S&P Upgrades Latam Airlines to 'BB+' on Strong Revenue and Cost Management

S&P Global Ratings has upgraded Latam Airlines Group S.A.'s (NYSE: LTM) issuer credit rating to 'BB+' from 'BB', reflecting the airline's strong performance despite significant market volatility. The ratings agency, in its September 21, 2026, announcement, also assigned a stable outlook to the new rating.

The Rating in Detail

The stable outlook is based on S&P's expectation that Latam's funds from operations (FFO) to debt ratio will remain above 45% through 2028. The agency also affirmed its 'BBB-' issue-level rating on the airline's senior secured notes due in 2030 and 2031, maintaining a '1' recovery rating on the debt.

This upgrade recognizes the company's resilience in the face of major operational headwinds. Notably, Latam successfully navigated an 80% year-over-year surge in all-in fuel prices during the first half of 2026.

Strong Financial Performance

Latam's ability to pass higher costs through to fares was a key factor in the decision. According to the S&P report, the airline's financial results for the second quarter of 2026 demonstrated this strength:

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• Passenger revenue increased by 27.9% year-over-year.
• Passenger revenue per available seat kilometer (a key industry metric) expanded by 17.5%.

Looking ahead, S&P projects that Latam's adjusted EBITDA will reach $4.3 billion in 2026, driven by a 9%-10% growth in available seat kilometers and load factors of approximately 84%. The ratings firm also anticipates positive free operating cash flow of around $1.3 billion in 2026 and $1.9 billion in 2027.

Capital Plans and Outlook

The airline is pursuing a significant fleet expansion, with plans for a net increase of 69 aircraft by 2028. S&P anticipates this will increase gross debt by $3.5 billion to $4.0 billion between 2025 and 2028, but expects the company's credit metrics to remain robust, with adjusted debt-to-EBITDA holding between 1.5x and 1.6x.

Latam has also balanced its growth investments with shareholder returns, recently approving a share repurchase program for up to 5% of its total shares over the next five years. S&P noted it expects the company to maintain a disciplined approach, in line with its financial policy targets of a net leverage ratio below 2.0x and a strong liquidity position.