SANTIAGO, CHILE — LATAM Airlines Group (LA) raised its 2026 earnings outlook and detailed a 42-route first phase for LATAM Airlines Brasil's (JJ) Embraer E195-E2 fleet, linking a more constructive financial forecast with a major change to its domestic Brazilian network.
LATAM now expects adjusted earnings before interest, taxes, depreciation, and amortization (EBITDA) of US$4.1–4.4 billion for 2026, up from the US$3.8–4.2 billion range issued in May. The airline group also restored a broader set of guidance covering capacity, revenue, margins, cash flow, liquidity, and debt.
The updated second-quarter filing with the U.S. Securities and Exchange Commission assumes jet fuel at US$147 per barrel in the third quarter and US$130 in the fourth. LATAM's May forecast had assumed US$170 and US$150, respectively.
That change is central to the upgrade. It does not mean fuel pressure has disappeared; it means LATAM now expects the second-half burden to be smaller than it did three months ago.
Revenue Growth Could Not Offset the Fuel Shock
Second-quarter revenue increased 27.6% to US$4.183 billion as passenger revenue rose 27.9% and cargo revenue grew 21.8%. LATAM expanded passenger capacity by 8.9% while maintaining an 81.8% consolidated load factor.
Profit moved in the opposite direction. Adjusted operating income fell 46.3% to US$227 million, reducing the adjusted operating margin to 5.4% from 12.9% a year earlier. Net income attributable to shareholders declined 48.2% to US$125 million.
The contrast shows how an airline can carry more traffic and collect substantially more revenue while earning less. Higher fuel prices, capacity growth, and currency effects lifted costs faster than revenue, compressing the amount retained from each dollar of sales.
LATAM said passenger revenue benefited from fare actions that passed part of the fuel increase to customers without weakening traffic. Premium cabins supplied 29% of passenger revenue during the quarter, two percentage points more than in the first quarter, while the shorter cargo sales cycle allowed fuel increases to be reflected more quickly in cargo pricing.
For the first half, attributable net income still rose 17.5% to US$701 million because the strong first quarter more than offset the second-quarter decline. That sequencing explains why LATAM can raise its outlook after reporting lower quarterly profit: year-to-date performance remains ahead, and the fuel assumptions for the remaining months have improved.
Updated Guidance Restores the Bigger Picture
LATAM expects total passenger capacity, measured in available seat-kilometres (ASKs), to grow 9–10% in 2026. The group projects 8–9% domestic growth in Brazil, 4–5% in Spanish-speaking domestic markets, and 11–12% on international services.
Full-year revenue is expected to reach US$17.3–17.7 billion. LATAM forecasts an adjusted operating margin of 12–13%, adjusted EBITDA margin of 23–25%, at least US$1.3 billion of adjusted levered free cash flow, liquidity of at least US$4.7 billion, and adjusted net leverage no higher than 1.6 times.
The revised EBITDA range improves on May's emergency outlook but does not fully restore the original December forecast of US$4.2–4.6 billion. The latest range therefore represents a partial recovery in expectations, not a return to the pre-fuel-shock plan.
E195-E2 Opens Four New Brazilian Destinations
LATAM Brasil expects its E195-E2s to operate 42 domestic routes through March 2027. The first phase includes eight new routes and four new destinations: Cabo Frio (CFB), Ji-Paraná (JPR), Rondonópolis (ROO), and Macaé (MEA), each connected with São Paulo/Guarulhos International Airport (GRU).
The filing did not provide the complete schedule, frequencies, launch dates, or identify the four other new routes between cities already in the network.
Beyond opening routes, LATAM plans to use the aircraft to add frequencies and replace larger aircraft where a smaller jet better matches demand. This is network “right-sizing”: assigning enough seats to capture traffic without carrying unnecessary empty capacity, while preserving connectivity through the hub.
The E195-E2 gives LATAM a capacity step below its Airbus A320-family fleet. The smaller aircraft can make thinner routes viable, add frequency without the same increase in seats, or release larger narrowbodies for markets that need them. LATAM said the first deployment will take its Brazilian domestic network to 67 destinations, up from 44 in 2019.
Only 24 Aircraft Are Firm
LATAM and Embraer announced the E195-E2 agreement in September 2025. It covers 24 firm aircraft and 50 purchase options, for a potential total of 74.
The categories must remain separate. The 24 firm aircraft are contracted deliveries and appear in Embraer's backlog. The 50 options give LATAM the right to buy additional jets under agreed terms but are not firm orders unless exercised.
LATAM's latest fleet plan projects 12 E2-family aircraft by the end of 2026 and all 24 firm aircraft by the end of 2027, with the total remaining at 24 in 2028. The table does not assume that any of the 50 options will be exercised within that period.
The group ended June with 383 aircraft and expects 28 more deliveries across its Airbus, Boeing, and Embraer programs during the remainder of 2026. In the second quarter, it received six Airbus A320neos, one A321neo, and two Boeing 787-9s.
What Happens Next
The immediate operational milestones are delivery of the first E195-E2, regulatory and crew readiness, publication of the complete route schedule, and entry into commercial service. The first 12 aircraft will determine how quickly LATAM can build frequency and open all eight planned routes through March.
Financially, the test is whether lower jet-fuel prices develop as LATAM assumes and whether fare, cargo, loyalty, and capacity actions preserve demand. The E195-E2 program supports that effort over a longer horizon by giving the airline more control over how much capacity it places on individual Brazilian routes.
Featured image: Adrian Nowakowski/Airways
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