chile | US$ | - | 29,000 | - | - | - | 29,000 | - | 29,009 | - | - | - | 29,009 | At Expiration | 2.82 | 2.82 | ||||||||||||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
97.023.000-9 | CORPBANCA | Chile | UF | 5,205 | 10,410 | - | - | - | 15,615 | 5,192 | 10,369 | - | - | - | 15,561 | Quarterly | 3.35 | 3.35 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | SANTANDER | Spain | US$ | - | - | 137,860 | - | - | 137,860 | 255 | - | 137,860 | - | - | 138,115 | Quarterly | 3.62 | 4.61 | ||||||||||||||||||||||||||||||||||||||||||||||
76.362.099-9 | BTG PACTUAL CHILE | Chile | UF | - | - | 62,769 | - | - | 62,769 | 113 | - | 62,172 | - | - | 62,285 | At Expiration | 3.10 | 3.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Obligations with the public | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | ESTADO | Chile | UF | - | - | 164,485 | - | 353,547 | 518,032 | - | 2,642 | 164,398 | - | 366,656 | 533,696 | At Expiration | 4.81 | 4.81 | ||||||||||||||||||||||||||||||||||||||||||||||
97.030.000-7 | BANK OF NEW YORK | U.S.A. | US$ | - | - | - | 700,000 | 800,000 | 1,500,000 | 18,640 | 10,779 | - | 698,256 | 803,563 | 1,531,238 | At Expiration | 7.16 | 6.94 | ||||||||||||||||||||||||||||||||||||||||||||||
Guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 8,115 | 36,282 | 93,788 | 100,622 | 275,134 | 513,941 | 10,058 | 36,855 | 91,224 | 99,297 | 273,038 | 510,472 | Quarterly | 3.81 | 3.81 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WILMINGTON TRUST | U.S.A. | US$ | 22,090 | 66,710 | 183,332 | 196,452 | 397,639 | 866,223 | 27,229 | 66,710 | 178,784 | 194,741 | 395,983 | 863,447 | Quarterly | 4.45 | 4.45 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 4,805 | 14,608 | 40,414 | 42,626 | 41,022 | 143,475 | 5,461 | 14,608 | 36,178 | 40,932 | 40,310 | 137,489 | Quarterly | 3.76 | 2.68 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 10,675 | 32,708 | 84,674 | 78,123 | 76,726 | 282,906 | 11,410 | 32,708 | 83,072 | 77,195 | 75,928 | 280,313 | Quarterly | 3.82 | 3.82 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | INVESTEC | England | US$ | 1,538 | 8,976 | 22,977 | 10,596 | - | 44,087 | 1,867 | 9,112 | 22,597 | 10,565 | - | 44,141 | Semiannual | 6.35 | 6.35 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | MUFG | U.S.A. | US$ | 2,973 | 18,593 | 53,816 | 57,993 | 189,285 | 322,660 | 3,182 | 18,593 | 53,367 | 57,694 | 188,471 | 321,307 | Quarterly | 3.43 | 3.43 | ||||||||||||||||||||||||||||||||||||||||||||||
- | SWAP Received Aircraft | - | US$ | 80 | 78 | - | - | - | 158 | 80 | 78 | - | - | - | 158 | Quarterly | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Other guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | - | - | 253,692 | - | - | 253,692 | 2,370 | - | 252,747 | - | - | 255,117 | At Expiration | 3.74 | 3.74 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | MUFG | U.S.A. | US$ | 23,669 | 71,432 | 188,440 | 44,482 | - | 328,023 | 23,929 | 71,431 | 185,938 | 44,017 | - | 325,315 | Quarterly | 3.54 | 3.54 | ||||||||||||||||||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | ING | U.S.A. | US$ | 3,875 | 7,931 | - | - | - | 11,806 | 3,952 | 7,931 | - | - | - | 11,883 | Quarterly | 5.71 | 5.01 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 4,831 | 14,723 | 6,537 | - | - | 26,091 | 4,943 | 14,723 | 6,537 | - | - | 26,203 | Quarterly | 3.15 | 2.52 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 17,972 | 52,790 | 113,746 | 16,399 | - | 200,907 | 18,633 | 52,790 | 112,712 | 16,368 | - | 200,503 | Quarterly | 3.39 | 2.80 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | PEFCO | U.S.A. | US$ | 1,901 | 1,926 | - | - | - | 3,827 | 1,918 | 1,926 | - | - | - | 3,844 | Quarterly | 5.65 | 5.03 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 8,523 | 23,197 | 25,182 | 20,717 | 10,110 | 87,729 | 9,042 | 23,197 | 24,675 | 20,424 | 9,975 | 87,313 | Quarterly | 3.85 | 3.72 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WELLS FARGO | U.S.A. | US$ | 32,321 | 97,956 | 248,086 | 199,037 | 14,284 | 591,684 | 34,868 | 97,956 | 233,822 | 195,209 | 14,138 | 575,993 | Quarterly | 2.67 | 1.98 | ||||||||||||||||||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 5,690 | 17,255 | 46,472 | 3,134 | - | 72,551 | 5,959 | 17,255 | 45,805 | 3,128 | - | 72,147 | Quarterly | 3.00 | 2.46 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | RRPF ENGINE | England | US$ | 864 | 2,348 | 7,441 | 8,075 | 915 | 19,643 | 908 | 2,348 | 7,441 | 8,075 | 915 | 19,687 | Monthly | 4.01 | 4.01 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | APPLE BANK | U.S.A. | US$ | 1,483 | 4,509 | 12,474 | 7,242 | - | 25,708 | 1,632 | 4,509 | 12,162 | 7,212 | - | 25,515 | Quarterly | 3.33 | 2.73 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BTMU | U.S.A. | US$ | 3,010 | 9,148 | 25,278 | 13,904 | - | 51,340 | 3,191 | 9,148 | 24,661 | 13,849 | - | 50,849 | Quarterly | 3.33 | 2.73 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 702 | 2,173 | 2,279 | - | - | 5,154 | 723 | 2,173 | 2,279 | - | - | 5,175 | Quarterly | 4.41 | 4.41 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | KFW IPEX-BANK | Germany | US$ | 1,760 | 3,568 | - | - | - | 5,328 | 1,769 | 3,568 | - | - | - | 5,337 | Quarterly | 3.55 | 3.55 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | AIRBUS FINANCIAL | U.S.A. | US$ | 1,977 | 5,687 | - | - | - | 7,664 | 1,992 | 5,687 | - | - | - | 7,679 | Monthly | 3.31 | 3.31 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | US BANK | U.S.A. | US$ | 15,862 | 48,132 | 132,441 | 135,200 | 17,492 | 349,127 | 17,610 | 48,132 | 119,881 | 130,865 | 17,188 | 333,676 | Quarterly | 4.01 | 2.82 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | PK AIRFINANCE | U.S.A. | US$ | 2,487 | 7,729 | 17,871 | - | - | 28,087 | 2,530 | 7,729 | 17,871 | - | - | 28,130 | Monthly | 3.45 | 3.45 | ||||||||||||||||||||||||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK (*) | U.S.A. | US$ | 24,595 | 76,431 | - | - | - | 101,026 | 24,830 | 76,431 | - | - | - | 101,261 | Quarterly | 6.00 | 6.00 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | 393,003 | 789,300 | 1,924,054 | 1,634,602 | 2,176,154 | 6,917,113 | 431,469 | 803,680 | 1,876,183 | 1,617,827 | 2,186,165 | 6,915,324 |
(*) Securitized bond with the future flows from the sales with credit card in United States and Canada, through the company Guanay Finance Limited.
83
Interest-bearing loans due in installments to December 31, 2019
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
Nominal values | Accounting values | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
More than | More than | More than | More | More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | than | Total | Up to | 90 days | one to | three to | than | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | nominal | 90 | to one | three | five | five | accounting | Effective | Nominal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | value | days | year | years | years | years | value | Amortization | rate | rate | ||||||||||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | NEDERLANDSCHE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CREDIETVERZEKERING MAATSCHAPPIJ | Holland | US$ | 148 | 452 | 689 | - | - | 1,289 | 153 | 452 | 689 | - | - | 1,294 | Monthly | 6.01 | 6.01 | |||||||||||||||||||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 3,243 | 6,906 | 76,107 | - | - | 86,256 | 3,723 | 6,906 | 76,107 | - | - | 86,736 | Quarterly/ Semiannual | 6.29 | 6.29 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WACAPOU LEASING S.A. | Luxemburg | US$ | 757 | 2,317 | 3,206 | - | - | 6,280 | 777 | 2,317 | 3,206 | - | - | 6,300 | Quarterly | 4.32 | 4.32 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | SOCIÉTÉ GÉNÉRALE MILAN BRANCH | Italy | US$ | 9,855 | 160,076 | - | - | - | 169,931 | 10,409 | 159,876 | - | - | - | 170,285 | Quarterly | 5.39 | 5.39 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | GA Telessis LLC | U.S.A | US$ | 306 | 1,100 | 2,385 | 2,694 | 7,010 | 13,495 | 399 | 1,100 | 2,385 | 2,694 | 7,010 | 13,588 | Monthly | 14.72 | 14.72 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | 14,309 | 170,851 | 82,387 | 2,694 | 7,010 | 277,251 | 15,461 | 170,651 | 82,387 | 2,694 | 7,010 | 278,203 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consolidated | 407,312 | 960,151 | 2,006,441 | 1,637,296 | 2,183,164 | 7,194,364 | 446,930 | 974,331 | 1,958,570 | 1,620,521 | 2,193,175 | 7,193,527 |
84
Interest-bearing loans due in installments to December 31, 2018
Debtor: LATAM Airlines Group S.A. and Subsidiaries, Tax No. 89.862.200-2, Chile.
Nominal values | Accounting values | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
More than | More than | More than | More | More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | than | Total | Up to | 90 days | one to | three to | than | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | nominal | 90 | to one | three | five | five | accounting | Effective | Nominal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | value | days | year | years | years | years | value | Amortization | rate | rate | ||||||||||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Loans to exporters | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | US$ | 38,000 | 75,000 | - | - | - | 113,000 | 38,432 | 75,623 | - | - | - | 114,055 | At Expiration | 3.36 | 3.36 | ||||||||||||||||||||||||||||||||||||||||||||||
97.032.000-8 | BBVA | Chile | UF | - | 50,785 | - | - | - | 50,785 | - | 50,930 | - | - | - | 50,930 | At Expiration | 3.31 | 3.31 | ||||||||||||||||||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 23,000 | - | - | - | - | 23,000 | 23,025 | - | - | - | - | 23,025 | At Expiration | 3.90 | 3.90 | ||||||||||||||||||||||||||||||||||||||||||||||
97.003.000-K | BANCO DO BRASIL | Chile | US$ | 200,000 | - | - | - | - | 200,000 | 200,698 | - | - | - | - | 200,698 | At Expiration | 3.64 | 3.64 | ||||||||||||||||||||||||||||||||||||||||||||||
97.951.000-4 | HSBC | Chile | US$ | 12,000 | - | - | - | - | 12,000 | 12,013 | - | - | - | - | 12,013 | At Expiration | 3.14 | 3.14 | ||||||||||||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
97.023.000-9 | CORPBANCA | Chile | UF | 5,461 | 16,385 | 16,385 | - | - | 38,231 | 5,480 | 16,385 | 16,232 | - | - | 38,097 | Quarterly | 3.35 | 3.35 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BLADEX | U.S.A. | US$ | - | 15,000 | - | - | - | 15,000 | - | 14,964 | - | - | - | 14,964 | Semiannual | 6.74 | 6.74 | ||||||||||||||||||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | - | - | 102,521 | - | - | 102,521 | 223 | - | 102,521 | - | - | 102,744 | Quarterly | 5.60 | 5.60 | ||||||||||||||||||||||||||||||||||||||||||||||
76.362.099-9 | BTG PACTUAL CHILE | Chile | UF | - | - | - | 65,862 | - | 65,862 | 118 | - | - | 64,957 | - | 65,075 | At Expiration | 3.10 | 3.10 | ||||||||||||||||||||||||||||||||||||||||||||||
Obligations with the public | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | BANK OF NEW YORK | U.S.A. | US$ | - | - | 500,000 | - | 700,000 | 1,200,000 | 13,057 | - | 495,617 | - | 697,869 | 1,206,543 | At Expiration | 7.44 | 7.03 | ||||||||||||||||||||||||||||||||||||||||||||||
97.030.000-7 | ESTADO | Chile | UF | - | - | - | 172,591 | 172,591 | 345,182 | 1,586 | - | - | 172,420 | 172,530 | 346,536 | At Expiration | 5.50 | 5.50 | ||||||||||||||||||||||||||||||||||||||||||||||
Guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 658 | 1,986 | 5,384 | 2,052 | - | 10,080 | 715 | 1,986 | 5,384 | 2,052 | - | 10,137 | Quarterly | 3.23 | 3.23 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 10,553 | 43,430 | 114,247 | 117,556 | 225,912 | 511,698 | 13,334 | 44,191 | 110,977 | 115,747 | 224,093 | 508,342 | Quarterly | 4.55 | 4.55 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WILMINGTON TRUST | U.S.A. | US$ | 20,689 | 65,846 | 178,818 | 237,334 | 450,071 | 952,758 | 26,365 | 65,846 | 173,617 | 235,058 | 447,686 | 948,572 | Quarterly | 4.47 | 4.47 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 10,776 | 32,790 | 90,991 | 72,189 | 62,619 | 269,365 | 11,923 | 32,790 | 86,130 | 70,048 | 61,203 | 262,094 | Quarterly | 3.82 | 2.93 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | US BANK | U.S.A. | US$ | 15,506 | 47,050 | 129,462 | 135,489 | 84,177 | 411,684 | 17,433 | 47,050 | 114,729 | 129,547 | 82,137 | 390,896 | Quarterly | 4.00 | 2.82 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 10,247 | 31,350 | 88,688 | 77,693 | 116,546 | 324,524 | 11,250 | 31,350 | 86,883 | 76,760 | 115,285 | 321,528 | Quarterly | 4.69 | 4.69 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | PK AIRFINANCE | U.S.A. | US$ | 2,319 | 7,208 | 24,944 | 3,144 | - | 37,615 | 2,387 | 7,208 | 24,944 | 3,144 | - | 37,683 | Monthly | 4.15 | 4.14 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | INVESTEC | England | US$ | 1,454 | 8,472 | 21,667 | 22,421 | - | 54,014 | 1,879 | 8,661 | 21,154 | 22,309 | - | 54,003 | Semiannual | 7.17 | 7.17 | ||||||||||||||||||||||||||||||||||||||||||||||
- | SWAP Received Aircraft | - | US$ | 194 | 414 | 158 | - | - | 766 | 194 | 414 | 158 | - | - | 766 | Quarterly | - | - | ||||||||||||||||||||||||||||||||||||||||||||||
Other guaranteed obligations | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | - | - | 253,692 | - | - | 253,692 | 2,646 | - | 252,207 | - | - | 254,853 | At Expiration | 4.11 | 4.11 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | DVB BANK SE | Germany | US$ | 23,417 | 70,626 | 191,207 | 117,084 | 19,731 | 422,065 | 23,871 | 70,626 | 188,231 | 116,185 | 19,686 | 418,599 | Quarterly | 4.42 | 4.42 | ||||||||||||||||||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | ING | U.S.A. | US$ | 3,687 | 11,338 | 11,806 | - | - | 26,831 | 3,923 | 11,338 | 11,657 | - | - | 26,918 | Quarterly | 5.70 | 5.01 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CREDIT AGRICOLE | France | US$ | 13,171 | 24,577 | 18,655 | - | - | 56,403 | 13,187 | 24,331 | 18,655 | - | - | 56,173 | Quarterly | 3.66 | 3.31 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK | U.S.A. | US$ | 13,209 | 40,365 | 77,587 | 40,997 | - | 172,158 | 13,998 | 40,365 | 75,830 | 40,801 | - | 170,994 | Quarterly | 4.40 | 3.80 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | PEFCO | U.S.A. | US$ | 5,486 | 13,094 | 3,827 | - | - | 22,407 | 5,641 | 13,094 | 3,743 | - | - | 22,478 | Quarterly | 5.64 | 5.02 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BNP PARIBAS | U.S.A. | US$ | 7,926 | 29,494 | 22,147 | - | - | 59,567 | 8,320 | 29,493 | 21,891 | - | - | 59,704 | Quarterly | 3.90 | 3.58 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WELLS FARGO | U.S.A. | US$ | 31,673 | 95,981 | 263,239 | 230,417 | 98,028 | 719,338 | 34,816 | 95,981 | 245,615 | 224,395 | 96,589 | 697,396 | Quarterly | 2.77 | 2.09 | ||||||||||||||||||||||||||||||||||||||||||||||
97.036.000-K | SANTANDER | Chile | US$ | 5,576 | 16,895 | 46,386 | 26,165 | - | 95,022 | 6,000 | 16,895 | 45,346 | 26,063 | - | 94,304 | Quarterly | 3.68 | 3.14 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | RRPF ENGINE | England | US$ | 552 | 2,531 | 7,142 | 7,752 | 5,035 | 23,012 | 552 | 2,531 | 7,142 | 7,752 | 5,035 | 23,012 | Monthly | 4.01 | 4.01 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | APPLE BANK | U.S.A. | US$ | 1,444 | 4,393 | 12,146 | 12,808 | 753 | 31,544 | 1,658 | 4,393 | 11,726 | 12,713 | 752 | 31,242 | Quarterly | 3.93 | 3.33 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | BTMU | U.S.A. | US$ | 2,933 | 8,916 | 24,635 | 25,937 | 768 | 63,189 | 3,199 | 8,916 | 23,798 | 25,751 | 767 | 62,431 | Quarterly | 4.06 | 3.46 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 10,056 | 7,951 | 5,154 | - | - | 23,161 | 10,135 | 7,952 | 5,154 | - | - | 23,241 | Quarterly | 4.28 | 4.12 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | KFW IPEX-BANK | Germany | US$ | 1,699 | 5,188 | 5,328 | - | - | 12,215 | 1,723 | 5,188 | 5,328 | - | - | 12,239 | Quarterly | 4.20 | 4.19 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | AIRBUS FINANCIAL | U.S.A. | US$ | 1,915 | 5,838 | 7,664 | - | - | 15,417 | 1,954 | 5,838 | 7,664 | - | - | 15,456 | Monthly | 4.19 | 4.19 | ||||||||||||||||||||||||||||||||||||||||||||||
Other loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | BOEING | U.S.A. | US$ | - | - | 55,727 | - | - | 55,727 | - | 1,229 | 55,727 | - | - | 56,956 | At Expiration | 4.01 | 4.01 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | CITIBANK (*) | U.S.A. | US$ | 23,167 | 72,018 | 101,026 | - | - | 196,211 | 23,583 | 72,018 | 100,301 | - | - | 195,902 | Quarterly | 6.00 | 6.00 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | 496,768 | 804,921 | 2,380,633 | 1,367,491 | 1,936,231 | 6,986,044 | 535,318 | 807,586 | 2,318,361 | 1,345,702 | 1,923,632 | 6,930,599 |
(*) | Securitized bond with the future flows from the sales with credit card in United States and Canada, through the company Guanay Finance Limited. |
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Interest-bearing loans due in installments to December 31, 2018
Debtor: TAM S.A. and Subsidiaries, Tax No. 02.012.862/0001-60, Brazil.
