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LATAM Airlines Group S.A. (NYSE:LTM)
Q3 2019 Earnings Call
Nov 13, 2019, 8:00 a.m. ET

Contents:

  • Prepared Remarks
  • Questions and Answers
  • Call Participants

Prepared Remarks:

Operator

Good day, everyone, and welcome to LATAM Airlines Group Earnings Release Conference Call. Just as a reminder, this conference is being recorded. LATAM Airlines Group earnings release for the period was distributed on Tuesday, November 12th. If you have not received it, you can find in our website, www.latamairlinesgroup.net, in the Investor Relations section.

At this time, I would like to point out that the statements regarding the Company's business outlook and anticipated financial and operating results constitute forward-looking comments. These expectations are highly dependent on the economy, the airline industry and international markets. Therefore, they are subject to change.

Now, it's my pleasure to call -- to turn the call over to Mr. Ramiro Alfonsin, Chief Financial Officer of LATAM Airlines Group. Mr. Alfonsin, please begin.

Ramiro Alfonsin -- Chief Financial Officer

Thank you, Victor. Good morning, everyone, and welcome to LATAM Airlines Third Quarter Earnings Call. Joining me today are Mr. Roberto Alvo, Chief Commercial Officer; Mr. Jerome Cadier, CEO of LATAM Airlines, Brazil; and Mr. Andres Del Valle, VP of Corporate Finance.

Please join me on slide 2 where you will find the highlights for the third quarter of 2019. We had an eventful third quarter this year. During this period, we announced a strategic agreement with Delta that involves not only a joint business agreement to be presented to the authorities but also has a broader scope that involves commercial and operational collaborations, and a tender offer in which Delta intends to acquire up to 20% of LATAM's share.

In addition, we announced that Mr. Enrique Cueto, our CEO for the past 25 years, will leave his position and will be replaced by Mr. Roberto Alvo starting in March next year. Roberto has an extensive knowledge of the Company and the airline industry. He has been part of LATAM for the past 18 years in different roles including finance, fleet and planning, and past years as our Chief Commercial Officer.

Finally, we unified our loyalty program under the LATAM Pass brand, concluding the integration process that started one year ago with the announcement of the tender offer of Multiplus. The Integration was a good [Phonetic] -- executed according to plan and we are very happy with this investment, as we are already seeing the results of having a more flexible and competitive loyalty program. Today, LATAM has a single frequent flyer program, which has over 38 million members and is the fourth largest frequent flyer program in the world.

Now moving to our results of the third quarter, LATAM Airlines carried more than 19 million passengers in the quarter, 1.4 million more than the third quarter of 2019 -- 2018, driven exclusively by domestic operations both in Brazil and the Spanish-speaking markets.

Our consolidated passenger RASK rose by 9.1% year-over-year, measured in US dollars. This improvement reflects a proactive capacity management across our international markets and a healthy domestic demand. Capacity adjustments in our international markets are bearing results, especially to the US.

In our domestic Brazilian market, we continued to see a strong RASK expansion in local currency and in US dollars while capacity increased by 10%. Regarding the Spanish-speaking domestic markets, we have a capacity increase of 10% in ASKs without affecting our RASK in local currency. On the other hand, our cost per ASK rose by 3.6% year-over-year. Our cost per ASK excluding fuel, however, increased by 8.2% due to the accounting non-cash effect of hyperinflation in Argentina.

If you remember, in our third quarter results of last year, we recognized $93 million lower cost in the third quarter of 2018 while in the third quarter of 2019 hyperinflation generated $38 million lower cost. Excluding this accounting effect, our cost per ASK rose by 1.1% year-over-year. As a result, our operating income amounted to $269 million, representing an operating margin of 10.1%, which is 1.2 percentage [Phonetic] points over the operating margin of the third quarter last year.

