LATAM capacity growth tracks lower end of guidance as fuel costs stay high

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LATAM capacity growth outlook

Highlights

LATAM Airlines expects 2026 capacity growth at the lower end of the 9%-10% guidance due to persistently high jet fuel prices.
A $10-per-barrel rise in jet fuel prices impacts LATAM's annual costs by about $370 million, with 2023 guidance including $1.7 billion extra fuel costs.
LATAM pursues a premium traffic strategy and considers expansion to Guadalajara and Monterrey, contingent on Airbus A321XLR deliveries from next year.

Fuel costs reshape 2026 capacity plans

As reported by Reuters, LATAM Airlines says its 2026 capacity growth is now trending toward the lower end of its previously announced guidance after the carrier cut some planned flying because of high jet fuel prices.

The airline said in August that it expected capacity growth of 9% to 10% year over year and adjusted core earnings of $4.1 billion to $4.4 billion. Chief Executive Roberto Alvo said the company remains within that range, but closer to the bottom end as fuel prices stay above earlier assumptions.

Alvo said LATAM consumes about 36 million to 38 million barrels of jet fuel a year, meaning a $10-per-barrel change in prices has an annual cost effect of roughly $370 million. He added that the assumptions behind the company's earlier guidance already included about $1.7 billion in additional fuel costs for the year, and that the impact has since increased somewhat as fourth-quarter prices remain elevated.

Premium strategy and Mexico expansion options

LATAM says its business model remains resilient because of strict cost controls and stronger premium revenue, even though the group has not been able to pass all higher fuel costs on to passengers. Alvo said the focus on higher-yield premium traffic is a long-term strategy supported by investments in cabins, lounges, onboard service, connectivity and the broader customer experience.

The airline is also studying service to additional Mexican cities, including business centers Guadalajara and Monterrey, although any new routes would depend partly on aircraft availability. Alvo said those opportunities could become more viable when LATAM begins receiving Airbus A321XLR jets from next year.

In our earlier report on the conflict-driven surge in oil shipping costs, we explained how war-related risks and rerouting around key chokepoints sharply lifted tanker rates and made freight a much larger component of crude prices. We also noted that higher transport and insurance costs can filter through to consumer fuel prices and broader inflation, with import-dependent markets facing the most immediate pressure.

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