Nominal values | Accounting values | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
More than | More than | More than | More | More than | More than | More than | More | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||
Up to | 90 days | one to | three to | than | Total | Up to | 90 days | one to | three to | than | Total | |||||||||||||||||||||||||||||||||||||||||||||||||||||
Creditor | 90 | to one | three | five | five | nominal | 90 | to one | three | five | five | accounting | Effective | Nominal | ||||||||||||||||||||||||||||||||||||||||||||||||||
Tax No. | Creditor | country | Currency | days | year | years | years | years | value | days | year | years | years | years | value | Amortization | rate | rate | ||||||||||||||||||||||||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | % | % | |||||||||||||||||||||||||||||||||||||||||||||||||||
Bank loans | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | NEDERLANDSCHE | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
CREDIETVERZEKERING MAATSCHAPPIJ | Holland | US$ | 138 | 426 | 1,233 | 54 | - | 1,851 | 147 | 426 | 1,233 | 54 | - | 1,860 | Monthly | 6.01 | 6.01 | |||||||||||||||||||||||||||||||||||||||||||||||
Financial leases | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
0-E | NATIXIS | France | US$ | 3,043 | 6,490 | 44,525 | 41,731 | - | 95,789 | 3,656 | 6,490 | 44,525 | 41,731 | - | 96,402 | Quarterly/Semiannual | 6.87 | 6.87 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | WACAPOU LEASING S.A. | Luxemburg | US$ | 728 | 2,219 | 6,280 | - | - | 9,227 | 756 | 2,219 | 6,280 | - | - | 9,255 | Quarterly | 4.81 | 4.81 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | SOCIÉTÉ GÉNÉRALE MILAN BRANCH | Italy | US$ | 9,422 | 28,872 | 169,930 | - | - | 208,224 | 10,212 | 28,871 | 169,730 | - | - | 208,813 | Quarterly | 5.88 | 5.82 | ||||||||||||||||||||||||||||||||||||||||||||||
0-E | GA Telessis LLC | U.S.A | US$ | 299 | 908 | 2,496 | 2,623 | 6,876 | 13,202 | 568 | 908 | 3,823 | 2,623 | 6,876 | 14,798 | Quarterly | 15.62 | 15.62 | ||||||||||||||||||||||||||||||||||||||||||||||
Total | 13,630 | 38,915 | 224,464 | 44,408 | 6,876 | 328,293 | 15,339 | 38,914 | 225,591 | 44,408 | 6,876 | 331,128 | ||||||||||||||||||||||||||||||||||||||||||||||||||||
Total consolidated | 510,398 | 843,836 | 2,605,097 | 1,411,899 | 1,943,107 | 7,314,337 | 550,657 | 846,500 | 2,543,952 | 1,390,110 | 1,930,508 | 7,261,727 |
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(b) | Lease Liability: |
The movement of the lease liabilities corresponding to the period reported is as follows:
Aircraft | Others | Lease Liability total | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
Opening balance as January 1, 2018 | ||||||||||||
Restated | 3,037,585 | 109,387 | 3,146,972 | |||||||||
New contracts | 283,620 | 36,191 | 319,811 | |||||||||
Renegotiations | (240,047 | ) | 1,397 | (238,650 | ) | |||||||
Payments | (526,071 | ) | (30,316 | ) | (556,387 | ) | ||||||
Accrued interest | 174,327 | 8,623 | 182,950 | |||||||||
Exchange differences | - | (5,667 | ) | (5,667 | ) | |||||||
Other variations | 8,395 | 625 | 9,020 | |||||||||
Changes | (299,776 | ) | 10,853 | (288,923 | ) | |||||||
Closing balance as of december 31, 2018 | ||||||||||||
Restated | 2,737,809 | 120,240 | 2,858,049 | |||||||||
Opening balance as January 1, 2019 | ||||||||||||
Restated | 2,737,809 | 120,240 | 2,858,049 | |||||||||
New contracts | 719,525 | 23,878 | 743,403 | |||||||||
Renegotiations | (41,535 | ) | 12,208 | (29,327 | ) | |||||||
Payments | (539,549 | ) | (37,391 | ) | (576,940 | ) | ||||||
Accrued interest | 165,981 | 11,968 | 177,949 | |||||||||
Exchange differences | - | 1,614 | 1,614 | |||||||||
Cumulative translation adjustment | - | (467 | ) | (467 | ) | |||||||
Other variations | - | (2,124 | ) | (2,124 | ) | |||||||
Changes | 304,422 | 9,686 | 314,108 | |||||||||
Closing balance as of December 31, 2019 | ||||||||||||
Restated | 3,042,231 | 129,926 | 3,172,157 |
The company recognizes the interest payments related to the lease liabilities in the consolidated result under Financial expenses (See Note 27 (d)).
(c) | Hedge derivatives |
Current liabilities | Non-current liabilities | Total hedge derivatives | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Accrued interest from the last date of interest rate swap | 1,723 | 2,321 | - | 340 | 1,723 | 2,661 | ||||||||||||||||||
Fair value of interest rate derivatives | 302 | 335 | 22 | - | 324 | 335 | ||||||||||||||||||
Fair value of fuel derivatives | - | 15,678 | - | - | - | 15,678 | ||||||||||||||||||
Fair value of foreign currency derivatives | 48,347 | 7,587 | - | - | 48,347 | 7,587 | ||||||||||||||||||
Total hedge derivatives | 50,372 | 25,921 | 22 | 340 | 50,394 | 26,261 |
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(d) | Derivatives do not qualify for hedge accounting |
Current liabilities | Non-current liabilities | Total derivatives of no coverage | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
31 December | 31 December | 31 December | 31 December | 31 December | 31 December | |||||||||||||||||||
of 2019 | of 2018 | of 2019 | of 2018 | of 2019 | of 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Derivative of foreign currency not registered as hedge | - | 7,712 | - | - | - | 7,712 | ||||||||||||||||||
Total derived not qualify as hedge accounting | - | 7,712 | - | - | - | 7,712 |
The foreign currency derivatives correspond to options, forwards and swaps.
Hedging operation
The fair values of net assets/ (liabilities), by type of derivative, of the contracts held as hedging instruments are presented below:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Cross currency swaps (CCS) (1) | (22,662 | ) | 15,099 | |||||
Interest rate swaps (2) | 2,618 | (2,194 | ) | |||||
Fuel options (3) | 48,542 | (15,811 | ) | |||||
Currency options R$/US$ (4) | (41 | ) | - |
(1) | Covers the significant variations in cash flows associated with market risk implicit in the changes in the 3-month LIBOR interest rate and the exchange rate US$/UF of bank loans. These contracts are recorded as cash flow hedges and fair value. |
(2) | Covers the significant variations in cash flows associated with market risk implicit in the increases in the 3 months LIBOR interest rates for long-term loans incurred in the acquisition of aircraft and bank loans. These contracts are recorded as cash flow hedges. |
(3) | Covers significant variations in cash flows associated with market risk implicit in the changes in the price of future fuel purchases. These contracts are recorded as cash flow hedges. |
(4) | They cover the exposure to foreign exchange risk of operating cash flows, mainly caused by the fluctuation of the CLP/US$, R$/US$, US$/EUR and US$/GBP exchange rate. These contracts are registered as cash flow hedge contracts. |
During the periods presented, the Company only has cash flow and fair value hedges (in the case of CCS). In the case of fuel hedges, the cash flows subject to such hedges will occur and will impact results in the next 12 months from the date of the consolidated statement of financial position, while in the case of hedges of interest rates, these they will occur and will impact results throughout the life of the associated loans, up to their maturity. In the case of currency hedges through a CCS, there is a group of hedging relationships, in which two types of hedge accounting are generated, one of cash flow for the US $ / UF component; and another of fair value, for the floating rate component US $. The other group of hedging relationships only generates cash flow hedge accounting for the US $ / UF component.
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All hedging operations have been performed for highly probable transactions.
Since none of the coverage resulted in the recognition of a non-financial asset, no portion of the result of the derivatives recognized in equity was transferred to the initial value of such assets.
The amounts recognized in comprehensive income during the period and transferred from net equity to income are as follows:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Debit (credit) recognized in comprehensive income during the period | 66,856 | (27,797 | ) | |||||
Debit (credit) transferred from net equity to income during the period | (30,074 | ) | 39,915 |
NOTE 20 - TRADE AND OTHER ACCOUNTS PAYABLES
The composition of Trade and other accounts payables is as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Current | ||||||||
(a) Trade and other accounts payables | 1,671,304 | 1,279,976 | ||||||
(b) Accrued liabilities at the reporting date | 551,570 | 394,327 | ||||||
Total trade and other accounts payables | 2,222,874 | 1,674,303 |
(a) | Trade and other accounts payable: |
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Trade creditors | 1,408,690 | 1,048,033 | ||||||
Other accounts payable | 262,614 | 231,943 | ||||||
Total | 1,671,304 | 1,279,976 |
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The details of Trade and other accounts payables are as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Aircraft Fuel | 476,320 | 304,426 | ||||||
Boarding Fee | 234,070 | 210,621 | ||||||
Suppliers technical purchases | 145,973 | 75,402 | ||||||
Handling and ground handling | 114,163 | 84,213 | ||||||
Other personnel expenses | 93,490 | 92,047 | ||||||
Professional services and advisory | 87,825 | 83,182 | ||||||
Airport charges and overflight | 81,459 | 82,181 | ||||||
Air companies | 79,958 | 59,524 | ||||||
Marketing | 60,850 | 60,303 | ||||||
Services on board | 59,647 | 44,434 | ||||||
Leases, maintenance and IT services | 59,011 | 55,427 | ||||||
Achievement of goals | 30,635 | 21,943 | ||||||
Maintenance | 42,202 | 8,244 | ||||||
Crew | 22,921 | 21,265 | ||||||
Land services | 18,166 | 26,014 | ||||||
Jol Fleet | 3,997 | - | ||||||
Aviation insurance | 3,050 | 11,943 | ||||||
Others | 57,567 | 38,807 | ||||||
Total trade and other accounts payables | 1,671,304 | 1,279,976 |
(b) | Liabilities accrued: |
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Aircraft and engine maintenance | 292,793 | 170,731 | ||||||
Accrued personnel expenses | 118,199 | 116,242 | ||||||
Accounts payable to personnel (*) | 91,153 | 81,222 | ||||||
Others accrued liabilities (**) | 49,425 | 26,132 | ||||||
Total accrued liabilities | 551,570 | 394,327 |
(*) Profits and bonus participation (Note 23 letter b).
(**) See Note 22
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NOTE 21 - OTHER PROVISIONS
Current liabilities | Non-current liabilities | Total Liabilities | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Provision for contingencies (1) | ||||||||||||||||||||||||
Tax contingencies | 2,033 | 2,982 | 164,190 | 197,038 | 166,223 | 200,020 | ||||||||||||||||||
Civil contingencies | 2,202 | 1,207 | 66,605 | 59,834 | 68,807 | 61,041 | ||||||||||||||||||
Labor contingencies | 971 | 605 | 26,505 | 23,244 | 27,476 | 23,849 | ||||||||||||||||||
Other | - | - | 19,886 | 13,976 | 19,886 | 13,976 | ||||||||||||||||||
Provision for European | ||||||||||||||||||||||||
Commission investigation (2) | - | - | 9,217 | 9,403 | 9,217 | 9,403 | ||||||||||||||||||
Total other provisions (3) | 5,206 | 4,794 | 286,403 | 303,495 | 291,609 | 308,289 |
(1) | Provisions for contingencies: |
The tax contingencies correspond to litigation and tax criteria related to the tax treatment applicable to direct and indirect taxes, which are found in both administrative and judicial stage.
The civil contingencies correspond to different demands of civil order filed against the Company.
The labor contingencies correspond to different demands of labor order filed against the Company.
The Provisions are recognized in the consolidated income statement in administrative expenses or tax expenses, as appropriate.