In respect of our balance sheet, our leverage ratio decreased to 4.2 times by the end of the quarter, down from 4.5 times at the end of the second quarter 2019. And yesterday, we announced that we will exercise the Make-Whole option for the outstanding amount of the LATAM 2020 unsecured bond.

The focus we have placed in our passenger remains unchanged. We were the most punctual airline in the world in every single month of the third quarter, according to Flightstats. Furthermore, we continue working to provide the best experience to our passengers and our planes with new cabins are already providing a significant improvement in customer satisfaction. I want to thank all of our passengers for their preference and continued support.

We have been recognized for the sixth consecutive year in the world category of the Dow Jones Sustainability Index, thus placing us in the 10% with the best performance in sustainability of all industries and representing one of the only three airline groups in this category globally and the only one in the Americas.

To conclude, I want to thank our employees for their efforts during this year. Together, we have adapted to a complex first part of the year and demonstrated the resilience of the Company in a difficult year. I want to thank in particular our employees in Chile that -- the recent events in the country, recovered our operations in only 3 days.

With that, I would like to turn the call to Andres Del Valle, our Vice President of Corporate Finance, to see the quarter in more detail.

Andres del Valle -- SVP, Corporate Finance and Investor Relations

Thank you, Ramiro, and good morning everyone. Please turn to slide 3, and here you will see a summary of the income statement. Total revenues of the Company reached $2.7 billion in the third quarter, representing an increase of almost 7% year-over-year. We carried more than 1.4 million additional passengers while capacity grew 1.8% in the quarter.

Revenues per ASK grew by 9.1% in dollar terms as a result of healthy domestic market and capacity adjustments in our international network. As a result, total passenger revenues rose 11.1%. Cargo revenues decreased by 9.8% year-over-year, in line with the previous quarter, due to the sale of a former subsidiary in Mexico, MasAir, and lower imports into the region, especially coming into Argentina and Brazil. Other revenues decreased 31% to $73 million, explained by the merger of Multiplus with LATAM Airlines in Brazil. Multiplus' revenues are now recognized under passenger revenues, same as revenues of our loyalty program LATAM Pass.

Total cost increased by 5.5% in the quarter to $2.4 billion. Excluding the hyperinflation effect, our cost would have risen by 3%. As a result, our operating income for the quarter amounted to $269 million. This is 22% higher than last year's operating results while operating margin improved by 1.2 percentage points to 10.1%.

Non-operating results amounted to $240 million [Phonetic] loss in the third quarter compared to $209 million loss in the third quarter of 2018. This is mainly explained by a $875 million foreign exchange loss in the quarter while the third quarter of 2018 we had a $92 million foreign exchange loss. With that, net income amounted to $86 million in the third quarter, an improvement of $51 million versus last year.

If you look at year-to-date figures on the right-hand side of the slide, despite a difficult first semester revenues remained flat at $7.6 million while costs grew by 2% due to an increase of 4.4% in capacity, resulting in the decline of 2.4% in cost per ASK and a decline of 2.3% in cost per ASK excluding fuel. With that, operating income for the 9 months ending September was $391 million, operating margin was 5.2% while net income amounted to $837 million [Phonetic] loss.

Please turn to slide 4. Looking at each of our business units, you can see that the international operations showed improvements year-over-year and versus the first half of this year due to the active capacity management of the Company. International segment represented approximately 54% of the total ASKs during this quarter, down from 57% in the previous quarter, as a result of the 4% decrease in capacity during the third quarter.

Traffic declined by 1.8% and load factor rose 2 percentage points to a very healthy 85.2%. The increase in load factor was driven by operation to the US as LATAM quickly adjusted its capacity match with current demand environment due to the currency devaluations across South America. As a result, revenues per ASKs were at $0.06, which is 0.5% higher than the same quarter of last year and compares with a 15% decline and a 12% decline in the first and second quarter respectively.

