Bloomberg News

Lan Quarterly Profit Drops 11% as Oil Prices Trim Margins

October 26, 2011

Oct. 25 (Bloomberg) -- Lan Airlines SA, Latin America’s largest carrier by market value, said third-quarter profit fell 11 percent as higher oil prices and costs to begin operations in Colombia offset growth in passenger and cargo demand.

Net income dropped to $94.5 million from a year earlier, Lan said in a statement posted on the website of Chile’s securities regulator. That compares with an average estimate of $90.7 million from three analysts surveyed by Bloomberg.

“Higher fuel prices led to a rise in costs of $134 million,” Lan said in the statement. The Santiago-based company also posted a $10 million extraordinary charge for costs to introduce its brand in Colombia. The recent depreciation of the Chilean peso and Colombian peso against the U.S. dollar also affected earnings, the statement said.

Sales rose 30 percent to $1.49 billion as passenger revenue jumped 33 percent and cargo revenue increased 23 percent, reflecting “strong” regional demand.

The company said in a BusinessWire statement that it was able to temper a 43 percent increase in fuel prices in the quarter through surcharges and strong demand.

Lan plans to complete its takeover of Tam SA, Brazil’s largest airline, in the first quarter of 2012.

Lan’s shares fell 1.7 percent to 11,670 pesos today in Santiago trading.

--Editors: Niamh Ring, Stephen West

To contact the reporter on this story: Eduardo Thomson in Santiago at ethomson1@bloomberg.net

To contact the editor responsible for this story: Ed Dufner at edufner@bloomberg.net


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