(2) | Provision made for proceedings brought by the European Commission for possible breaches of free competition in the freight market. |
(3) | Total other provision as of December 31, 2019, and December 31, 2018, include the fair value correspond to those contingencies from the business combination with TAM S.A and subsidiaries, with a probability of loss under 50%, which are not provided for the normal application of IFRS enforcement and that only must be recognized in the context of a business combination in accordance with IFRS 3. |
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Movement of provisions:
European | ||||||||||||
Legal | Commission | |||||||||||
claims (1) | Investigation (2) | Total | ||||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
Opening balance as of January 1, 2018 | 367,493 | 9,883 | 377,376 | |||||||||
Increase in provisions | 106,870 | - | 106,870 | |||||||||
Provision used | (59,032 | ) | - | (59,032 | ) | |||||||
Difference by subsidiaries conversion | (48,330 | ) | - | (48,330 | ) | |||||||
Reversal of provision | (66,965 | ) | - | (66,965 | ) | |||||||
Exchange difference | (1,150 | ) | (480 | ) | (1,630 | ) | ||||||
Closing balance as of December 31, 2018 | 298,886 | 9,403 | 308,289 | |||||||||
Opening balance as of January 1, 2019 | 298,886 | 9,403 | 308,289 | |||||||||
Increase in provisions | 134,847 | - | 134,847 | |||||||||
Provision used | (82,212 | ) | - | (82,212 | ) | |||||||
Difference by subsidiaries conversion | (10,764 | ) | - | (10,764 | ) | |||||||
Reversal of provision | (58,063 | ) | - | (58,063 | ) | |||||||
Exchange difference | (302 | ) | (186 | ) | (488 | ) | ||||||
Closing balance as of December 31, 2019 | 282,392 | 9,217 | 291,609 |
(1) | Cumulative balances include judicial deposit delivered as security, with respect to the “Aerovía Fundo” (FA), for US$ 88 million, made in order to suspend the application of the tax credit. The Company is discussing in the Court the constitutionality of the requirement made by FA in a lawsuit. Initially it was covered by the effects of a precautionary measure, this means that the Company would not be obliged to collect the tax, as long as there is no judicial decision in this regard. However, the decision taken by the judge in the first instance was published unfavorably, revoking the injunction. As the lawsuit is still underway (TAM appealed this first decision), the Company needed to make the judicial deposit, for the suspension of the enforceability of the tax credit; deposit that was classified in this item, discounting the existing provision for this purpose. Finally, if the final decision is favorable to the Company, the deposit made will return to TAM. On the other hand, if the court confirms the first decision, said deposit will become a final payment in favor of the Government of Brazil. The procedural stage as of December 31, 2019 is described in Note 31 in the Role of the case 2001.51.01.012530-0. |
2) | European Commission Provision: |
Provision constituted on the occasion of the process initiated in December 2007 by the General Competition Directorate of the European Commission against more than 25 cargo airlines, among which is Lan Cargo SA, which forms part of the global investigation initiated in 2006 for possible infractions of free competition in the air cargo market, which was carried out jointly by the European and United States authorities.
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With respect to Europe, the General Directorate of Competition imposed fines totaling € 799,445,000 (seven hundred and ninety-nine million four hundred and forty-five thousand Euros) for infractions of European Union regulations on free competition against eleven (11) airlines, among which are LATAM Airlines Group SA and its subsidiary Lan Cargo S.A .,For its part, LATAM Airlines Group S.A. and Lan Cargo S.A., jointly and severally, have been fined for the amount of € 8,220,000 (eight million two hundred and twenty thousand Euros), for these infractions, an amount that was provisioned in the financial statements of LATAM. On January 24, 2011, LATAM Airlines Group S.A. and Lan Cargo S.A. They appealed the decision before the Court of Justice of the European Union. On December 16, 2015, the European Court resolved the appeal and annulled the Commission’s Decision. The European Commission did not appeal the judgment, but on March 17, 2017, the European Commission again adopted its original decision to impose on the eleven lines original areas, the same fine previously imposed, amounting to a total of 776,465,000 Euros In the case of LAN Cargo and its parent, LATAM Airlines Group S.A. imposed the same fine of 8.2 million Euros. The procedural stage as of December 31, 2019 is described in Note 31 in section (ii) judgments received by LATAM Airlines Group S.A. and Subsidiaries.
NOTE 22 - OTHER NON-FINANCIAL LIABILITIES
Current liabilities | Non-current liabilities | Total Liabilities | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
2019 | 2018 | 2019 | 2018 | 2019 | 2018 | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Deferred revenues (1)(2) | 2,689,083 | 2,330,058 | 851,383 | 644,702 | 3,540,466 | 2,974,760 | ||||||||||||||||||
Sales tax | 2,556 | 12,726 | - | - | 2,556 | 12,726 | ||||||||||||||||||
Retentions | 43,916 | 34,434 | - | - | 43,916 | 34,434 | ||||||||||||||||||
Others taxes | 7,555 | 7,700 | - | - | 7,555 | 7,700 | ||||||||||||||||||
Dividends payable | 57,129 | 54,580 | - | - | 57,129 | 54,580 | ||||||||||||||||||
Other sundry liabilities | 34,982 | 15,248 | - | - | 34,982 | 15,248 | ||||||||||||||||||
Total other non-financial liabilities | 2,835,221 | 2,454,746 | 851,383 | 644,702 | 3,686,604 | 3,099,448 |
Deferred Income Movement
Adjustment | ||||||||||||||||||||||||||||||||
Deferred income | application | |||||||||||||||||||||||||||||||
Initial balance | (1) Recognition | Use | Loyalty (accreditation and exchange) | Expiration of tickets | IAS 29, Argentina hyperinflation | Others provisions | Final balance | |||||||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||||||||
From January 1 to December 31, 2018 | 2,849,266 | 7,690,972 | (8,230,750 | ) | 944,246 | (284,730 | ) | 927 | 4,829 | 2,974,760 | ||||||||||||||||||||||
From January 1 to December 31, 2019 | 2,974,760 | 8,264,970 | (7,703,011 | ) | 124,548 | (156,435 | ) | 2,232 | 33,402 | 3,540,466 |
(1) | The balance includes, mainly, deferred income for services not provided as of December 31, 2019 and December 31, 2018; and programs such as: LATAM Pass, LATAM Fidelidade and Multiplus: |
LATAM Pass is the frequent passenger program created by LAN to reward the preference and loyalty of its customers with multiple benefits and privileges, through the accumulation of miles that can be exchanged for free flight tickets or for a varied range of products and services. Customers accumulate LATAM Pass miles every time they fly on LAN, TAM, oneworld® member companies and other airlines associated with the program, as well as buying at stores or using the services of a vast network of companies that have an agreement with the program around the world.
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For its part, TAM, thinking of people who travel constantly, created the LATAM Fidelidade program, in order to improve the service and give recognition to those who choose the company. Through the program, customers accumulate points in a wide variety of loyalty programs in a single account and can redeem them in all TAM destinations and associated airline companies, and even more, participate in the Multiplus Fidelidade Network.
Multiplus is a coalition of loyalty programs, with the objective of operating accumulation and exchange of points. This program has a network integrated by associated companies, including hotels, financial institutions, retail companies, supermarkets, vehicle leases and magazines, among many other partners from different segments.
After the merger of Multiplus S.A. described in Note1, the Latam Fidelidade programs and the Multiplus coalition and loyalty program become part of the Latam Pass Brazil Program.
During 2018 the Company signed a renewal of the agreement with Banco Santander-Chile, which one extends its alliance in Chile to continue developing travel benefits to its respective clients during the next 7 years, and during 2019 signed a renewal of the agreement with Banco Crédito del Perú.
On September 26, 2019, the Company signed a framework agreement with Delta Air Lines, Inc, in which the latter agreed to pay ThUS $ 350,000 for compensation of costs and revenues that the Company must incur or cease to receive, respectively, during the transition period until the implementation of the strategic alliance. ThUS $ 150,000 was received on september 2019.
During December 2019, the Company sold its rights to receive future payments of the committed transition. The payments consisted of ThUS $ 200,000 payable in 8 quarterly installments of ThUS $ 25,000 as of January 2, 2020. On December 13, 2019, the Company received ThUS $ 194,068 for said sale. Account receivable was derecognized and ThU S 5,932 was recognized as financial cost on income statement.
(2) | As of December 31, 2019, Deferred Income includes ThUS $ 315,225 corresponding to the balance due from the compensation committed from Delta Airlines Inc., which will be recognized in income, on a systematic basis over the period in which related cost it intends to compensate, until the implementation of the strategic alliance. During the year, the Company recognized ThUS $ 4,435 for this concept. |
Additionally, the Company maintains a balance of ThUS $ 30,340 in the Commercial accounts payable item of the Statement of Financial Position regarding to Delta compensation, the cost already incurred.
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NOTE 23 - EMPLOYEE BENEFITS
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Retirements payments | 64,824 | 56,126 | ||||||
Resignation payments | 9,722 | 8,802 | ||||||
Other obligations | 19,024 | 17,437 | ||||||
Total liability for employee benefits | 93,570 | 82,365 |
(a) The movement in retirements and resignation payments and other obligations:
Increase (decrease) | Actuarial | |||||||||||||||||||||||
Opening | current service | Benefits | (gains) | Currency | Closing | |||||||||||||||||||
balance | provision | paid | losses | translation | balance | |||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
From January 1 to December 31, 2018 | 101,087 | (7,384 | ) | (6,018 | ) | 5,819 | (11,139 | ) | 82,365 | |||||||||||||||
From January 1 to December 31, 2019 | 82,365 | 11,242 | (4,390 | ) | 10,636 | (6,283 | ) | 93,570 |
The principal assumptions used in the calculation to the provision in Chile are presented below:
For the period ended | ||||||||
December 31, | ||||||||
Assumptions | 2019 | 2018 | ||||||
Discount rate | 3.13 | % | 4.27 | % | ||||
Expected rate of salary increase | 4.5 | % | 4.50 | % | ||||
Rate of turnover | 6.04 | % | 6.60 | % | ||||
Mortality rate | RV-2014 | RV-2014 | ||||||
Inflation rate | 2.8 | % | 2.7 | % | ||||
Retirement age of women | 60 | 60 | ||||||
Retirement age of men | 65 | 65 |
The discount rate corresponds to the 20-year term rate of the BCP Central Bank of Chile Bonds. The RV-2014 mortality tables correspond to those established by the Commission for the Financial Market of Chile and for the determination of the inflation rates; the market performance curves of Central Bank of Chile papers of the BCUs have been used. BCP long term at the date of scope.
The calculation of the present value of the defined benefit obligation is sensitive to the variation of some actuarial assumptions such as discount rate, salary increase, rotation and inflation.
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The sensitivity analysis for these variables is presented below:
Effect on the liability | ||||||||
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Discount rate | ||||||||
Change in the accrued liability an closing for increase in 100 p.b. | (7,257 | ) | (6,538 | ) | ||||
Change in the accrued liability an closing for decrease of 100 p.b. | 5,365 | 4,918 | ||||||
Rate of wage growth | ||||||||
Change in the accrued liability an closing for increase in 100 p.b. | 4,989 | 4,750 | ||||||
Change in the accrued liability an closing for decrease of 100 p.b. | (7,159 | ) | (6,547 | ) |
(b) The liability for short-term:
As of December 31, 2019 | As of December 31, 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Profit-sharing and bonuses (*) | 91,153 | 81,222 |
(*) | Accounts payables to employees (Note 20 letter b) |
The participation in profits and bonuses correspond to an annual incentives plan for achievement of objectives.
(c)Employment expenses are detailed below:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Salaries and wages | 1,478,804 | 1,481,357 | ||||||
Short-term employee benefits | 147,576 | 132,394 | ||||||
Termination benefits | 54,256 | 54,007 | ||||||
Other personnel expenses | 114,126 | 152,211 | ||||||
Total | 1,794,762 | 1,819,969 |
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NOTE 24 - ACCOUNTS PAYABLE, NON-CURRENT
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Aircraft and engine maintenance | 412,710 | 513,544 | ||||||
Fleet (JOL) | 190,225 | - | ||||||
Provision for vacations and bonuses | 15,868 | 15,357 | ||||||
Other sundry liabilities | 307 | 376 | ||||||
Total accounts payable, non-current | 619,110 | 529,277 |
NOTE 25 - EQUITY
(a)Capital
The Company’s objective is to maintain an appropriate level of capitalization that enables it to ensure access to the financial markets for carrying out its medium and long-term objectives, optimizing the return for its shareholders and maintaining a solid financial position.
The paid capital of the Company at December 31, 2019 amounts to ThUS$ 3,146,265 divided into 606,407,693 common stock of a same series (ThUS$ 3,146,265 (*) divided into 606,407,693 shares as of December 31, 2018), a single series nominative, ordinary character with no par value. There are no special series of shares and no privileges. The form of its stock certificates and their issuance, exchange, disablement, loss, replacement and other similar circumstances, as well as the transfer of the shares, is governed by the provisions of Corporations Law and its regulations.
(*) | Includes deduction of issuance costs for ThUS $ 3,299 and adjustment for placement of 10,282 shares for ThUS $ 156, approved at the Extraordinary Shareholders Meeting of the Company on April 27, 2017. |
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(b)Subscribed and paid shares
On August 18, 2016, the Company held an extraordinary shareholders' meeting at which it was approved to increase the capital by issuing 61,316,424 payment shares, all ordinary, without par value. As of December 31, 2016, 60,849,592 shares had been placed against said increase, according to the following breakdown: (a) 30,499,685 shares subscribed and paid at the end of the pre-emptive option period, which expired on December 23, 2016; December 2016, collecting the equivalent of US $ 304,996,850; and (b) 30,349,907 additional shares subscribed on December 28, 2016, collecting the equivalent of US $ 303,499,070. Due to this last described placement, as of December 31, 2019, the number of subscribed and paid shares of the Company reached 606,407,693. On August 18, 2019, there was a full reduction of capital after the expiration of the three-year legal term to subscribe the balance of 466,832 shares depending on the placement of this capital increase. Consequently, at December 31, 2019 the statutory capital of the Company is represented by 606,874,525 shares, all of the same and unique series, registered, ordinary, without par value, which is divided into. The following table shows the movement of authorized and fully paid shares previously described above:
Movement of authorized shares
Expired shares | ||||||||||||
intended for | ||||||||||||
Opening | compensation plans | Closing | ||||||||||
No of shares | balance | and others | balance | |||||||||
From July 1 to December 31, 2018 | 608,374,525 | (1,500,000 | )(*) | 606,874,525 | ||||||||
From July 1 to December 31, 2019 | 606,874,525 | (466,832 | ) | 606,407,693 |
(*) | On June 11, 2018, the term of subscription and payment of 1,500,000 shares to create and implement compensation plans for Company employees expired. |
Movement fully paid shares
Movementvalue | Cost of issuance | |||||||||||||||
of shares | and placement | Paid- in | ||||||||||||||
No of | (1) | of shares (2) | Capital | |||||||||||||
shares | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Paid shares as of January 1, 2018 | 606,407,693 | 3,160,718 | (14,453 | ) | 3,146,265 | |||||||||||
There are no movements of shares paid during the 2018 period | - | - | - | - | ||||||||||||
Paid shares as of December 31, 2018 | 606,407,693 | 3,160,718 | (14,453 | ) | 3,146,265 | |||||||||||
Paid shares as of January 1, 2019 | 606,407,693 | 3,160,718 | (14,453 | ) | 3,146,265 | |||||||||||
There are no movements of shares paid during the 2019 period | - | - | - | - | ||||||||||||
Paid shares as of December 31, 2019 | 606,407,693 | 3,160,718 | (14,453 | ) | 3,146,265 |
(1) | Amounts reported represent only those arising from the payment of the shares subscribed. |
(2) | Decrease of capital by capitalization of reserves for cost of issuance and placement of shares established according to Extraordinary Shareholder´s Meetings, where such decreases were authorized. |
(c)Treasury stock
At December 31, 2019, the Company held no treasury stock, the remaining of ThUS$ (178) corresponds to the difference between the amount paid for the shares and their book value, at the time of the full right decrease of the shares which held in its portfolio.
98
(d)Reserve of share- based payments
Movement of Reserves of share- based payments:
Stock | ||||||||||||
Openings | option | Closing | ||||||||||
Periods | balance | plan | balance | |||||||||
ThUS$ | ThUS$ | ThUS$ | ||||||||||
From January 1 to December 31, 2018 | 39,481 | (1,607 | ) | 37,874 | ||||||||
From January 1 to December 31, 2019 | 37,874 | (1,585 | ) | 36,289 |
These reserves are related to the “Share-based payments” explained in Note 34.