For domestic Brazil operations, which represents 28% of the total ASKs, total capacity increased by 9.8% and traffic by 10.4%. Load factor reached 82%. This is 0.5 percentage points above the third quarter of the last year. LATAM minus Brazil leased 14 aircrafts previously operated by Avianca Brazil at the beginning of the year, thus accelerating its growth compared with the first half of the year, mainly by operating the slots after the exit of Avianca Brazil. In addition, the continued recovery of Brazil on domestic demand drove revenues per ASK growth of 24.3% in local currency and 23% growth in US dollar terms, reaching $0.074 in the quarter.

For the Spanish-speaking countries' domestic operations, which altogether represent 18% of our total passenger capacity, capacity rose 95%, especially in Chile, Peru and Colombia. Traffic grew 9.3%, maintaining the load factor at 81%. Revenues per ASK declined by 9.5% during the quarter, mainly due to the devaluation of local currencies.

Excluding foreign exchange effects, revenues per ASKs would have been relatively stable in the Spanish-speaking countries' domestic operations. As a result, overall passenger capacity grew by 1.8% year-over-year this quarter, revenues per ASK rose 9.1% year-over-year and load factor rose by 1 percentage points reaching 83.6%.

Lastly, if we exclude the effect of our former Mexican subsidiary, MasAir, our cargo operations increased capacity by 0.1% while traffic rose 0.8%. We saw an increase of 0.47 percentage points in load factor to 53.6%. Revenues per ATK declined by 6.2% in the third quarter, mainly due to lower imports into the region, especially looking into Brazil and Argentina.

Please turn to slide number 5. Once again, we wanted to show you this slide where you can track -- maintain this by point of sale of our passenger and cargo revenues in the past 12 months. On the left side, you can see the revenues by point of sale in the third quarter of 2018. Here, Brazil represented approximately 35% of the total revenues while Argentina represented 9% of the revenues.

If we move to the graph on the right, that reflects revenues by country in the same period of 2019. We can see a 7-points increase for Brazil while Argentina declined almost to half of what it was one year ago, accounting for only 5%. This diversification allows us to adjust our operations and to offset the impacts that we may face in certain markets.

Please turn now to slide number 6. At the top of the slide, you can see that LATAM today continues to expand its operations and transport more passengers. We carried more than 19 million passengers in the second quarter and reduced the number of [Indecipherable] compared to last year. Fuel cost decreased by 4% due to decline of 11% [Phonetic] in the fuel price per gallon, offset by a 4% increase in fuel consumption and 9 million hedge loss in the third quarter, while last year [Indecipherable] again of $19 million.

Cost associated with wages and benefits increased by 11% in the third quarter as compared to the third quarter 2018, as in the last year we reversed the provision of the performance bonus. If we exclude this one-time effect, wages and benefits would have remained flat year-over-year. Average headcount for the quarter declined by 1.1% and offset cost increases from the INSS payroll taxes in Brazil. Once we look at the fleet cost, which includes maintenance, depreciation and amortization expenses, those were up 12% year-over-year in the quarter, mainly due to the reduction in expected life of the engines and to 13 additional aircraft in our fleet compared to third quarter of 2018.

Lastly, the other costs on this slide increased 8%, as we carried 7.6% more passengers and due to the hyper-placement effect in Argentina. Finally, cost per ASK increased by 3.6% to $0.063, while cost per ASK ex-fuel increased by 8.2% year-over-year to $0.044.

Please turn to slide 7 for few words regarding our strategic agreement with Delta. We are excited with the opportunity that this agreement brings to LATAM's stakeholders. Our customers will benefit from expanded travel choices and enhanced customer experience. LATAM will benefit from new growth opportunities, building upon stealth test and LATAM's global footprint and their complementary networks, while for our shareholders the transaction will improve free cash flow generation, reduce forecasted debt by over $2 billion by the year 2025, improve LATAM's capital structure and provide funding for transition costs in connection to this agreement. Our employees will benefit from being part of a Company that has strong growth opportunities and is aligning with one of the premier carriers in the world.

