Earlier this week, LAN Airlines S.A. (LFL) and its subsidiaries reported its preliminary monthly traffic statistics and punctuality indicators for August. While passenger traffic rose 4.4% year over year, capacity jumped 7.4%. However, its load factor dropped 2.2 points to 76.5%. International passenger traffic accounted for almost 70% of total passenger traffic, with the rest coming from domestic passengers.

Domestic passenger traffic in Chile, Argentina, Peru and Ecuador rose 10.2% and international passenger traffic rose 2.1%. International capacity was mainly driven by a spike in operations to Europe and the South Pacific, which was partially offset by a decrease in certain regional routes.

Cargo traffic fell 4.2% mainly due to the slowdown in import and export markets in Latin America, partially offset by an increase in exports from Peru to the United States, as well as by an increase in operations to and from Europe after addition of two new B777F.

LAN’s near-term outlook is not as bright as it was few months ago primarily due to the international economic crisis. However, we believe Chile will perform reasonably during 2009.

In fact, the Chilean Government has already announced a $4 billion economic stimulus package that represents 2.8% of the country’s GDP. The plan will be funded by the country’s sovereign wealth fund. As the most organized and developed economy in Latin America, Chile is now capable of pursuing a truly anti-cyclical policy.

LAN accounts for more than one half of Chile’s international passenger traffic and nearly three-quarters of its domestic traffic. Moreover, consistent positive results and solid financial and liquidity positions will enable LAN to move ahead with a number of long-term initiatives.

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