(e) Other sundry reserves
Movement of Other sundry reserves:
Opening | Transactions | Legal | Closing | |||||||||||||
Periods | balance | with minorities | reserves | balance | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
From January 1 to December 31, 2018 | 2,639,780 | - | (864 | ) | 2,638,916 | |||||||||||
From January 1 to December 31, 2019 | 2,638,916 | (184,135 | ) | (2,312 | ) | 2,452,469 |
Balance of Other sundry reserves comprise the following:
As of | As of | |||||||
December 31, | December 31, | |||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Higher value for TAM S.A. share exchange (1) | 2,665,692 | 2,665,692 | ||||||
Reserve for the adjustment to the value of fixed assets (2) | 2,620 | 2,620 | ||||||
Transactions with non-controlling interest (3) | (210,048 | ) | (25,913 | ) | ||||
Others | (5,795 | ) | (3,483 | ) | ||||
Total | 2,452,469 | 2,638,916 |
(1) | Corresponds to the difference between the value of the shares of TAM S.A., acquired by Sister Holdco S.A. (under the Subscriptions) and by Holdco II S.A. (by virtue of the Exchange Offer), which is recorded in the declaration of completion of the merger by absorption, and the fair value of the shares exchanged by LATAM Airlines Group S.A. as of June 22, 2012. |
(2) | Corresponds to the technical revaluation of the fixed assets authorized by the Commission for the Financial Market in the year 1979, in Circular No. 1529. The revaluation was optional and could be made only once; the originated reserve is not distributable and can only be capitalized. |
(3) | The balance as of December 31, 2019 corresponds to the loss generated by: Lan Pax Group S.A. e Inversiones Lan S.A. in the acquisition of shares of Aerovías de Integración Regional Aires S.A. for ThUS $ (3,480) and ThUS $ (20), respectively; the acquisition of TAM S.A. of the minority interest in Aerolinhas Brasileiras S.A. for ThUS $ (885), the acquisition of Inversiones Lan S.A. of the minority participation in Aires Integra Regional Airlines S.A. for an amount of ThUS $ (2) and the acquisition of a minority stake in Aerolane S.A. by Lan Pax Group S.A. for an amount of ThUS $ (21,526) through Holdco Ecuador S.A. The loss due to the acquisition of the minority interest of Multiplus S.A. for ThUS $ (184.135) (see Note 1). |
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(f) Reserves with effect in other comprehensive income.
Movement of Reserves with effect in other comprehensive income:
Actuarial gain | ||||||||||||||||
Currency | Cash flow | or loss on defined | ||||||||||||||
translation reserve | hedging reserve | benefit plans reserve | Total | |||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Opening balance as of January 1, 2018 | (2,131,591 | ) | 18,140 | (10,926 | ) | (2,124,377 | ) | |||||||||
Increase (decrease) by application of new accounting standards | 205,877 | - | - | 205,877 | ||||||||||||
Initial balance Restated | (1,925,714 | ) | 18,140 | (10,926 | ) | (1,918,500 | ) | |||||||||
Derivatives valuation gains (losses) | - | (26,899 | ) | - | (26,899 | ) | ||||||||||
Deferred tax | - | (574 | ) | - | (574 | ) | ||||||||||
Actuarial reserves by employee benefit plans | - | - | (5,818 | ) | (5,818 | ) | ||||||||||
Deferred tax actuarial IAS by employee benefit plans | - | - | 1,566 | 1,566 | ||||||||||||
Translation difference subsidiaries | (730,930 | ) | - | - | (730,930 | ) | ||||||||||
Closing balance as of December 31, 2018 Restated | (2,656,644 | ) | (9,333 | ) | (15,178 | ) | (2,681,155 | ) | ||||||||
Opening balance as of January 1, 2019 | (2,656,644 | ) | (9,333 | ) | (15,178 | ) | (2,681,155 | ) | ||||||||
Derivatives valuation gains (losses) | - | 65,880 | - | 65,880 | ||||||||||||
Deferred tax | - | 345 | - | 345 | ||||||||||||
Actuarial reserves by employee benefit plans | - | - | (10,635 | ) | (10,635 | ) | ||||||||||
Deferred tax actuarial IAS by employee benefit plans | - | - | 2,873 | 2,873 | ||||||||||||
Translation difference subsidiaries | (233,643 | ) | - | - | (233,643 | ) | ||||||||||
Closing balance as of December 31, 2019 | (2,890,287 | ) | 56,892 | (22,940 | ) | (2,856,335 | ) |
(f.1) Currency translation reserve
These originate from exchange differences arising from the translation of any investment in foreign entities (or Chilean investment with a functional currency different to that of the parent), and from loans and other instruments in foreign currency designated as hedges for such investments. When the investment (all or part) is sold or disposed and loss of control occurs, these reserves are shown in the consolidated statement of income as part of the loss or gain on the sale or disposal. If the sale does not involve loss of control, these reserves are transferred to non-controlling interests.
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(f.2) Cash flow hedging reserve
These originate from the fair value valuation at the end of each period of the outstanding derivative contracts that have been defined as cash flow hedges. When these contracts expire, these reserves should be adjusted, and the corresponding results recognized.
(f.3) Reserves of actuarial gains or losses on defined benefit plans
Correspond to the increase or decrease in the obligation present value for defined benefit plan due to changes in actuarial assumptions, and experience adjustments, which is the effects of differences between the previous actuarial assumptions and what has actually occurred.
(g) Retained earnings
Movement of Retained earnings:
Increase | Other | |||||||||||||||||||||||
(decrease) by | Result | increase | ||||||||||||||||||||||
Opening | new standards | for the | (decreases) | Closing | ||||||||||||||||||||
Periods | balance | (1) | period | Dividends | (1) (2) | balance | ||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
From January 1 to December 31, 2018 (Restated) | 475,118 | (516,130 | ) | 309,811 | (54,580 | ) | 4,752 | 218,971 | ||||||||||||||||
From January 1 to December 31, 2019 | 218,971 | - | 190,430 | (57,129 | ) | - | 352,272 |
(1) | Adjustments adoption IFRS 9 and IFRS 15 ThUS (9,548) and IFRS 16 ThUS (506.582) (See Note 2). |
(2) | Variation effect in Accumulated results, by application IAS 29, Argentina hyperinflation: |
Items | ThUS$ | |||
Property, plant and equipment | 4,573 | |||
Intangible assets other than goodwill | 69 | |||
Goodwill | 335 | |||
Deferred incomes | (377 | ) | ||
Other non-financial assets | 152 | |||
Total Adjust accumulated results | 4,752 |
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(h) Dividends per share
Minimum mandatory | Minimum mandatory | |||||||
dividend | dividend | |||||||
Description of dividend | 2019 | 2018 | ||||||
Date of dividend | 12-31-2019 | 12-31-2018 | ||||||
Amount of the dividend (ThUS$) | 57,129 | 54,580 | ||||||
Number of shares among which the dividend is distributed | 606,407,693 | 606,407,693 | ||||||
Dividend per share (US$) | 0.0942 | 0.0900 |
NOTE 26 - REVENUE
The detail of revenues is as follows:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Passengers | 9,005,629 | 8,708,988 | ||||||
Cargo | 1,064,434 | 1,186,468 | ||||||
Total | 10,070,063 | 9,895,456 |
NOTE 27 - COSTS AND EXPENSES BY NATURE
(a)Costs and operating expenses
The main operating costs and administrative expenses are detailed below:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Aircraft fuel | 2,929,008 | 2,983,028 | ||||||
Other rentals and landing fees (*) | 1,275,859 | 1,206,881 | ||||||
Aircraft maintenance | 444,611 | 366,627 | ||||||
Comisions | 221,884 | 222,506 | ||||||
Passenger services | 261,330 | 280,279 | ||||||
Other operating expenses | 1,291,895 | 1,229,311 | ||||||
Total | 6,424,587 | 6,288,632 |
(*) | Lease expenses are included within this amount (See Note 2.21) |
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For the period ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Restated | ||||||||
Payments for leases of low-value assets | 31,982 | 27,929 | ||||||
Total | 31,982 | 27,929 |
(b)Depreciation and amortization
Depreciation and amortization are detailed below:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Depreciation (*) | 1,389,465 | 1,307,032 | ||||||
Amortization | 80,511 | 65,596 | ||||||
Total | 1,469,976 | 1,372,628 |
(*) | Included within this amount is the depreciation of the Properties, plants and equipment (See Note 17 (a)) and the maintenance of the aircraft recognized as assets by right of use. The maintenance cost amount included in the depreciation line for the period ended December 31, 2019 is ThUS $ 445,680 and ThUS $ 366,393 for the same period 2018. |
(c)Personnel expenses
The costs for personnel expenses are disclosed in Note 23 liability for employee benefits.
(d) Financial costs
The detail of financial costs is as follows:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Bank loan interest | 325,650 | 283,786 | ||||||
Financial leases | 61,980 | 62,202 | ||||||
Lease liabilities | 181,814 | 182,868 | ||||||
Other financial instruments | 20,490 | 10,281 | ||||||
Total | 589,934 | 539,137 |
Costs and expenses by nature presented in this Note plus the Employee expenses disclosed in Note 23, are equivalent to the sum of cost of sales, distribution costs, administrative expenses, other expenses and financing costs presented in the consolidated statement of income by function.
103
NOTE 28 - OTHER INCOME, BY FUNCTION
Other income by function is as follows:
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Coalition and loyalty program Multiplus (*) | 36,172 | 126,443 | ||||||
Tours | 96,997 | 108,448 | ||||||
Aircraft leasing | 102,704 | 78,056 | ||||||
Customs and warehousing | 29,353 | 26,667 | ||||||
Duty free | 543 | 3,555 | ||||||
Maintenance | 10,471 | 16,569 | ||||||
Other miscellaneous income | 84,624 | 113,020 | ||||||
Total | 360,864 | 472,758 |
(*) | See Note 22. |
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NOTE 29 - FOREIGN CURRENCY AND EXCHANGE RATE DIFFERENCES
The functional currency of LATAM Airlines Group S.A. is the US dollar, also it has subsidiaries whose functional currency is different to the US dollar, such as the chilean peso, argentine peso, colombian peso, brazilian real and guaraní.
The functional currency is defined as the currency of the primary economic environment in which an entity operates and in each entity and all other currencies are defined as foreign currency.
Considering the above, the balances by currency mentioned in this Note correspond to the sum of foreign currency of each of the entities that make LATAM Airlines Group S.A. and Subsidiaries.
(a)Foreign currency
The foreign currency detail of balances of monetary items in current and non-current assets is as follows:
As of | As of | |||||||
December 31, | December 31, | |||||||
Current assets | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Cash and cash equivalents | 242,624 | 606,673 | ||||||
Argentine peso | 10,974 | 4,236 | ||||||
Brazilian real | 9,407 | 34,360 | ||||||
Chilean peso | 50,421 | 415,399 | ||||||
Colombian peso | 5,971 | 2,732 | ||||||
Euro | 21,927 | 20,339 | ||||||
U.S. dollar | 77,933 | 51,382 | ||||||
Other currency | 65,991 | 78,225 | ||||||
Other financial assets, current | 47,328 | 57,132 | ||||||
Argentine peso | 7 | 11 | ||||||
Brazilian real | 17,395 | 25,829 | ||||||
Chilean peso | 26,008 | 25,904 | ||||||
Colombian peso | 138 | 139 | ||||||
U.S. dollar | 2,795 | 4,923 | ||||||
Other currency | 985 | 326 |
105
As of | As of | |||||||
December 31, | December 31, | |||||||
Current assets | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Other non - financial assets, current | 81,521 | 106,952 | ||||||
Argentine peso | 11,263 | 13,077 | ||||||
Brazilian real | 20,553 | 37,794 | ||||||
Chilean peso | 24,451 | 30,916 | ||||||
Colombian peso | 61 | 434 | ||||||
Euro | 2,878 | 3,935 | ||||||
U.S. dollar | 5,140 | 8,949 | ||||||
Other currency | 17,175 | 11,847 | ||||||
Trade and other accounts receivable, current | 501,006 | 518,006 | ||||||
Argentine peso | 22,809 | 54,053 | ||||||
Brazilian real | 1,457 | 6,037 | ||||||
Chilean peso | 125,342 | 112,133 | ||||||
Colombian peso | 545 | 5,065 | ||||||
Euro | 32,711 | 49,044 | ||||||
U.S. dollar | 257,421 | 2,938 | ||||||
Other currency | 60,721 | 288,736 | ||||||
Accounts receivable from related entities, current | 537 | 593 | ||||||
Chilean peso | 42 | 200 | ||||||
U.S. dollar | 495 | 393 | ||||||
Tax current assets | 19,506 | 20,774 | ||||||
Argentine peso | 1,560 | 812 | ||||||
Brazilian real | 1,006 | 1,106 | ||||||
Chilean peso | 1,111 | 4,860 | ||||||
Colombian peso | 54 | 5 | ||||||
Euro | 264 | - | ||||||
U.S. dollar | - | 429 | ||||||
Peruvian sun | 13,707 | 13,306 | ||||||
Other currency | 1,804 | 256 | ||||||
Total current assets | 892,522 | 1,310,130 | ||||||
Argentine peso | 46,613 | 72,189 | ||||||
Brazilian real | 49,818 | 105,126 | ||||||
Chilean peso | 227,375 | 589,412 | ||||||
Colombian peso | 6,769 | 8,375 | ||||||
Euro | 57,780 | 73,318 | ||||||
U.S. Dollar | 343,784 | 69,014 | ||||||
Other currency | 160,383 | 392,696 |
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As of | As of | |||||||
December 31, | December 31, | |||||||
Non-current assets | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Other financial assets, non-current | 10,243 | 21,850 | ||||||
Brazilian real | 4,441 | 4,941 | ||||||
Chilean peso | 65 | 68 | ||||||
Colombian peso | 296 | 145 | ||||||
Euro | 1,525 | 7,438 | ||||||
U.S. dollar | 2,169 | 7,441 | ||||||
Other currency | 1,747 | 1,817 | ||||||
Other non - financial assets, non-current | 29,166 | 31,126 | ||||||
Argentine peso | 54 | 86 | ||||||
Brazilian real | 7,891 | 7,465 | ||||||
U.S. dollar | 3 | 3 | ||||||
Other currency | 21,218 | 23,572 | ||||||
Accounts receivable, non-current | 4,722 | 5,378 | ||||||
Chilean peso | 4,722 | 5,378 | ||||||
Deferred tax assets | 3,339 | 2,102 | ||||||
Colombian peso | 487 | 78 | ||||||
U.S. dollar | 856 | 29 | ||||||
Other currency | 1,996 | 1,995 | ||||||
Total non-current assets | 47,470 | 60,456 | ||||||
Argentine peso | 54 | 86 | ||||||
Brazilian real | 12,332 | 12,406 | ||||||
Chilean peso | 4,787 | 5,446 | ||||||
Colombian peso | 783 | 223 | ||||||
Euro | 1,525 | 7,438 | ||||||
U.S. dollar | 3,028 | 7,473 | ||||||
Other currency | 24,961 | 27,384 |
107
The foreign currency detail of balances of monetary items in current liabilities and non-current is as follows:
Up to 90 days | 91 days to 1 year | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
Current liabilities | 2019 | 2018 | 2019 | 2018 | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Other financial liabilities, current | 69,623 | 63,920 | 210,627 | 107,815 | ||||||||||||
Argentine peso | 1 | 3 | 2 | - | ||||||||||||
Brazilian real | 128 | 261 | 118 | - | ||||||||||||
Chilean peso | 42,625 | 41,694 | 15,229 | 68,901 | ||||||||||||
Euro | 145 | 704 | 339 | - | ||||||||||||
U.S. dollar | 26,676 | 16,773 | 194,896 | 38,914 | ||||||||||||
Other currency | 48 | 4,485 | 43 | - | ||||||||||||
Trade and other accounts payables, current | 1,338,123 | 970,872 | 10,091 | 37,809 | ||||||||||||
Argentine peso | 252,799 | 229,907 | 1,096 | 6,142 | ||||||||||||
Brazilian real | 59,837 | 30,974 | 320 | 1,152 | ||||||||||||
Chilean peso | 322,996 | 198,766 | 1,295 | 26,113 | ||||||||||||
Colombian peso | 2,558 | 7,915 | 868 | 752 | ||||||||||||
Euro | 113,733 | 84,903 | 484 | 1,375 | ||||||||||||
U.S. dollar | 480,129 | 325,385 | 4,263 | 55 | ||||||||||||
Peruvian sol | 24,197 | 37,285 | 1,447 | 1,124 | ||||||||||||
Mexican peso | 5,233 | 5,975 | 33 | 167 | ||||||||||||
Pound sterling | 20,289 | 13,395 | 119 | 305 | ||||||||||||
Uruguayan peso | 1,018 | 847 | 29 | - | ||||||||||||
Other currency | 55,334 | 35,520 | 137 | 624 | ||||||||||||
Accounts payable to related entities, current | 53 | 365 | - | - | ||||||||||||
Chilean peso | 53 | 253 | - | - | ||||||||||||
U.S. dollar | - | 112 | - | - | ||||||||||||
Other provisions, current | 2,079 | 1,434 | - | - | ||||||||||||
Chilean peso | 27 | 28 | - | - | ||||||||||||