On the tender offer, Delta already submitted the HSR notification with the US authorities and awaits the response before launch of the tender offer. On the haircut part of the agreement, there is nothing different since the last call. We will sell 4 of our 350s -- Airbus 350s to Delta, 2 at the end of the year 2020 and 2 at the beginning of 2021, and we'll assign the fleet commitments of 10 Airbus 350s, which will reduce our deliveries for the period 2021 through 2025.

We are currently working to execute the transition as swiftly [Phonetic] as possible for our passengers, getting ready with our commercial agreement with Delta that that will replace the existing cultures agreement with American Airlines. Lastly, regarding the transition cost, we received $150 million of the $350 million committed. We will be recognizing this cost as we move forward with the implementation of this agreement.

Please turn to slide number 8. Regarding our financial metrics shown on slide number 8, gross debt declined by $231 million from the previous quarter, down to $7.5 billion. Thus, our leverage was down to 4.2 times in September compared with the 4.5 times in June.

We continue having a very good liquidity position, with $1.4 billion of cash on hand plus a revolving credit facility of $600 million in the third quarter. With this, LATAM's liquidity position reached over 19% of the last 12 months revenues, same as in the last quarter.

During the quarter, we further adjusted our debt profile by reopening the LATAM 2026 bonds, adding an additional 200 million [Phonetic]at a rate below 6% and prepaying $238 million of our LATAM 2020 bond with a coupon of 7.25%. As announced yesterday, the remaining $262 million of that same bond, the LATAM 2020, will be prepared in the next few days once we exercise the Make-Whole option reducing our maturities for 2020 for around $1 billion.

Moving on to hedges at the bottom left on the same slide, you can find our updated fuel hedge position as of to-date. For the third quarter of 2019, we had approximately 60% of fuel consumption. For the fourth quarter of this year, we have about 53% of the estimated consumption hedge while for next year we have a good portion hedged for the first half and we are building a position [Phonetic] for the second half of 2020.

Please turn to slide number 9. Finally, regarding the guidance, we -- and based on the visibility that we have for the fourth quarter of 2019, we have now done our guidance for 2019 to the lower end of the range originally provided. Operating margin guidance was in range of 7% to 9% and we expect to close the year with an operating margin of approximately 7%.

Regarding capacity, this remains unchanged compared to the previous guidance -- quarter. We expect total capacity to grow between 3% to 5% this year. This is composed by zero to 2% target for our international segments, 5% to 7% growth for domestic Brazil and 8% to 10% for domestic Spanish-speaking countries' operations. And for cargo, we expect the cargo capacity to grow between zero to 2% this year.

Even though the first half of the year was undoubtedly very challenging, our resilience and active capacity management have allowed us to adapt and report strong results this quarter. With that, we conclude our presentation for today and we'd be happy to open the line for questions. Thank you very much.

Questions and Answers:

Operator

[Operator Instructions]. And our first question will come from the line of Mike Linenberg from Deutsche Bank. You may begin.

Michael Linenberg -- Deutsche Bank -- Analyst

Yeah, hey, good morning everybody, a couple of questions here. What was -- what drove the decision to sell MAS Cargo? And were there any airplanes that went with that divestiture of that company?

Roberto Alvo -- Senior Commercial VP

Hi, Mike, this is Roberto. Yeah. We sold MasAir late last year. We basically did it because it has very little synergy with our passenger operation. And remember that our cargo strategy is to support our belly. MasAir has 1,767 [Phonetic] sub-leased to the Company and that aircraft is still sub-leased to MasAir and they fly now whatever they decide. But it was relatively small for our cargo operations and [Technical Issues] related to our network.

Michael Linenberg -- Deutsche Bank -- Analyst

Okay, so then it is just -- it's just the year-over-year impact. Okay. Then just a second question, the recent announcement by IAG to buy Air Europa, that company I believe does compete head-to-head with you, other companies as well. Does that potentially change the relationship that you currently have with IAG or how are you thinking about it, just your thoughts on that? Thank you.

