# BTG Cuts LATAM Target to US$66, Keeps Buy Rating

*Bank sees 38.5% upside for LATAM Airlines despite lower earnings forecasts, citing premium revenue growth, financial strength and competitive advantages*

- Published: 2026-11-09
- Section: Insights
- URL: https://brazilstockguide.com/insights/btg-cuts-latam-target-to-us66-keeps-buy-rating/

![Latam quarterly profit](https://i0.wp.com/brazilstockguide.com/wp-content/uploads/2025/09/g_66_0_1_20122023154657.jpg?fit=1024%2C682&ssl=1)

*Latam Posts $576 Million Quarterly Profit (Image/Latam)*

**By Brazil Stock Guide –** BTG Pactual (B3: BPAC11) lowered its 12-month price target for LATAM Airlines Group (NYSE: LTM) to US$66 from US$74 while maintaining its buy recommendation, according to a research report released on November 8. The Brazilian investment bank sees 38.5% upside from the US$47.67 ADR reference price used in its analysis, despite mounting pressure from fuel costs, currency volatility and weaker earnings expectations.

Including an estimated dividend yield of 1.9%, BTG forecasts a total return of 40.3% for LATAM investors. The airline remains the bank’s preferred investment in the aviation sector, supported by its diversified revenue base, stronger balance sheet and growing exposure to higher-spending passengers.

The report, authored by analysts Lucas Marquiori, Fernanda Recchia and Samuel Alkmim, argues that LATAM is better positioned than regional competitors to withstand an increasingly challenging operating environment.

Higher fuel prices linked to the Middle East conflict, potential depreciation of the Brazilian real and upcoming tax changes are among the principal risks identified by the analysts.

#### BTG Lowers Earnings Forecasts for 2026 and 2027

BTG reduced its adjusted EBITDA forecast for LATAM in 2026 to US$3.97 billion from US$4.36 billion, reflecting a more challenging cost environment.

The bank also revised its 2027 EBITDA estimate to US$4.84 billion from approximately US$5.1 billion.

For 2026, the expected adjusted EBITDA margin declined to 22.4% from 24.5%. The margin is projected to recover to 25.3% in 2027, although that remains below the previous forecast of 26%.

Net income expectations were also adjusted downward. BTG now projects approximately US$1.3 billion in profit for 2026, compared with its previous estimate of US$1.6 billion.

For 2027, expected net income declined to approximately US$1.7 billion from US$1.9 billion.

Revenue projections were more resilient. BTG maintained its 2026 revenue forecast at US$17.7 billion, while reducing its 2027 estimate to US$19.1 billion from US$19.7 billion.

Despite the downward revisions, the bank expects LATAM to deliver revenue growth of approximately 8% in 2027 and a recovery in operating profitability.

#### Fuel Costs Could Exceed 2025 Levels by US$2 Billion

Fuel expenses represent the most immediate challenge for LATAM’s profitability.

According to the report, management expects fuel costs in 2026 to exceed their 2025 levels by more than US$2 billion, including an additional burden of over US$900 million in the fourth quarter alone.

The airline raised its fourth-quarter jet fuel price assumption to US$180 per barrel from US$130, reflecting the deterioration in market conditions.

As a result, LATAM lowered its full-year adjusted EBITDA guidance to a range of US$3.9 billion to US$4.05 billion, compared with its previous forecast of US$4.1 billion to US$4.4 billion.

The company simultaneously increased its revenue guidance to US$17.6 billion-US$17.8 billion from US$17.3 billion-US$17.7 billion.

The combination suggests that stronger passenger revenues and commercial performance will not fully compensate for rising operating expenses.

BTG expects the fourth quarter to be particularly challenging, partly because changes in jet fuel prices take time to flow through LATAM’s Brazilian operations.

The bank nevertheless believes that the company’s cost management, pricing flexibility and diversified business model should provide greater protection than those of several regional competitors.

#### Third-Quarter Results Beat Market Expectations

LATAM’s third-quarter performance exceeded BTG’s estimates, particularly in operating profitability.

Adjusted EBITDA reached approximately US$1.1 billion, representing a margin of 24%, or 2.2 percentage points above the bank’s forecast.

The performance was supported by higher passenger yields, resilient travel demand and disciplined cost management.

Unit costs excluding fuel increased approximately 3% year over year, a relatively contained increase given the industry’s operating pressures.

The airline also benefited from higher revenue per available seat kilometer and a more favorable passenger mix.

BTG considers these results evidence that LATAM can protect profitability even when fuel expenses rise sharply.

However, the analysts expect the company’s fourth-quarter performance to weaken as higher fuel prices weigh more heavily on margins.

#### Premium Passengers Become a Key Profitability Driver

LATAM’s shift toward premium travel services remains central to BTG’s investment thesis.

Premium-related revenue accounted for approximately 29% of passenger revenue in the second quarter of 2026, compared with 14% in 2019.

The category includes business-class cabins, upgraded seating, ancillary services, corporate travel and other products targeting customers willing to pay more for convenience and flexibility.

BTG believes these customers typically spend more, travel more frequently and demonstrate lower price sensitivity than conventional economy passengers.