Other currency | 2,052 | 1,406 | - | - | ||||||||||||
Tax liabilities, current | - | 13 | - | - | ||||||||||||
Argentine peso | - | 4 | - | - | ||||||||||||
Brazilian real | - | - | - | - | ||||||||||||
Chilean peso | - | 9 | - | - |
108
As of | As of | As of | As of | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
Current liabilities | 2019 | 2018 | 2019 | 2018 | ||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||
Other non-financial liabilities, current | 19,335 | 38,120 | - | - | ||||||||||||
Argentine peso | 348 | 1,089 | - | - | ||||||||||||
Brazilian real | 1,537 | 1,455 | - | - | ||||||||||||
Chilean peso | 705 | 14,130 | - | - | ||||||||||||
Colombian peso | 3,059 | 1,009 | - | - | ||||||||||||
Euro | 3,133 | 4,411 | - | - | ||||||||||||
U.S. dollar | 4,531 | 10,468 | - | - | ||||||||||||
Other currency | 6,022 | 5,558 | - | - | ||||||||||||
Total current liabilities | 1,429,213 | 1,074,724 | 220,718 | 145,624 | ||||||||||||
Argentine peso | 253,148 | 231,003 | 1,098 | 6,142 | ||||||||||||
Brazilian real | 61,502 | 32,690 | 438 | 1,152 | ||||||||||||
Chilean peso | 366,406 | 254,880 | 16,524 | 95,014 | ||||||||||||
Colombian peso | 5,617 | 8,924 | 868 | 752 | ||||||||||||
Euro | 117,011 | 90,018 | 823 | 1,375 | ||||||||||||
U.S. dollar | 511,336 | 352,738 | 199,159 | 38,969 | ||||||||||||
Other currency | 114,193 | 104,471 | 1,808 | 2,220 |
109
More than 1 to 3 years | More than 3 to 5 years | More than 5 years | ||||||||||||||||||||||
As of | As of | As of | As of | As of | As of | |||||||||||||||||||
December 31, | December 31, | December 31, | December 31, | December 31, | December 31, | |||||||||||||||||||
Non-current liabilities | 2019 | 2018 | 2019 | 2018 | 2019 | 2018 | ||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | |||||||||||||||||||
Other financial liabilities, non-current | 366,889 | 299,735 | 12,915 | 281,785 | 376,535 | 179,406 | ||||||||||||||||||
Chilean peso | 236,346 | 16,259 | 2,291 | 237,377 | 369,525 | 172,530 | ||||||||||||||||||
Brazillian real | 700 | 948 | 40 | - | - | - | ||||||||||||||||||
Euro | 550 | 296 | 141 | - | - | - | ||||||||||||||||||
U.S. dollar | 128,820 | 280,197 | 10,308 | 44,408 | 7,010 | 6,876 | ||||||||||||||||||
Other currency | 473 | 2,035 | 135 | - | - | - | ||||||||||||||||||
Accounts payable, non-current | 151,254 | 294,704 | - | - | - | - | ||||||||||||||||||
Chilean peso | 14,367 | 14,027 | - | - | - | - | ||||||||||||||||||
U.S. dollar | 135,541 | 279,437 | - | - | - | - | ||||||||||||||||||
Other currency | 1,346 | 1,240 | - | - | - | - | ||||||||||||||||||
Other provisions, non-current | 36,615 | 36,120 | - | - | - | - | ||||||||||||||||||
Argentine peso | 485 | 542 | - | - | - | - | ||||||||||||||||||
Brazillian real | 20,538 | 19,815 | - | - | - | - | ||||||||||||||||||
Colombian peso | 281 | 295 | - | - | - | - | ||||||||||||||||||
Euro | 9,217 | 9,403 | - | - | - | - | ||||||||||||||||||
U.S. dollar | 6,094 | 6,065 | - | - | - | - | ||||||||||||||||||
Provisions for employees benefits, non-current | 80,628 | 72,674 | - | - | - | - | ||||||||||||||||||
Chilean peso | 80,628 | 72,187 | - | - | - | - | ||||||||||||||||||
U.S. dollar | - | 487 | - | - | - | - | ||||||||||||||||||
Total non-current liabilities | 635,386 | 703,233 | 12,915 | 281,785 | 376,535 | 179,406 | ||||||||||||||||||
Argentine peso | 485 | 542 | - | - | - | - | ||||||||||||||||||
Brazilian real | 21,238 | 20,763 | 40 | - | - | - | ||||||||||||||||||
Chilean peso | 331,341 | 102,473 | 2,291 | 237,377 | 369,525 | 172,530 | ||||||||||||||||||
Colombian peso | 281 | 295 | - | - | - | - | ||||||||||||||||||
Euro | 9,767 | 9,699 | 141 | - | - | - | ||||||||||||||||||
U.S. dollar | 270,455 | 566,186 | 10,308 | 44,408 | 7,010 | 6,876 | ||||||||||||||||||
Other currency | 1,819 | 3,275 | 135 | - | - | - |
110
As of | As of | |||||||
December 31, | December 31, | |||||||
General summary of foreign currency: | 2019 | 2018 | ||||||
ThUS$ | ThUS$ | |||||||
Total assets | 939,992 | 1,370,586 | ||||||
Argentine peso | 46,667 | 72,275 | ||||||
Brazilian real | 62,150 | 117,532 | ||||||
Chilean peso | 232,162 | 594,858 | ||||||
Colombian peso | 7,552 | 8,598 | ||||||
Euro | 59,305 | 80,756 | ||||||
U.S. dollar | 346,812 | 76,487 | ||||||
Other currency | 185,344 | 420,080 | ||||||
Total liabilities | 2,674,767 | 2,446,785 | ||||||
Argentine peso | 254,731 | 237,687 | ||||||
Brazilian real | 83,218 | 54,605 | ||||||
Chilean peso | 1,086,087 | 862,274 | ||||||
Colombian peso | 6,766 | 9,971 | ||||||
Euro | 127,742 | 101,092 | ||||||
U.S. dollar | 998,268 | 1,071,190 | ||||||
Other currency | 117,955 | 109,966 | ||||||
Net position | ||||||||
Argentine peso | (208,064 | ) | (165,412 | ) | ||||
Brazilian real | (21,068 | ) | 62,927 | |||||
Chilean peso | (853,925 | ) | (267,416 | ) | ||||
Colombian peso | 786 | (1,373 | ) | |||||
Euro | (68,437 | ) | (20,336 | ) | ||||
U.S. dollar | (651,456 | ) | (994,703 | ) | ||||
Other currency | 67,389 | 310,114 |
111
(a) | Exchange differences |
The exchange differences recognized in profit or loss, except for financial instruments measured at fair value through profit or loss, for the period ended December 31, 2019 and 2018, meant a charge of ThUS $ 32,571 and ThUS $ 38,070, respectively.
The exchange differences recognized in the statement of comprehensive income as reserves for exchange differences for conversion, for the period ended December 31, 2019 and 2018, meant a charge of ThUS $ 243,271 and ThUS $ 743,516, respectively.
The following shows the current exchange rates for the U.S. dollar, on the dates indicated:
As of December 31, | As of December 31, | |||||||||||||||
2019 | 2018 | 2017 | 2016 | |||||||||||||
Argentine peso | 59.83 | 37.74 | 18.57 | 15.84 | ||||||||||||
Brazilian real | 4.01 | 3.87 | 3.31 | 3.25 | ||||||||||||
Chilean peso | 748.74 | 694.77 | 614.75 | 669.47 | ||||||||||||
Colombian peso | 3,271.55 | 3,239.45 | 2,984.77 | 3,000.25 | ||||||||||||
Euro | 0.89 | 0.87 | 0.83 | 0.95 | ||||||||||||
Australian dollar | 1.43 | 1.42 | 1.28 | 1.38 | ||||||||||||
Boliviano | 6.86 | 6.86 | 6.86 | 6.86 | ||||||||||||
Mexican peso | 18.89 | 19.68 | 19.66 | 20.63 | ||||||||||||
New Zealand dollar | 1.49 | 1.49 | 1.41 | 1.44 | ||||||||||||
Peruvian Sol | 3.31 | 3.37 | 3.24 | 3.35 | ||||||||||||
Uruguayan peso | 37.24 | 32.38 | 28.74 | 29.28 |
112
NOTE 30 - EARNINGS / (LOSS) PER SHARE
For the year ended | ||||||||
December 31, | ||||||||
Basic earnings / (loss) per share | 2019 | 2018 | ||||||
Restated | ||||||||
Earnings / (loss) attributable to owners of the parent (ThUS$) | 190,430 | 309,811 | ||||||
Weighted average numberof shares, basic | 606,407,693 | 606,407,693 | ||||||
Basic earnings / (loss) per share (US$) | 0.31403 | 0.51090 |
For the year ended | ||||||||
December 31, | ||||||||
Diluted earnings / (loss) per share | 2019 | 2018 | ||||||
Restated | ||||||||
Earnings / (loss) attributable to owners of the parent (ThUS$) | 190,430 | 309,811 | ||||||
Weighted average number of shares, basic | 606,407,693 | 606,407,693 | ||||||
Weighted average number of shares, diluted | 606,407,693 | 606,407,693 | ||||||
Diluted earnings / (loss) per share (US$) | 0.31403 | 0.51090 |
113
NOTE 31 – CONTINGENCIES
I. | Lawsuits |
1) | Lawsuits filed by LATAM Airlines Group S.A. and Subsidiaries |
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||||
Tam Viagens S.A. | Fazenda Pública do Município de São Paulo. | 1004194-37.2018.8.26.0053 | This is a voidance action appealing the charges for violations and fines (67.168.795 / 67.168.833 / 67.168.884 / 67.168.906 / 67.168.914 / 67.168.965). We are arguing that numbers are missing from the ISS calculation base since the company supposedly made improper deductions. | The lawsuit was assigned on January 31, 2018. That same day, a decision was rendered suspending the charges without any bond. The municipality filed an appeal against this decision on April 30, 2018. A decision was rendered on November 11, 2019 fully in favor of Tam Viagens S.A. We are waiting to see if the Municipality files an appeal. | 95,216
|
114
2) | Lawsuits received by LATAM Airlines Group S.A. and Subsidiaries |
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||||
LATAM Airlines Group S.A. y Lan Cargo S.A. | European Commission. | Investigation of alleged infringements to free competition of cargo airlines, especially fuel surcharge. On December 26, 2007, the General Directorate for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group S.A. the instruction process against twenty five cargo airlines, including Lan Cargo S.A., for alleged breaches of competition in the air cargo market in Europe, especially the alleged fixed fuel surcharge and freight. | On April 14, 2008, the notification of the European Commission was replied. The appeal was filed on January 24, 2011. On May 11, 2015, we attended a hearing at which we petitioned for the vacation of the Decision based on discrepancies in the Decision between the operating section, which mentions four infringements (depending on the routes involved) but refers to Lan in only one of those four routes; and the ruling section (which mentions one single conjoint infraction). On November 9, 2010, the General Directorate for Competition of the European Commission notified Lan Cargo S.A. and LATAM Airlines Group S.A. the imposition of a fine in the amount of THUS$ 9,217 (8,220,000 Euros) This fine is being appealed by Lan Cargo S.A. and LATAM Airlines Group S.A. On December 16, 2015, the European Court of Justice revoked the Commission’s decision because of discrepancies. The European Commission did not appeal the decision, but presented a new one on March 17, 2017 reiterating the imposition of the same fine on the eleven original airlines. The fine totals 776,465,000 Euros. It imposed the same fine as before on Lan Cargo and its parent, LATAM Airlines Group S.A., totaling 8.2 million Euros. On May 31, 2017 Lan Cargo S.A. and LATAM Airlines Group S.A. filed a petition with the General Court of the European Union seeking vacation of this decision. We presented our defense in December 2017. On July 12, 2019, we attended a hearing before the European Court of Justice to confirm our petition for vacation of judgment or otherwise, a reduction in the amount of the fine. LATAM AIRLINES GROUP, S.A. expects that the ruling by the General Court of the European Union may reduce the amount of this fine. | 9,217 |
115
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
Lan Cargo S.A. y LATAM Airlines Group S.A. | In the High Court of Justice Chancery División (England) Ovre Romerike District Court (Norway) y Directie Juridische Zaken Afdeling Ceveil Recht (Netherlands), Cologne Regional Court (Landgerich Köln Germany). | Lawsuits filed against European airlines by users of freight services in private lawsuits as a result of the investigation into alleged breaches of competition of cargo airlines, especially fuel surcharge. Lan Cargo S.A. and LATAM Airlines Group S.A., have been sued in court proceedings directly and/or in third party, based in England, Norway, the Netherlands and Germany. | Cases are in the uncovering evidence stage. In the case in England, mediation was held with nearly all the airlines involved in the aim of attempting to reach an agreement. It began in September, and LATAM Airlines Group S.A. reached an agreement for approximately GBP 636,000. A settlement was signed in December 2018 and payment was made in January 2019. This lawsuit ended for all plaintiffs in the class action, except for one who signed a settlement for approximately GBP 222,469.63 in December 2019. The payment will be made in January 2020, which will put an end to the entire lawsuit in England. The amount remains undetermined for the lawsuits in the remaining countries (Norway, the Netherlands and Germany). | -0- | ||||||
Aerolinhas Brasileiras S.A. | Federal Justice. | 0008285-53.2015.403.6105 | An action seeking to quash a decision and petioning for early protection in order to obgain a revocation of the penalty imposed by the Brazilian Competition Authority (CADE) in the investigation of cargo airlines alleged fair trade violations, in particular the fuel surcharge. | This action was filed by presenting a guaranty – policy – in order to suspend the effects of the CADE’s decision regarding the payment of the following fines: (i) ABSA:ThUS$10,438; (ii) Norberto Jochmann: ThUS$201; (iii) Hernan Merino: ThUS$ 102; (iv) Felipe Meyer :ThUS$ 102. The action also deals with the affirmative obligation required by the CADE consisting of the duty to publish the condemnation in a widely circulating newspaper. This obligation had also been stayed by the court of federal justice in this process. Awaiting CADE’s statement. ABSA began a judicial review in search of an additional reduction in the fine amount. The Judge’s decision was published on March 12, 2019, and we filed an appeal against it on March 13, 2019 | 10,403 | |||||
Aerolinhas Brasileiras S.A. | Federal Justice. | 0001872- 58.2014.4.03.6105 | An annulment action with a motion for preliminary injunction, was filed on 02/28/2014, in order to cancel tax debts of PIS, CONFINS, IPI and II, connected with the administrative process 10831.005704/2006.43. | We have been waiting since August 21, 2015 for a statement by Serasa on TAM’s letter of indemnity and a statement by the Union. The statement was authenticated on January 29, 2016. A new insurance policy was submitted on March 30, 2016 with the change to the guarantee requested by PGFN. On 05/20/2016 the process was sent to PGFN, which was manifested on 06/03/2016. A decision is pending | 14,061 |
116
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
Tam Linhas Aéreas S.A | Department of Federal Revenue of Brazil | 19515.720476/2015-83 | Alleged irregularities in the SAT payments for the periods 01/2011 to 12/2012 | The lawsuit was converted into a measure in January 2018. A statement will be made after the prosecutor’s measure has concluded. The Brazilian Administrative Council of Tax Appeals (CARF) issued a decision in favor of the Company on September 22, 2018. We are currently expecting that the Ministry of Finance of Brazil will appeal. | 59,481 | |||||
Tam Linhas Aéreas S.A. | Court of the Second Region. | 2001.51.01.012530-0 | Ordinary judicial action brought for the purpose of declaring the nonexistence of legal relationship obligating the company to collect the Air Fund. | Unfavorable court decision in first instance. Currently expecting the ruling on the appeal filed by the company. In order to suspend chargeability of Tax Credit a Guaranty Deposit to the Court was delivered for THUS$106. | ||||||
The court decision requesting that the Expert make all clarifications requested by the parties in a period of 30 days was published on March 29, 2016. The plaintiffs’ submitted a petition on June 21, 2016 requesting acceptance of the opinion of their consultant and an urgent ruling on the dispute. No amount additional to the deposit that has already been made is required if this case is lost. | 87,538 | |||||||||
Tam Linhas Aéreas S.A. | Internal Revenue Service of Brazil. | 10880.725950/2011-05 | Compensation credits of the Social Integration Program (PIS) and Contribution for Social Security Financing (COFINS) Declared on DCOMPs. | The objection (manifestação de inconformidade) filed by the company was rejected, which is why the voluntary appeal was filed. The case was assigned to the 1st Ordinary Group of Brazil’s Administrative Council of Tax Appeals (CARF) on June 8, 2015. TAM’s appeal was included in the CARF session held August 25, 2016. An agreement that converted the proceedings into a formal case was published on October 7, 2016. The amount has been reduced after some set-offs were approved by the Department of Federal Revenue of Brazil. | 26,293 |
117
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
Aerovías de Integración Regional, AIRES S.A. | United States Court of Appeals for the Eleventh Circuit, Florida, U.S.A.