Roberto Alvo -- Senior Commercial VP

No, it is not our expectation that it will change and we are analyzing the situation as we speak. So, we'll provide more information when we have it.

Michael Linenberg -- Deutsche Bank -- Analyst

Okay, fair enough. Okay, thanks everybody.

Operator

And our next question will come from the line of Savi Syth from Raymond James. You may begin.

Savanthi Syth -- Raymond James -- Analyst

Hey, good morning everybody. Just a question on Brazil; now that you are seeing -- in fourth quarter I think a lot of the players have kind of backfilled Avianca Brazil's capacity and then kind of new networks are kind of set, what's your kind of view of trends there? Is it still kind of strong and is kind of the underlying demand strong? And directionally, how should we think about RASK in that region?

Roberto Alvo -- Senior Commercial VP

Hi, Savi, this is Roberto again. Yes, we are confident and optimistic for what remains of the year. We see the demand in domestic Brazil still being strong and we expect healthy figures for the fourth quarter in domestic Brazil.

Savanthi Syth -- Raymond James -- Analyst

Okay, perfect. And then if I might, on the cost side, I think last time you were thinking unit costs roughly flat, that would -- you kind of require 4Q costs to be up more than if the adjusted cost I think [Indecipherable] without the accounting change and the -- kind of the add-back last year or the takeaway last year of the -- and some of the bonuses kind of comes in roughly up 1%. What would cause fourth quarter cost to be up year-over-year or maybe I'm wrong, maybe [Indecipherable] should be better than flat for the year?

Roberto Alvo -- Senior Commercial VP

When we think at -- our commitment was to have CASK ex-fuel flat within the year, that is offsetting inflation and escalation of our costs, and we are maintaining that. We see our cost -- overall when we compare 2018 full-year to 2018 full-year to be within that range and be flattish, including the hyperinflation effect that was mentioned, particularly in this quarter. But we will offset that during the whole year. So all 2019 CASK ex-fuel will be flat compared to 2018.

Savanthi Syth -- Raymond James -- Analyst

Okay, so that's still on. And if I might, just a follow-on to Michael's question on Air Europe. it seems like -- if IAG's kind of proposed acquisition goes through, there'll be a very kind of a strong player in that kind of Europe LATAM market, which I would think would make for a strong partnership for LATAM because they still need LATAM for what you provide, which is kind of the beyond connections and things like that.

Is it -- are you still kind of agnostic and kind of the partnership with Delta doesn't really kind of change the way you view Europe? Is that still the right way to think about it? I know you're looking through it, but just kind of curious if you can share a little bit more of your thinking about how you think about your positioning North-South versus kind of East-West?

Roberto Alvo -- Senior Commercial VP

So I think that the two things are slightly separated, Savi. Our partnership with Delta relates to the US and does not relate to any other region other than that. So we will look at our decisions, whether it's Europe or elsewhere, and also within the region, with the independence of what the Company needs and is best for the Company. So, we're working on that line and that's our point in this particular case.

Yes, indeed, the acquisition -- the potential acquisition of IAG and to -- of Air Europa will create a much larger company into the region and we will go -- and we will talk to them and see how this proceeds in the upcoming weeks and months. We'll keep you updated.

Savanthi Syth -- Raymond James -- Analyst

Right, thank you.

Operator

Thank you. [Operator Instructions]. Our next question comes from the line of Alberto Valerio from UBS. You may begin.

Alberto Valerio -- UBS -- Analyst

Hi, good morning. Thanks for taking my question. I'd like to know if you could provide additional color about the guidance that you've taken [Phonetic] on the bottom now. We see strongly pre-quarter results as well better international markets, and I'd like to know why you keep that on the bottom. Thank you very much.

