SAO PAULO, May 5 (Reuters) - LATAM Airlines slashed its 2026 core earnings forecast on Tuesday, as higher jet fuel prices driven by the conflict in the Middle East significantly increased costs despite mitigation measures.
The Chile-based carrier cut its full-year adjusted earnings before interest, taxes, depreciation and amortization (EBITDA) outlook to a range of $3.8 billion to $4.2 billion, from a previous forecast of $4.2 billion to $4.6 billion.
Global airlines are contending with surging fuel
prices since the U.S.-Israeli strikes on Iran disrupted traffic through the Strait of Hormuz, in the air travel industry's worst crisis since the COVID-19 pandemic.
LATAM estimated a $40 million hit to first-quarter results, saying the burden was softened by hedging and pricing lags, but warned of additional fuel expenses of more than $700 million in the second quarter, assuming an average jet fuel price of $170 per barrel.
Despite the fuel shock, LATAM said it still expects a mid-to-low single-digit adjusted operating margin in the second quarter, as revenue measures, targeted capacity adjustments and additional cost controls help it offset the impact.
"LATAM's strong balance sheet and liquidity position provide the flexibility to absorb fuel price volatility, continue investing in the business, and manage uncertainty while maintaining operational and financial discipline," it said.
The carrier's new financial outlook assumes jet fuel prices of $170 per barrel in the second and third quarters and $150 in the fourth, compared with a prior full-year assumption of $90 per barrel.
LATAM raised its forecast for cost per available seat kilometer this year to a range between 4.50 and 4.70 cents, from 4.30 to 4.50 cents previously.
For the first quarter, Latin America's largest carrier reported net income of $576 million, up 62.1% year-on-year, on revenue that rose 21.7% to $4.15 billion.
(Reporting by Gabriel Araujo; Additional reporting by Iñigo Alexander; Editing by Sarah Morland)