45th Civil Court of the Bogota Circuit in Colombia. | 2013-20319 CA 01 | The July 30, 2012 Aerovías de Integración Recional, Aires S.A. (LATAM AIRLINES COLOMBIA) initiated a legal process in Colombia against Regional One INC and Volvo Aero Services LLC, to declare that these companies are civilly liable for moral and material damages caused to LATAM AIRLINES COLOMBIA arising from breach of contractual obligations of the aircraft HK- 4107.
The June 20, 2013 AIRES SA and / Or LATAM AIRLINES COLOMBIA was notified of the lawsuit filed in U.S. for Regional One INC and Dash 224 LLC for damages caused by the aircraft HK-4107 arguing failure of LATAM AIRLINES GROUP S.A. customs duty to obtain import declaration when the aircraft in April 2010 entered Colombia for maintenance required by Regional One. | Colombia. This case is being heard by the 45th Civil Court of the Bogota Circuit in Colombia. Statements were taken from witnesses presented by REGIONAL ONE and VAS on October 31, 2018. The court received the expert opinions requested by REGIONAL ONE and VAS and given their petition, it asked the experts to expand upon their opinions. It also changed the experts requested by LATAM AIRLINES COLOMBIA. The case was brought before the Court on September 10, 2018 and these rulings are pending processing so that a new hearing can be scheduled. On October 31, 2018, the judge postponed the deadline for the parties to answer the objection because of a serious error brought to light by VAS regarding the translation submitted by the expert. The process has been in the judge’s chambers since March 11, 2019 to decide on replacing the damage estimation expert as requested by LATAM AIRLINES COLOMBIA. The one previously appointed did not take office. A petition has also been made by VAS objecting to the translation of the documents in English into Spanish due to serious mistakes, which was served to the parties in October 2018. The 45th Civil Circuit Court issued an order on August 13, 2019 that did not decide on the pending matters but rather voided all actions since September 14, 2018 and ordered the case to be referred to the 46th Civil Circuit Court according to article 121 of the General Code of Procedure. Said article says that court decisions must be rendered in no more than one (1) year as from the service of the court order admitting the claim. If that period expires without any ruling being issued, the Judge will automatically forfeit competence over the proceedings and must give the Administrative Room of the Superior Council of the Judiciary notice of that fact the next day, in addition to referring the case file to the next sitting judge in line, who will have competence and will issue a ruling in no more than 6 months. The case was sent to the 46th Civil Circuit Court on September 4, 2019, which claims that there was a competence conflict and then sent the case to the Superior Court of Bogotá to decide which court, the 45th or 46th, had to continue with the case.
Florida. On June 4, 2019, the State Court of Florida allowed REGIONAL ONE to add a new claim against LATAM AIRLINES COLOMBIA for default on a verbal contract. Given the new claim, LATAM AIRLINES COLOMBIA petitioned that the Court postpone the trial to August 2019 to have the time to investigate the facts alleged by REGIONAL ONE to prove a verbal contract. The State Court granted the postponement of a jury trial to June 2020. In the meantime, the discovery stage continues, including verbal statements by experts on behalf of both parties. There may be some change in the committed amount, which will be reported in due course. | 12,443 |
118
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
Tam Linhas Aéreas S.A. | Internal Revenue Service of Brazil | 10880.722.355/ 2014-52 | On August 19, 2014 the Federal Tax Service issued a notice of violation stating that compensation credits Program (PIS) and the Contribution for the Financing of Social Security COFINS by TAM are not directly related to the activity of air transport. | An administrative objection was filed on September 17, 2014. A first-instance ruling was rendered on June 1, 2016 that was partially favorable. The separate fine was revoked. A voluntary appeal was filed on June 30, 2016, which is pending a decision by CARF. On September 9, 2016, the case was referred to the Second Division, Fourth Chamber, of the Third Section of the Administrative Council of Tax Appeals (CARF). | 65,895 | |||||
TAM Linhas Aéreas S.A. | Sao Paulo Labor Court, Sao Paulo | 1001531- 73.2016.5.02.0 710 | The Ministry of Labor filed an action seeking that the company adapt the ergonomics and comfort of seats. | In August 2016, the Ministry of Labor filed a new lawsuit before the competent Labor Court in Sao Paulo, in the same terms as case 0000009-45.2016.5.02.090, as previously reported, the hearing date is set for October 22, 2018. We were served the decision completely dismissing the claim in March 2019, against which the plaintiff has filed an appeal. We are now awaiting the hearing by the Court of Appeals. | 17,982 | |||||
LATAM Airlines Group S.A. | 22° Civil Court of Santiago | C-29.945-2016 | The Company received notice of a civil liability claim by Inversiones Ranco Tres S.A. on January 18, 2017. It is represented by Mr. Jorge Enrique Said Yarur. It was filed against LATAM Airlines Group S.A. for an alleged contractual default by the Company and against Ramon Eblen Kadiz, Jorge Awad Mehech, Juan Jose Cueto Plaza, Enrique Cueto Plaza and Ignacio Cueto Plaza, directors and officers, for alleged breaches of their duties. In the case of Juan Jose Cueto Plaza, Enrique Cueto Plaza and Ignacio Cueto Plaza, it alleges a breach, as controllers of the Company, of their duties under the incorporation agreement. LATAM has retained legal counsel specializing in this area to defend it. | The claim was answered on March 22, 2017 and the plaintiff filed its replication on April 4, 2017. LATAM filed its rejoinder on April 13, 2017, which concluded the argument stage of the lawsuit. A reconciliation hearing was held on May 2, 2017, but the parties did not reach an agreement. The Court issued the evidentiary decree on May 12, 2017. We filed a petition for reconsideration because we disagreed with certain points of evidence. That petition was partially sustained by the Court on June 27, 2017. The evidentiary stage commenced and then concluded on July 20, 2017. Observations to the evidence must now be presented. That period expires August 1, 2017. We filed our observations to the evidence on August 1, 2017. We were served the decision on December 13, 2017 that dismissed the claim since LATAM was in no way liable. The plaintiff filed an appeal on December 26, 2017. Arguments were pled before the Santiago Court of Appeals on April 23, 2019, and on April 30, 2019, this Court confirmed the ruling of the trial court absolving LATAM. The losing party was ordered to pay costs in both cases. On May 18, 2019, Inversiones Ranco Tres S.A. filed a remedy of vacation of judgment based on technicalities and on substance against the Appellate Court decision. The Appellate Court admitted both appeals on May 29, 2019 and the appeals are pending a hearing by the Supreme Court. | 17,705 |
119
Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
TAM Linhas Aéreas S.A. | 10th Jurisdiction of Federal Tax Enforcement of Sao Paulo | 0061196- 68.2016.4.03.6 182 | Tax Enforcement Lien No. 0020869- 47.2017.4.03.6182 on Profit-Based Social Contributions from 2004 to 2007. | This tax enforcement was referred to the 10th Federal Jurisdiction on February 16, 2017. A petition reporting our request to submit collateral was recorded on April 18, 2017. At this time, the period is pending for the plaintiff to respond to our petition. The bond was replaced. We are waiting for the evidentiary period to begin. | 39,584 | |||||
TAM Linhas Aéreas S.A. | Department of Federal Revenue of Brazil | 5002912.29.20 19.4.03.6100 | A lawsuit disputing the debit in the administrative proceeding 16643.000085/2009- 47, reported in previous Notes, consisting of a notice demanding recovery of the Income and Social Assessment Tax on the net profit (SCL) resulting from the itemization of royalties and use of the TAM trademark | The lawsuit was assigned on February 28, 2019. A decision was rendered on March 1, 2019 stating that no guarantee was required. A final decision is now pending. | 11,139 | |||||
TAM Linhas Aéreas S.A. | DERAT SPO (Delegacía de Receita Federal) | 13808.005459/ 2001-45 | Collection of the Social Security Funding Contribution (COFINS) based on gross revenue of the company in the period 1999-2000. | The decision on collection was pending through June 2, 2010. | 23,228 | |||||
TAM Linhas Aéreas S.A | Delegacía de Receita Federal | 10611.720630/ 2017-16 | This is an administrative claim about a fine for the incorrectness of an import declaration (new lawsuit). | The administrative defensive arguments were presented September 28, 2017. The Court dismissed the Company’s appeal in August 2019. Then on September 17, 2019, Company filed a special appeal (CRSF (Higher Tax Appeals Chamber)) that is pending a decision. | 20,410 | |||||
TAM Linhas Aéreas S.A | Delegacía de Receita Federal | 10611.720852/ 2016-58 | An improper charge of the Contribution for the Financing of Social Security (COFINS) on an import (new lawsuit). | We are currently awaiting a decision. There is no predictable decision date because it depends on the court of the government agency. | 14,631 | |||||
TAM Linhas Aéreas S.A | Delegacía de Receita Federal | 16692.721.933/ 2017-80 | The Internal Revenue Service of Brazil issued a notice of violation because TAM applied for credits offsetting the contributions for the Social Integration Program (PIS) and the Social Security Funding Contribution (COFINS) that do not bear a direct relationship to air transport. | An administrative defense was presented on May 29, 2018. | 31,381 | |||||
SNEA (Sindicato Nacional das empresas aeroviárias) | União Federal | 0012177- 54.2016.4.01.3 400 | A claim against the 72% increase in airport control fees (TAT-ADR) and approach control fees (TAT-APP) charged by the Airspace Control Department (“DECEA”). | A decision is now pending on the appeal presented by SNEA. | 63,951 |
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Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
TAM Linhas Aéreas S/A | União Federal | 2001.51.01.02 0420-0 | TAM and other airlines filed a recourse claim seeking a finding that there is no legal or tax basis to be released from collecting the Additional Airport Fee (“ATAERO”). | A decision by the superior court is pending. The amount is indeterminate because even though TAM is the plaintiff, if the ruling is against it, it could be | -0- | |||||
TAM Linhas Aéreas S/A | Delegacia da Receita Federal | 10880- 900.424/ 2018- 07 | This is a claim for a negative Legal Entity Income Tax (IRPJ) balance for the 2014 calendar year (2015 fiscal year) because set-offs were not allowed. | The administrative defensive arguments were presented March 19, 2018. An administrative decision is now pending. | 17,202 | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 19515- 720.823/ 2018- 11 | An administrative claim to collect alleged differences in SAT payments for the periods 11/2013 to 12/2017. | A defense was presented on November 28, 2018. The Court dismissed the Company’s appeal in August 2019. Then on September 17, 2019, Company filed a voluntary appeal (CRSF (Administrative Tax Appeals Board)) that is pending a decision. | 120,551 | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 10880.938832 /2013-19 | The decision denied the reallocation petition and did not equate the Social Security Tax (COFINS) credit declarations for the second quarter of 2011, which were determined to be in the non-cumulative system | An administrative defense was argued on March 19, 2019. The decision is pending. | 16,108 | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 10880.938834 /2013-16 | The decision denied the reallocation petition and did not equate the Social Security Tax (COFINS) credit declarations for the third quarter of 2011, which were determined to be in the non-cumulative system. | An administrative defense was argued on March 19, 2019. The decision is pending. | 11,777 | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 10880.938837 /2013-41 | The decision denied the reallocation petition and did not equate the Social Security Tax (COFINS) credit declarations for the fourth quarter of 2011, which were determined to be in the non-cumulative system. | An administrative defense was argued on March 19, 2019. The decision is pending. | 15,782 |
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Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 10880.938838 /2013-96 | The decision denied the reallocation petition and did not equate the Social Security Tax (COFINS) credit declarations for the first quarter of 2012, which were determined to be in the non-cumulative system. | We presented our administrative defense. | 10,891 | |||||
TAM Linhas Aéreas S/A | Department of Federal Revenue of Brazil | 0012541- 56.2016.5.03.0 144 | A class action in which the Union is petitioning that TAM be ordered to make payment of the correct calculation of Sundays and holidays. | A hearing was set for December 17, 2019 | 14,423 | |||||
LATAM Airlines Argentina | Commercial Trial Court No. 15 of Buenos Aires. | 11479/2012 | Proconsumer and Rafaella Cabrera filed a claim citing discriminating fees charged to foreign users as compared to domestic users for services retained in Argentina. | The trial court judge dismissed Mrs. Cabrera’s claim on March 7, 2019 and sustained the motion of lack of standing entered by Proconsumer. The ruling was appealed by the plaintiff on April 8, 2019 and will be decided by Room D. | -0- | |||||
LATAM Airlines Group Argentina, Brasil, Perú, Ecuador, y TAM Mercosur. | Commercial and Civil Trial Court No. 11 of Buenos Aires. | 1408/2017 | Consumidores Libres Coop. Ltda. filed this claim on March 14, 2017 regarding a provision of services. It petitioned for the reimbursement of certain fees or the difference in fees charged for passengers who purchased a ticket in the last 10 years but did not use it. | Federal Commercial and Civil Trial Court No. 11 in the city of Buenos Aires. After two years of arguments on jurisdiction and competence, the claim was assigned to this court and an answer was filed on March 19, 2019 | -0- | |||||
TAM Linhas Aéreas S.A | Department of Federal Revenue of Brazil | 10.880.938842/ 2013-54 | The decision denied the petition for reassignment and did not equate the CONFINS credit statements for the third quarter of 2012 that had been determined to be in the nonaccumulative system. | We presented our administrative defense. | 11,521 | |||||
TAM Linhas Aéreas S.A | Department of Federal Revenue of Brazil | 10.880.93844/ 2 013-43 | The decision denied the petition for reassignment and did not equate the CONFINS credit statements for the third quarter of 2012 that had been determined to be in the nonaccumulative system. | We presented our administrative defense | 10,876 |
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Company | Court | Case Number | Origin | Stage of trial | Amounts Committed (*) ThUS$ | |||||
TAM Linhas Aéreas S.A | Department of Federal Revenue of Brazil | 10880.938841/ 2013-18 | The decision denied the petition for reassignment and did not equate the CONFINS credit statements for the second quarter of 2012 that had been determined to be in the non-accumulative system. | We presented our administrative defense. | 10,292 | |||||
TAM Linhas Aéreas S.A | Receita Federal de Brasil | 10840.727719/ 2019-71 | Collection of PIS / COFINS tax for the period of 2014. | We presented our administrative defense on January 11, 2020 | 42,276 | |||||
Latam-Airlines Ecuador S.A. | Tribunal Distrital de lo Fiscal | 17509-2014-0088 | An audit of the 2006 Income Tax Return that disallowed fuel expenses, fees and other items because the necessary support was not provided, according to Management. | On August 6, 2018, the District Tax Claims Court rendered a decision denying the request for a refund of a mistaken payment. An appeal seeking vacation of this judgment by the Court was filed on September 5 and we are awaiting a decision by the Appellate judges. As of December 31, 2018, the lawyers believe that the probability of recovering this amount has fallen by 30% to 40%, so the provision was increased to $8.7 million. We have applied IFRIC 23 as of 12/31/19 because of the percentage loss (more than 50%), and we have recorded the entire provision in the income tax item. | 12,505 | |||||
Latam Airlines Group S.A. | Southern District of Florida. United States District Court | 19cv23965 | A lawsuit filed by Jose Ramon Lopez Regueiro against American Airlines Inc. and Latam Airlines Group S.A. seeking an indemnity for damages caused by the commercial use of the Jose Marti International Airport in Cuba that he says were repaired and reconditioned by his family before the change in government in 1959. | Latam Airlines Group S.A. was served this claim on September 27, 2019. LATAM Airlines Group filed a motion to dismiss on November 26, 2019. In response, a motion to suspend discovery was filed on December 23, 2019 while the Court was deciding on the motion to dismiss. The provision is undetermined. | -0- |
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- | In order to deal with any financial obligations arising from legal proceedings in effect at December 31, 2019, whether civil, tax, or labor, LATAM Airlines Group S.A. and Subsidiaries, has made provisions, which are included in Other non-current provisions that are disclosed in Note 21. |
- | The Company has not disclosed the individual probability of success for each contingency in order to not negatively affect its outcome. |
(*) | The Company has reported the amounts involved only for the lawsuits for which a reliable estimation can be made of the financial impacts and of the possibility of any recovery, pursuant to Paragraph 86 of IAS 37 Provisions, Contingent Liabilities and Contingent Assets. |
II. | Governmental Investigations. |
1) On July 25, 2016, LATAM reached agreements with theU.S. Department of Justice(“DOJ”) and theU.S. Securities and Exchange Commission (“SEC”) regarding the investigation of payments for US$1,150,000 by Lan Airlines S.A. in 2006-2007 to a consultant advising it in the resolution of labor matters in Argentina.