Andres del Valle -- SVP, Corporate Finance and Investor Relations

Yes, thank you Alberto. I think we have been mentioning since the first quarter, we had a very tough first quarter improving slightly on the second quarter and these are very solid results for the third quarter. But we have been mentioning in the past calls that we will be on the shorter side of the guidance, particularly due to effect of the Argentinean reduction in terms of demand in the first quarter. That affected our international operations.

And therefore, you saw our capacity adjustments during the end of the first quarter and beginning of the second quarter. And -- but that has an effect that we won't be able to recover and that's why when we're providing guidance between 7% and 9% we started saying we're going to be on the shorter end of that guidance. And now we're being more concrete, we're almost at the end of the year and we think we're going to be on this approx 7% due to the international impact.

Alberto Valerio -- UBS -- Analyst

Perfect. And [Technical Issues] of the MAX for next year, especially in Brazil?

Andres del Valle -- SVP, Corporate Finance and Investor Relations

Grounding of the MAX, I think that you've mentioned. The question -- we are following the news on when the MAX will be flying. So, we have no personal or Company opinion other than what we see in the news. What we understand at this point in time it that it will potentially fly during the first quarter and we're just following the news. We have no MAXes committed to the Company. We don't operate it. So, no issue for us.

Alberto Valerio -- UBS -- Analyst

But they supply in Brazil, you think that it would be OK or if you can oversupply for next year when Max returns.

Andres del Valle -- SVP, Corporate Finance and Investor Relations

We don't comment on the capacity of competitors, Alberto, and we will provide guidance on our growth for 2020, as we always do later in the year beginning of 2020.

Alberto Valerio -- UBS -- Analyst

Perfect. Thank you very much.

Operator

Thank you. And our next question will come from the line of Pablo Monsivais from Barclays. You may begin.

Pablo Monsivais -- Barclays -- Analyst

Hi, good morning. I have a quick question. What has been the impact of the social unrest in Chile in your day-to-day operations? And what do you -- and to what extent do you think that this situation may influence your guidance for 2020? Thank you.

Ramiro Alfonsin -- Chief Financial Officer

Hi, Pablo, this is Ramiro. We have announced that the cost of the social unrest in Chile and the impact on future demand we estimate -- we currently are estimating that in $30 million for the fourth quarter. That is included in the guidance that we are providing now, which is approx 7% of EBIT margin. Just to complement, Ramiro, that's the statement which we made at the date of the statement with the information we had. Of course, the situation in Chile is fluid and it may change as the situation evolves here.

Pablo Monsivais -- Barclays -- Analyst

Okay, thank you.

Ramiro Alfonsin -- Chief Financial Officer

Thank you, Pablo.

Operator

And our next question will come from the line of Matthew Wisniewski from Barclays. You may begin.

Matthew Wisniewski -- Barclays -- Analyst

Hi, good morning. So you've spoken a lot about the capacity management on the international front. I was wondering if you could highlight maybe some potential changes that could be made within -- or talk about the process of evaluating -- making changes within Latin America, given there is some kind of -- quite a bit varying pricing outcomes within the Spanish speaking countries in Brazil? Should we assume there's continued capacity adjustments within Latin America or any detail you can provide on that front would be great.

Roberto Alvo -- Senior Commercial VP

So we are very active in looking at the different markets and we move capacity along very quickly. The biggest decrease that we did this year was that we reduced approximately 20% of our international capacity to Argentina. We did that in the second quarter of the year, given the situation in Argentina. And that actually balanced, I would say, the capacity demand situation, at least in our flights.

We look at -- there is very -- a set of segments where we look, so we look regional Spanish-speaking, regional Brazil and of course long-haul divided by Europe and the US and we make changes that are sometimes not related to the IATA seasons [Phonetic] which is -- which [Indecipherable] trying to be more active in terms of managing capacity. At this point in time, we feel comfortable with the capacity we have an international after the adjustments that you saw. Capacity is going down in the third quarter for approximately 4% and we will see this trend continuing in the fourth quarter of the year.

