Chile’s LATAM Airlines Group narrowed its net loss to $63 million in the second-quarter, as rising passenger revenues were offset by the ongoing financial crisis in Argentina.

The loss was significantly smaller than the Santiago-based group’s $208 million net loss in 2Q 2018, when it was buffeted by currency woes and a drivers strike in Brazil.

Revenue for the quarter was $2.37 billion, up 0.5% from $2.36 billion in the year-ago quarter, driven by a 3.2% increase in passenger revenues. Cargo revenue was 10.2% lower, harmed by currency devaluations and global weakness in trade.

The Avianca Brasil bankruptcy and fleet reduction has left LATAM as one of only three major airlines competing for domestic flights in Brazil. LATAM has capitalized, growing 2Q Brazil revenue nearly 20% to $878 million year-over-year on a 1.3% bump in capacity. Unit revenue, measured in RASK, rose 29% for domestic operations in the country.

While trends in Brazil continue to improve, Argentina remains a headache for the group. Revenues in Argentina fell by almost half to $135 million in 2Q from $260 million a year ago.

LATAM commercial SVP Roberto Alvo Milosawlewitsch said on an Aug. 14 earnings call the company had limited its exposure in Argentina, which he said would offer a degree of protection amid the fallout from the Argentine Peso’s sharp slide recently. Milosawlewitsch speculated that the weakened currency could eventually serve as a boon for inbound tourism to the country once the dust from recent moves settles.

In May, Chile’s Supreme Court ruled against implementing the proposed joint venture (JV) between LATAM, American Airlines and International Airlines Group (IAG), the holding company of British Airways and Iberia. Milosawlewitsch said LATAM is working with American and IAG to figure out how to rework the planned JV without the Chilean component to try once more to gain approval from the Chilean authorities. 

Systemwide capacity, measured in ASKs, grew 5.8% in 2Q, driven higher by LATAM’s SSC domestic operations, which include Argentina, Colombia, Ecuador and Peru. Domestic SSC countries saw a consolidated capacity increase of 16.4% year-over-year, mainly in Chile and Peru, while traffic rose 15.2%.

LATAM is keeping its capacity-growth guidance at 3-5% for the full year. That equates to a target of 0-2% for international operations, 5%-7% in domestic Brazil and 8%-10% for domestic SCC countries. Full-year cargo capacity is expected to grow between 0-2%. 

Ben Goldstein,