The purpose of the investigation was to determine whether these payments violated the U.S. Foreign Corrupt Practices Act (“FCPA”) that: (i) forbids bribery of foreign government authorities in order to obtain a commercial advantage; and (ii) requires the companies that must abide by the FCPA to keep appropriate accounting records and implant an adequate internal control system. The FCPA is applicable to LATAM because of its ADR program in effect on the U.S. securities market.
After an exhaustive investigation, the DOJ and SEC concluded that there was no violation of the bribery provisions of the FCPA, which is consistent with the results of LATAM’s internal investigation. However, the DOJ and SEC consider that LATAM accounted for these payments incorrectly and, consequently, infringed the part of the FCPA requiring companies to keep accurate accounting records. These authorities also consider that LATAM’s internal controls in 2006-2007 were weak, so LATAM would have also violated the provisions in the FCPA requiring it to maintain an adequate internal control system.
The agreements signed, included the following:
(a) The agreement with the DOJ involves: (i) entering into a Deferred Prosecution Agreement (“DPA”), which is a public contract under which the DOJ files public charges alleging an infringement of the FCPA accounting regulations. LATAM is not obligated to answer these charges, the DOJ will not pursue them for a period of 3 years, and the DOJ will dismiss the charges after expiration of that 3-year period provided LATAM complies with all terms of the DPA. In exchange, LATAM must admit to the negotiated events described in the DPA and agree to pay the negotiated fine explained below and abide by other terms stipulated in the agreement; (ii) clauses in which LATAM admits that the payments to the consultant in Argentina were incorrectly accounted for and that at the time those payments were made (2006-2007), it did not have adequate internal controls in place; (iii) LATAM’s agreement to have an outside consultant monitor, evaluate and report to the DOJ on the effectiveness of LATAM’s compliance program for a period of 27 months; and LATAM’s agreement to continue evaluating and reporting directly to the DOJ on the effectiveness of its compliance program for a period of 9 months after the consultant’s work concludes; and (iv) LATAM paid a fine of ThUS$12,750.
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(b) The agreement with the SEC involves: (i) accepting a Cease and Desist Order, which is an administrative resolution of the SEC closing the investigation, in which LATAM will accept certain obligations and statements of fact that are described in the document; (ii) accepting the same obligations regarding the consultant mentioned above; and (iii) LATAM paid a fine of ThUS$ 6,744 and interest of ThUS$ 2,694.
On May 15, 2019, the external consultant certified that the Anticorruption program of LATAM Airlines Group S.A. It is reasonably designed and implemented to prevent and detect violations within LATAM to anti-corruption laws.
On July 23, 2019, the DOJ approved the certification made by the consultant on May 15, 2019 regarding the Anticorruption program of LATAM Airlines Group S.A.
On January 31, 2020, the Florida Court sustained the DOJ’s motion to withdraw the criminal action filed against LATAM Airlines Group S.A. as LATAM had fulfilled all the conditions in the DPA. So, the DOJ case is closed.
2) On April 6, 2019, LATAM Airlines Group S.A. received notification of the resolution issued by the National Economic Prosecutor's Office (FNE), which begins an investigation into the LATAM Pass frequent passenger program. The last move in the cause Role No. 2530-19 leading this investigation corresponds to LATAM Airlines Group S.A. response in May 2019.
3) On July 9, 2019, LATAM Airlines Group S.A. received the resolution issued by the National Economic Prosecutor's Office (FNE), which begins an investigation into the Alliance Agreement between LATAM Airlines Group S.A. and American Airlines INC. The last move in the cause Role No. 2565-19 leading this investigation corresponds to a statement on September 11, 2019
4) On July 26, 2019, the National Consumer Service of Chile (SERNAC) issued the Ordinary Resolution No. 12,711 which proposed to initiate a collective voluntary mediation procedure on effectively informing passengers of their rights in cases of cancellation of flights or no show to boarding, as well as the obligation to return the respective boarding fees as provided by art. 133 C of the Aeronautical Code. The Company has voluntarily decided to participate in this procedure, the terms and conditions of which are being negotiated.
5) On October 15, 2019, LATAM Airlines Group S.A. received the resolution issued by the National Economic Prosecuting Authority (FNE) advising of the start of an investigation into the agreement between LATAM Airlines Group S.A. and Delta Airlines, Inc. (Case number 2585-19). The Company is cooperating in this investigation.
6) On December 11, 2019, LATAM Airlines Group S.A. received Office No. 122019 / FFD / 208993 by the Fiscalía Regional Metropolitana Centro Norte, requesting information on statements that appeared in the press in Brazil about alleged payments to public officials within the framework of the Asociación Brasileña de Compañías Aéreas, ABEAR. Cause No. 2585-19. The Company is currently cooperating with this process.
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NOTE 32 – COMMITMENTS
(a) | Loan covenants |
The Company and its subsidiaries do not maintain credit agreements that set limits on certain financial indicators of the Company or its subsidiaries, with the exception of those detailed below:
With respect to the various contracts concluded by the Company for the financing of Boeing 787 aircraft that have the guarantee of the Export - Import Bank of the United States of America, limits have been established for some financial indicators of the parent company on a consolidated basis, in respect of which, in any case, non-compliance does not accelerate payment of the loan.
The established limits measured semiannually on the basis of the Consolidated Financial Statements are the following:
I. | Debt to EBITDAR: The ratio of the Company’s financial obligations, on a consolidated basis, to EBITDAR must not exceed 6 times. |
EBITDAR: It is defined as the net result, excluding interest, depreciation, amortization, rental income and profits or extraordinary losses not related to ordinary course of business.
II. | Fixed charge index: EBITDAR of the last twelve months on the sum of the cash on a consolidated basis required to cover interest expenses during said period, plus lease rental expenses, plus dividends declared or paid by the Company. This index should not be less than 1.2 times. |
III. | Minimum liquidity: The cash and cash equivalent of the Consolidated Company must not be less than ThUS $ 75,000. |
Regarding the renewable credit line of credit (“Revolving Credit Facility”) established with a consortium of twelve banks led by Citibank, with a guarantee of airplanes, engines, spare parts and supplies for a total amount available of US $ 600 million, this includes restrictions of minimum liquidity, measured at the level of the Consolidated Company (with a minimum level of US $ 750 million) and measured at the individual level for LATAM Airlines Group SA and TAM Linhas Aéreas S.A. (with a minimum level of US $ 400 million). Compliance with these restrictions is a precondition for using the line; If the line is used, these restrictions must be reported quarterly, and failure to comply with these restrictions results acceleration of loan payment. As of December 31, 2019, this line of credit is not used.
As of December 31, 2019 this line of credit established with a consortium of twelve banks led by Citibank, is not used.
As of December 31, 2019, the Company is in compliance with all the financial indicators detailed above.
On the other hand, the Company’s financing contracts generally establish clauses related to changes in the ownership structure and in the controller and disposition of the assets (as regards mainly to important transfers of assets).
In particular, the contract “Indenture” signed between Guanay Finance Limited (see Note 1), LATAM Airlines Group S.A. and Citibank, N.A. on November 7, 2013, it includes clauses related to changes in the ownership structure and Company controller, which generate the anticipation of certain payment obligations. As result of the acquisition of 20% of the shares of LATAM Airlines Group S.A. by Delta Air Lines, Inc., the debt held by Guanay Finance Limited, which mature in December 2020, will be paid in March 2020, this was considered by the Company.
Finally, we Note that the particular terms of the aforementioned clauses regarding the Indenture contract are not included in any other financing contract that the Company maintains in force as of this date.
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(b) | Other commitments |
At December 31, 2019 the Company has existing letters of credit, certificates of deposits and warranty insurance policies as follows:
Value | Release | |||||||||
Creditor Guarantee | Debtor | Type | ThUS$ | date | ||||||
Corporación Peruana de Aeropuertos y Aviación Comercial | Latam Airlines Perú S.A. | Twenty six letter of credit | 3,493 | Jan-31-20 | ||||||
Lima Airport Partners S.R.L. | Latam Airlines Perú S.A. | Twenty one letter of credit | 2,990 | Feb-17-20 | ||||||
Superintendencia Nacional de Aduanas y de Administración Tributaria | Latam Airlines Perú S.A. | Twenty five letter of credit | 200,000 | Feb-12-20 | ||||||
Instituto Nacional de Defensa de la Compentencia y de la Protección | Latam Airlines Perú S.A. | Forty three letter of credit | 1,483 | Feb-27-20 | ||||||
Aena Aeropuertos S.A. | Latam Airlines Group S.A. | Four letter of credit | 2,820 | Nov-15-20 | ||||||
American Alternative Insurance Corporation | Latam Airlines Group S.A. | Seven letter of credit | 3,790 | Apr-05-20 | ||||||
Citibank N.A. | Latam Airlines Group S.A. | One letter of credit | 27,226 | Dec-20-20 | ||||||
Comisión Europea | Latam Airlines Group S.A. | One letter of credit | 9,346 | Dec-31-20 | ||||||
Deutsche Bank A.G. | Latam Airlines Group S.A. | One letter of credit | 2,500 | March-31-20 | ||||||
Dirección General de Aeronáutica Civil | Latam Airlines Group S.A. | Forty six letter of credit | 18,487 | Feb-28-20 | ||||||
Empresa Pública de Hidrocarburos del Ecuador EP Petroecuador | Latam Airlines Group S.A. | One letter of credit | 5,500 | Jun-18-20 | ||||||
Metropolitan Dade County | Latam Airlines Group S.A. | Eight letter of credit | 2,298 | March-13-20 | ||||||
Numinous LLC | Latam Airlines Group S.A. | One letter of credit | 2,200 | Oct-15-20 | ||||||
Conselho Administrativo de Conselhos Federais | Tam Linhas Aéreas S.A. | Two letter of credit | 1,730 | Nov-24-20 | ||||||
Procon | Tam Linhas Aéreas S.A. | Three insurance policy guarantee | 3,728 | Apr-01-21 | ||||||
União Federal | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 1,277 | Sep-28-21 | ||||||
Aena Aeropuertos S.A. | Tam Linhas Aéreas S.A. | One letter of credit | 1,405 | Aug-14-20 | ||||||
Procuradoria da Fazenda Nacional | Tam Linhas Aéreas S.A. | One letter of credit | 8,017 | Aug-10-20 | ||||||
RB Comercial Properties 49 | ||||||||||
Empreendimentos Imobiliarios LTDA | Tam Linhas Aéreas S.A. | One letter of credit | 35,974 | Apr-29-20 | ||||||
Tribunal de Justição de São Paulo. | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 1,927 | Sep-23-24 | ||||||
17a Vara Cível da Comarca da Capital de João Pessoa/PB. | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 3,050 | Jun-25-23 | ||||||
10ª Vara de Execuções Fiscais Federais de São Paulo/SP. | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 33,938 | Oct-03-20 | ||||||
Vara da Fazenda Pública da Comarca do Rio de Janeiro - RJ | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 1,043 | Sep-25-23 | ||||||
Vara das Execuções Fiscais Estaduais | Tam Linhas Aéreas S.A. | Three insurance policy guarantee | 6,770 | Jul-05-23 | ||||||
Vara Civel Campinas. | Tam Linhas Aéreas S.A. | An insurance policy guarantee | 1,709 | Jun-14-24 | ||||||
Procon | ABSA Linhas Aereas Brasileira S/A | An insurance policy guarantee | 10,453 | May-19-20 | ||||||
Vara Federal da Subseção de Campinas SP | ABSA Linhas Aereas Brasileira S/A | An insurance policy guarantee | 15,856 | Feb-20-21 | ||||||
Vara Federal da Subseção de Campinas SP | ABSA Linhas Aereas Brasileira S/A | One letter of credit | 2,329 | Oct-20-21 | ||||||
Conselho Administrativo de Conselhos Federais | ABSA Linhas Aereas Brasileira S/A | An insurance policy guarantee | 5,435 | Oct-20-21 | ||||||
416,774 |
The credit letters related to right of use assets are included in Note 17 letter (d) Additional information Property, Plant and Equipment, in numeral (i) Property Plant and equipment delivered under guarantee.
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NOTE 33 - TRANSACTIONS WITH RELATED PARTIES
(a) | Details of transactions with related parties as follows: |
Nature of | Transaction amount | |||||||||||||||||
relationship | Nature of | with related parties | ||||||||||||||||
with | Country | related parties | As of December 31, | |||||||||||||||
Tax No. | Related party | related parties | of origin | transactions | Currency | 2019 | 2018 | |||||||||||
ThUS$ | ThUS$ | |||||||||||||||||
96.810.370-9 | Inversiones Costa Verde Ltda. y CPA. | Related director | Chile | Tickets sales | CLP | 16 | 16 | |||||||||||
78.591.370-1 | Bethia S.A and subsidiaries | Related director | Chile | Services received of cargo transport | CLP | 556 | 1,778 | |||||||||||
Services received from National and International Courier | CLP | (3 | ) | (85 | ) | |||||||||||||
Services provided of cargo transport | CLP | - | - | |||||||||||||||
Sales commissions | CLP | (218 | ) | (821 | ) | |||||||||||||
Services received advertising | CLP | (726 | ) | (1,205 | ) | |||||||||||||
87.752.000-5 | Granja Marina Tornagaleones S.A. | Common shareholder | Chile | Tickets sales | CLP | 61 | 51 | |||||||||||
96.782.530-1 | Inmobiliaria Inversiones Asturias S.A. | Related director | Chile | Tickets sales | CLP | - | 25 | |||||||||||
76.335.600-0 | Parque de Chile S.A. | Related director | Chile | Tickets sales | CLP | 9 | 20 | |||||||||||
96.989.370-3 | Rio Dulce S.A. | Related director | Chile | Tickets sales | CLP | - | 18 | |||||||||||
Foreign | Inversora Aeronáutica Argentina | Related director | Argentina | Property leases received | ARS$ | - | (231 | ) | ||||||||||
Foreign | TAM Aviação Executiva e Taxi Aéreo S/A | Common shareholder | Brazil | Services provided | BRL | 58 | 62 | |||||||||||
Services received of cargo transport | BRL | 2 | 8 | |||||||||||||||
Services provided | BRL | (10 | ) | - | ||||||||||||||
Services received at airports | BRL | - | (2 | ) | ||||||||||||||
Foreign | Qatar Airways | Indirect shareholder | Qatar | Services provided by aircraft lease | US$ | 39,528 | 21,321 | |||||||||||
Interlineal received service | US$ | (2,050 | ) | (6,345 | ) | |||||||||||||
Interlineal provided service | US$ | 3,739 | 8,635 | |||||||||||||||
Services provided of handling | US$ | 1,106 | 1,392 | |||||||||||||||
Services provided/ received others | US$ | 996 | 1,805 |
The balances of Accounts receivable and accounts payable to related parties are disclosed in Note 9.