Matthew Wisniewski -- Barclays -- Analyst

Okay. I guess I was just hoping maybe you could comment on within Latin America if there is an ability to switch, given some strong outcomes in Brazil and then some weaker within the Spanish-speaking, just within kind of more of the regional and within the region.

Roberto Alvo -- Senior Commercial VP

Okay, sorry I misunderstood the question. Yes, we do. On the Spanish-speaking side, all the aircraft are same registration and we have interchange that gives us the capacity to move our capacity within Colombia, Ecuador, Peru and Chile relatively freely. And in the case of Brazil, we have -- we don't have interchange yet, but we do move capacity from one factory to another by changing which airline of the Group operates regional routes. So, we have the ability of adjusting without necessarily having to de- register, unregister aircraft in the short-haul.

In the long-haul, we have [Indecipherable] rates between different countries which allows us to operate from different airlines, different routes. Just as an example, at some point in time we flew the Lima-Buenos Aires route with four different operators.

Matthew Wisniewski -- Barclays -- Analyst

Okay, great, that's super helpful. And then, I was just wondering if you -- I was hoping that you can provide a little bit of detail or just high-level thoughts on what we should think about for costs next year, I know the Neo is coming on but some of the fleet growth slows a little bit. What should we keep in mind as we look at -- look for next year in terms of cost?

Andres del Valle -- SVP, Corporate Finance and Investor Relations

Thank you, Matthew. We will be providing guidance toward the end of the year. At this point in time, we're working on the budget. So, we will keep you informed on what we see on cost and what are the targets for next year.

Matthew Wisniewski -- Barclays -- Analyst

Okay, that's fair. Thank you. Thanks so much.

Roberto Alvo -- Senior Commercial VP

Thank you, Mathew.

Operator

Thank you. [Operator Instructions]. Our next question will come from the line of Lucas Barbosa from Morgan Stanley. You may begin.

Lucas Barbosa -- Morgan Stanley -- Analyst

Good morning, Ramiro, Andres, Jose [Phonetic], thanks for taking my question. I just wanted to hear your thoughts on how you're seeing the corporate demand pickup in Brazil and also if you could comment on LATAM's efforts to strengthen its position in the corporate market in Brazil, how much it currently represents of your demand in Brazil and how much it has represented in the past? That's my question. Thank you.

Jerome Cadier -- CEO, LATAM Airlines, Brazil

Thank you, Lucas. This is Jerome, CEO of LATAM Brazil. We have clearly -- did significant moves over the last year or so to attract the corporate passenger more. This has come in the form of the itinerary that we drew and the improvements of the product with the cabin retrofit and the domestic and international fleet.

So, we do expect this to make sure our position is strengthened and continues to strengthen in the corporate segment and we see as a whole when we look at the industry, the corporate demand over the last year with a small growth, corresponding a little bit to what we see in terms of GDP expectations for '19 and '20. So small single-digit growth and LATAM targeting that passenger with the changes, both in fleet, in itinerary, and also Multiplus over the last 3 months.

Lucas Barbosa -- Morgan Stanley -- Analyst

Okay, thanks very much Jerome.

Jerome Cadier -- CEO, LATAM Airlines, Brazil

Thank you.

Operator

[Operator Closing Remarks].

Duration: 35 minutes

Call participants:

Ramiro Alfonsin -- Chief Financial Officer

Andres del Valle -- SVP, Corporate Finance and Investor Relations

Roberto Alvo -- Senior Commercial VP

Jerome Cadier -- CEO, LATAM Airlines, Brazil

Michael Linenberg -- Deutsche Bank -- Analyst

Savanthi Syth -- Raymond James -- Analyst

Alberto Valerio -- UBS -- Analyst

Pablo Monsivais -- Barclays -- Analyst

Matthew Wisniewski -- Barclays -- Analyst

Lucas Barbosa -- Morgan Stanley -- Analyst

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