That provides an important source of revenue stability during periods of economic uncertainty or rising ticket prices.

The LATAM Pass loyalty program also supports this strategy.

Membership exceeded 57 million in the third quarter of 2026, including approximately 2.8 million Elite members.

BTG estimates that converting just 1% of non-Elite members into Elite customers could generate approximately US$250 million in additional annual EBITDA.

That would represent an increase of roughly 5% relative to the bank’s 2027 EBITDA forecast.

The calculation is a scenario analysis rather than a company earnings target. It assumes higher annual spending and profitability among Elite customers.

The potential increase excludes additional revenue opportunities from cabin upgrades, premium seating and ancillary products.

#### Brazilian Real Depreciation Creates Additional Risks

Currency movements are another significant factor influencing LATAM’s financial outlook.

Approximately 62% of the airline’s revenues are generated in hard currencies, while the remaining 38% come from local currencies, with the Brazilian real representing the largest exposure.

About 70% of operating costs are denominated in hard currencies.

As a result, depreciation of the real can reduce passenger revenue and yields when translated into US$, although the company benefits from a partial offset through expenses incurred in local currencies.

BTG’s sensitivity analysis indicates that an exchange rate of R$5.50 per US$1 would reduce estimated 2027 EBITDA by approximately 5.6% relative to a R$5.00 baseline.

At R$6.00 per US$1, the estimated negative impact rises to 10.3%.

The bank notes that LATAM has no debt denominated in Brazilian reais, reducing direct balance-sheet exposure to the currency.

Management also reported that passenger demand and ticket sales in Brazil remained stable in local-currency terms in the days following the country’s October elections.

LATAM’s geographically diversified operations and ability to adjust ticket prices and flight capacity should help mitigate potential currency pressures, according to BTG.

#### Brazil Remains Central to LATAM’s Expansion

Brazil continues to play a central role in LATAM’s operating strategy.

The airline has reached approximately 41% domestic market share and around 45% of corporate travel demand, according to figures cited in the report.

Brazil accounts for roughly 53% of the group’s available seat kilometers, an industry metric measuring passenger capacity.

LATAM has increased its Brazilian capacity by approximately 39% compared with 2019, supported by stronger corporate demand and regional network expansion.

The company is also incorporating aircraft manufactured by Embraer (NYSE: EMBJ; B3: EMBJ3) into its fleet.

Its plan calls for 24 Embraer E2 aircraft to enter service across 2026 and 2027, with 12 scheduled for each year.

The aircraft are expected to support regional connectivity and allow LATAM to serve routes where larger aircraft would be less economically efficient.

Destinations associated with the expansion include Cabo Frio, Ji-Paraná, Rondonópolis and Macaé.

Management has also identified opportunities to strengthen domestic connectivity without relying exclusively on major aviation hubs.

LATAM has additionally acquired three Boeing (NYSE: BA) 787 aircraft for delivery in 2027.

The airline expects to end 2026 with 409 aircraft and reach 426 by the end of 2027, after incorporating new deliveries and retiring older models.

#### Stronger Balance Sheet Supports Investment Case

BTG identifies LATAM’s financial position as another major advantage over regional competitors.

The airline received rating upgrades from S&P and Fitch, with its issuer ratings reaching BB, one notch below investment grade.

Its bonds also received BBB- ratings from both agencies.

The improvements reflect the company’s strengthened financial profile and capacity to generate operating cash flow.

LATAM generated close to US$900 million in operating cash flow during the third quarter, according to figures highlighted in the research report.

The company is also working to reduce financing expenses, with its weighted-average debt cost currently estimated at approximately 6.4%.

BTG expects net leverage to decline from approximately 1.6 times adjusted EBITDA in 2026 to 1.1 times in 2027.

The bank also highlights LATAM’s flexibility in adjusting capacity during periods of weaker demand.

Rather than eliminating entire routes, the airline can reduce flight frequencies across its extensive network, limiting the operational impact of temporary demand changes.

Management has indicated that fleet expansion and capacity growth in 2027 will depend on profitability and fuel price trends.

#### LATAM Remains BTG’s Top Airline Pick

BTG maintains its positive investment outlook despite reducing its valuation assumptions and near-term earnings estimates.

The bank values LATAM at approximately four times projected 2027 enterprise value to EBITDA, a multiple it considers attractive relative to the company’s earnings capacity and competitive position.

The revised US$66 price target is based on an assumed exit valuation of five times EV/EBITDA.

The analysts also expect industry-wide aircraft availability constraints to limit capacity expansion, potentially supporting ticket prices into 2027.

Although prolonged fuel inflation could create further difficulties for airlines with weaker financial positions, BTG believes LATAM’s premium revenue strategy, network scale and balance-sheet strength offer relative advantages.

The bank continues to regard the airline as its preferred investment within its aviation coverage, while identifying fuel prices, currency depreciation and the pace of demand growth as the main variables affecting its earnings forecasts.

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Source: Brazil Stock Guide, https://brazilstockguide.com/insights/btg-cuts-latam-target-to-us66-keeps-buy-rating/