Transactions between related parties have been carried out under market conditions between interested and duly informed parties.
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(b) | Compensation of key management |
The Company has defined for these purposes that key management personnel are the executives who define the Company’s policies and macro guidelines and who directly affect the results of the business, considering the levels of Vice-Presidents, Chief Executives and Senior Directors.
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Remuneration | 13,701 | 14,841 | ||||||
Management fees | 411 | 307 | ||||||
Non-monetary benefits | 1,815 | 748 | ||||||
Short-term benefits | 31,124 | 45,653 | ||||||
Long-term benefits | 8,577 | 2,412 | ||||||
Share-based payments | 3,296 | (7,210 | ) | |||||
Termination benefits | 1,428 | 1,404 | ||||||
Total | 60,352 | 58,155 |
NOTE 34 - SHARE-BASED PAYMENTS
(a) | Compensation plan for increase of capital |
Compensation plans implemented by providing options for the subscription and payment of shares that have been granted by LATAM Airlines Group S.A. to employees of the Company and its subsidiaries, are recognized in the financial statements in accordance with the provisions of IFRS 2 “Share-based Payment”, showing the effect of the fair value of the options granted under compensation in linear between the date of grant of such options and the date on which these irrevocable.
(a.1) | Compensation plan 2013 not current as of this date |
At the Extraordinary Shareholders’ Meeting held on June 11, 2013, the shareholders of the Company approved, among other matters, the increase in the share capital, of which 1,500,000 shares were allocated to compensation plans for the employees of the Company. Company and its subsidiaries, in accordance with the provisions of Article 24 of the Law on Public Limited Companies.
On June 11, 2018, expired the term to subscribe said actions, which were neither subscribed nor paid, reducing the capital of full rights.
(b) | Compensation plan 2016-2018 |
The company implemented a retention plan long-term for executives, which lasts until December 2018, with a vesting period between October 2018 and March 2019, which consists of an extraordinary bonus whose calculation formula is based on the variation the value to experience the action of LATAM Airlines Group S.A. for a period of time.
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This benefit is recorded in accordance with the provisions of IFRS 2 “Payments based on shares” and has been considered as a cash settled award and, therefore, recorded at fair value as a liability, which is updated at the closing date. of each financial statement with effect on the result of the period.
Base Units | ||||||||||||||||||||
Opening | Closing | |||||||||||||||||||
Periods | balance | Granted | Annulled | Exercised | Balance | |||||||||||||||
From January 1 to December 31, 2018 | 2,932,896 | - | (171,419 | ) | (1,168,700 | ) | 1,592,777 | |||||||||||||
From January 1 to December 31, 2019 | 1,592,777 | 93,481 | - | (1,686,258 | ) | - |
The fair value has been determined on the basis of the best estimate of the future value of the Company share multiplied by the number of units granted bases.
As of December 31, 2019 and 2018, the amount recorded is ThUS$ 3,296 and ThUS$ (7,210), respectively, classified under the line “Administrative expenses” of the Consolidated Income Statement by function.
We inform you that this Compensation Plan is finished (LP1).
(c) | LP2 compensation plans (2019-2020) |
The company implemented a long-term retention plan for executives that lasts until March 2020, with a period of enforceability between October 2019 and March 2020, which consists of an extraordinary bonus whose calculation formula is based on the variation of the value experienced by the action of LATAM Airlines Group SA for a certain period of time.
At December 31, 2019 the required action price for its collection is under the initial target.
(d) | LP3 compensation plans (2020-2023) |
The Company implemented a program for a group of executives, which lasts until March 2023, with a period of enforceability between October 2020 and March 2023, where the collection percentage is annual and cumulative. The methodology is an allocation, of quantity of units, where a goal of the value of the action is set.
The bonus is applicable, if the target of the price of the action defined in each year is met. In case the bonus is accumulated, until the last year, the total bonus is doubled (in the case of the share price is activated).
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(e) | Subsidiary compensation plans |
(e.1) | Stock-based payments |
As indicated in Note 1, and the consequent resignation of the executives of Multiplus S.A. the option plans granted were canceled. (As of December 31, 2018, the options for current shares amounted to 247,500 shares for Multiplus S.A.)
Multiplus S.A. | 4nd Extraordinary | |||||||||||||||
3rd Grant | 4th Grant | Grant | ||||||||||||||
Description | 03/21/2012 | 04/03/2013 | 11/20/2013 | Total | ||||||||||||
Outstanding option number as December 31, 2018 | 84,249 | 163,251 | - | 247,500 | ||||||||||||
Outstanding option number as December 31, 2019 | - | - | - | - |
The acquisition of the share’s rights, in both companies is as follows:
Number of shares | Number of shares | |||||||||||||||
Accrued options | Non accrued options | |||||||||||||||
As of | As of | As of | As of | |||||||||||||
December 31, | December 31, | December 31, | December 31, | |||||||||||||
Company | 2019 | 2018 | 2019 | 2018 | ||||||||||||
Multiplus S.A. | - | 247,500 | - | 247,500 |
In accordance with IFRS 2 - Payments based on shares, the fair value of the option must be recalculated and recorded in the liability of the Company, once cash payment is made (cash-settled). The fair value of these options was calculated using the “Black-Scholes-Merton” method, where the assumptions were updated with information from LATAM Airlines Group S.A. As of December 31, 2018 there is no value recorded in liabilities and results.
(e.2) | Payments based on restricted stock |
As of December 31, 2019, payment contracts based on restricted shares signed with the executives of Multiplus S.A. were canceled, as described in Note 1.
Not acquired due | ||||||||||||||||
Opening | to breach of employment | Closing | ||||||||||||||
balance | Exercised | retention conditions | balance | |||||||||||||
From January 1 to December 31, 2018 | 309,710 | (83,958 | ) | (8,916 | ) | 216,836 | ||||||||||
From January 1 to December 31, 2019 | 216,836 | - | - | 216,836 |
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NOTE 35 - STATEMENT OF CASH FLOWS
(a) | The Company has carried out non-monetary transactions mainly related to financial lease and lease liabilities, which are described in Note 19 Other financial liabilities. |
(b) | Other inflows (outflows) of cash: |
For the year ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Delta Air Lines Inc. Compensation (1) | 350,000 | - | ||||||
Fuel hedge | (9,966 | ) | 77,234 | |||||
Hedging margin guarantees | (21,200 | ) | 1,573 | |||||
Currency hedge | - | (1,282 | ) | |||||
Change reservation systems | - | - | ||||||
Tax paid on bank transaction | (11,369 | ) | 318 | |||||
Fuel derivatives premiums | (17,102 | ) | (13,947 | ) | ||||
Bank commissions, taxes paid and other | (20,627 | ) | (8,179 | ) | ||||
Guarantees | (5,474 | ) | 14,755 | |||||
Court deposits | (22,976 | ) | (30,860 | ) | ||||
Total Other inflows (outflows) Operation flow | 241,286 | 39,612 | ||||||
Others deposits in guarantees | - | - | ||||||
Tax paid on bank transaction | (2,249 | ) | (2,476 | ) | ||||
Others | - | - | ||||||
Total Other inflows (outflows) Investment flow | (2,249 | ) | (2,476 | ) | ||||
Loan guarantee | - | - | ||||||
Settlement of derivative contracts | (2,976 | ) | (11,675 | ) | ||||
Aircraft Financing advances | (55,728 | ) | 55,728 | |||||
Others | - | - | ||||||
Total Other inflows (outflows) Financing flow | (58,704 | ) | 44,053 |
(1) | See Note 22. |
(c) | Dividends: |
For the period ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Latam Airlines Group S.A. | (54,580 | ) | (46,591 | ) | ||||
Multiplus S.A. (*) | - | (26,029 | ) | |||||
Latam Airlines Perú S.A. (*) | (536 | ) | - | |||||
Total dividends paid | (55,116 | ) | (72,620 | ) |
(*) | Dividends paid to minority shareholders |
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(d) | Reconciliation of liabilities arising from financing activities: |
As of | Cash flows | Non-Flow Movements | As of | |||||||||||||||||||||||||
Obligations with | December 31, | Obtainment | Payment | Interest accrued | December 31, | |||||||||||||||||||||||
financial institutions | 2018 | Capital | Capital | Interest | and others | Reclassifications | 2019 | |||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||
Restated | ||||||||||||||||||||||||||||
Loans to exporters | 400,721 | 93,000 | (145,505 | ) | (12,934 | ) | 6,193 | - | 341,475 | |||||||||||||||||||
Bank loans | 222,741 | 164,095 | (165,549 | ) | (11,352 | ) | 7,320 | - | 217,255 | |||||||||||||||||||
Guaranteed obligations | 2,534,021 | 607,797 | (282,721 | ) | (93,335 | ) | 93,286 | (701,721 | ) | 2,157,327 | ||||||||||||||||||
Other guaranteed obligations | 673,452 | - | (92,549 | ) | (28,417 | ) | 27,946 | - | 580,432 | |||||||||||||||||||
Obligation with the public | 1,553,079 | 1,009,836 | (487,086 | ) | (144,932 | ) | 134,037 | - | 2,064,934 | |||||||||||||||||||
Financial leases | 1,624,854 | - | (591,861 | ) | (72,311 | ) | 68,440 | 701,721 | 1,730,843 | |||||||||||||||||||
Other loans | 252,858 | 27,864 | (178,777 | ) | (9,648 | ) | 8,964 | - | 101,261 | |||||||||||||||||||
Lease liability | 2,858,049 | - | (398,992 | ) | (177,949 | ) | 891,049 | - | 3,172,157 | |||||||||||||||||||
Total Obligations with financial institutions | 10,119,775 | 1,902,592 | (2,343,040 | ) | (550,878 | ) | 1,237,235 | - | 10,365,684 |
As of | Cash flows | Non-Flow Movements | As of | |||||||||||||||||||||||||
Obligations with | December 31, | Obtainment | Payment | Interest accrued | December 31, | |||||||||||||||||||||||
financial institutions | 2017 | Capital | Capital | Interest | and others | Reclassifications | 2018 | |||||||||||||||||||||
ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ThUS$ | ||||||||||||||||||||||
Restated | Restated | |||||||||||||||||||||||||||
Loans to exporters | 314,619 | 293,001 | (202,000 | ) | (10,467 | ) | 5,568 | - | 400,721 | |||||||||||||||||||
Bank loans | 321,633 | 74,663 | (167,548 | ) | (13,961 | ) | 7,954 | - | 222,741 | |||||||||||||||||||
Guaranteed obligations | 4,036,843 | - | (315,698 | ) | (122,639 | ) | 99,320 | (1,163,805 | ) | 2,534,021 | ||||||||||||||||||
Other guaranteed obligations | 242,175 | 704,398 | (274,339 | ) | (16,873 | ) | 18,091 | - | 673,452 | |||||||||||||||||||
Obligation with the public | 1,584,066 | - | 1,561 | (107,629 | ) | 75,081 | - | 1,553,079 | ||||||||||||||||||||
Financial leases | 1,109,504 | - | (691,390 | ) | (69,808 | ) | 112,743 | 1,163,805 | 1,624,854 | |||||||||||||||||||
Other loans | 282,800 | 55,728 | (88,934 | ) | (15,978 | ) | 19,242 | - | 252,858 | |||||||||||||||||||
Lease liability | 3,146,972 | - | (373,440 | ) | (182,948 | ) | 267,465 | - | 2,858,049 | |||||||||||||||||||
Total Obligations with financial institutions | 11,038,612 | 1,127,790 | (2,111,788 | ) | (540,303 | ) | 605,464 | - | 10,119,775 |
(e) | Advances of aircraft |
Below are the cash flows associated with aircraft purchases, which are included in the statement of consolidated cash flow, in the item Purchases of properties, plants and equipment:
For the period ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Increases (payments) | (86,288 | ) | (212,163 | ) | ||||
Recoveries | 349,702 | 157,508 | ||||||
Total cash flows | 263,414 | (54,655 | ) |
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f) | The net effect by the hyperinflation application in the consolidated statement of cash flow for the exercise ended December 31, 2019 and 2018 corresponds to: |
For the period ended | ||||||||
December 31, | ||||||||
2019 | 2018 | |||||||
ThUS$ | ThUS$ | |||||||
Net cash flows from (used in) operating activities | 118,797 | 6,088 | ||||||
Net cash flows from (used in) investment activities | 64,516 | (17,611 | ) | |||||
Net cash flows from (used in) financing activities | (56,866 | ) | 3,914 | |||||
Effects of variation in the exchange rate on cash and cash equivalents | (126,447 | ) | 7,609 | |||||
Net increase (decrease) in cash and cash equivalents | - | - |
NOTE 36 - THE ENVIRONMENT
LATAM Airlines Group S.A has a commitment to sustainable development seeking to generate value taking into account the governance, environmental and social aspects. The company manages environmental issues at a corporate level, centralized in the Sustainability Management. For the company to monitor and minimize its impact on the environment is a commitment of the highest level; where the continuous improvement and contribute to the solution of the global climate change problem, generating added value to the company and the region, are the pillars of its management.
One of the functions of the Sustainability Management in environmental issues, together with the various areas of the Company, is to ensure environmental compliance, implement a management system and environmental programs that comply with the requirements every day more demanding worldwide; in addition to continuous improvement programs in their internal processes, which generate environmental, social and economic benefits and which are added to those currently carried out.
Within the sustainability strategy, the Environment dimension of LATAM Airlines Group S.A., is called Climate Change and is based on the goal of achieving world leadership in this area, and for which we work on the following aspects:
i. | Carbon footprint |
ii. | Eco Efficiency |
iii. | Sustainable Alternative Energy |
iv. | Standards and Certifications |
This is how, during 2019, the following initiatives have been carried out:
- | Implementation of an Environmental Management System for the main operations of the company. It is highlighted that the company during 2018 has recertified its environmental management system in Miami facilities following the guidelines of the international standard ISO 14.001. |
- | Maintenance of the Stage 2 Certification of IATA Environmental Assestment (IEnvA) whose scope is the international flights operated from Chile, the most advanced level of this certification; being the first in the continent and one of the four airlines in the world that have this certification. |
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- | Maintenance of the Stage 1 Certification of IEnvA of our operation in Colombian, achieved in 2018 |
- | Preparation of the environmental chapter for the sustainability report of the company 2019, which allows to measure progress in environmental issues. |
- | Answer to the questionnaire of the DJSI. |
- | Measurement and external verification of the Corporate Carbon Footprint. |
- | Neutralization of domestic air operations in Colombia. |
- | Neutralization of land operations in all spanish speaking countries through the purchase of carbon credits for an emblematic project in the Amazon. |
- | Incorporation of 100% electric power from renewable sources in the maintenance base facilities and the corporate building of operations in Chile. |
- | Implementation of the Recycle Your Trip program, which seeks to manage the waste generated on board domestic flights in Chile. This program aims to incorporate a hub every 6 months. |
It is highlighted that in 2019, LATAM Airlines Group maintained its inclusion for the sixth consecutive year in the world category of the Dow Jones Sustainability Index, with only 3 airlines in the world belonging to this select group.
NOTE 37 - EVENTS SUBSEQUENT TO THE DATE OF THE FINANCIAL STATEMENTS
Subsequent to the closing date of the financial statements as of December 31, 2019, there has been a significant variation in the exchange rate (Central Bank of Brazil) R $ / US $, from R $ 4.03 to US$ to R $ 4.49 per US$ to March 03, 2020, which represents a depreciation of 11.51% of the Brazilian currency.
After December 31, 2019 and until the date of issuance of these financial statements, there is no knowledge of other events of a financial or other nature, which significantly affect the balances or interpretation thereof.
The consolidated financial statements of LATAM Airlines Group S.A. and Subsidiaries as of December 31, 2019, have been approved in the Extraordinary Board Session of March 3, 2020.
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