Good morning, everyone, and thanks for joining us on our third quarter earnings call today. With me here in the room is Andrés Osorio, who's the CFO of LATAM Airlines Group; Andres del Valle, Corporate Finance Director; Roberto Alvo, who's in charge of the International Passenger Operations; and Álvaro Carril from the Cargo Operations.

And also joining us from Brazil is Cláudia Sender, who's the President of TAM. We wanted to start today as usual by going through some slides with the main highlights of our third quarter earnings results.

And then, we will have time for Q&A at the end. If you -- when we look at our third quarter numbers, the main highlight is the strong improvement in our operational results during the quarter.

As you saw, our EBIT margin for the quarter reached 4.8%, and this was driven mainly by a very strong performance on the cost side. Our cost per ASK equivalent for the quarter, excluding fuel, decreased by 14% when compared to the third quarter of 2014.

Also, very relevant to mention is regarding the domestic Brazil operations. We continue to make capacity adjustments to a -- to our networks, both in the domestic and international routes in Brazil.

Regarding the domestic routes specifically, our revenue per ASK in Brazil improved by 11% on a quarter-over-quarter basis when we look at it in Brazilian reals and by 6% in reals as compared to the third quarter of 2014. This is very relevant and it's driven mainly by a -- this reduction in capacity, which we implemented in the domestic market in the third quarter, which reached a reduction of 0.5% of ASKs when compared to the third quarter of 2014.

Another very important adjust -- announcement for the quarter has to do with the revision of our fleet. And we mentioned in our release, we are reviewing currently all of our fleet CapEx for the next 3 years that is the period between 2016 and 2018, with the objective of reducing these -- the commitments by approximately 40%.

So that would result in a $3 billion reduction in our fleet CapEx over this 3-year period. Of this, we have already achieved a reduction of $1.8 billion as compared to the fleet plan that we had at the beginning of this year.

This revision is in response to the weaker demand environment that we're seeing in the region and especially in the Brazilian market, and also it has to do with our focus on maintaining a solid balance sheet and adequate liquidity levels for the coming years. If you look at our balance sheet for the quarter, we closed September with a leverage of 5.2x, which is very much in line with what we had at the close of June; and with a cash balance of $1.5 billion, which is a little bit over 14% of our last 12 months revenue.

All of this was done in a macroeconomic environment that continues to be very weak. And we see weakened demand trends, especially in the Brazilian market, in line with what we've already been discussing for the past couple of quarters.

And we continue to see strong devaluations in the Latin American currency. If we look at the Brazilian currency, we had a devaluation of over 55% in the third quarter compared to the third quarter last year, and we also saw a devaluation of over 50% of the Colombian peso and of 17% of the Chilean peso, all of which affect our revenues in these countries in the region.

We continue to also see, as a result of this environment, weak cargo demand on the back of this slowdown in economic growth and about -- some of this, on the positive side, is offset by the fuel price decline. So in the third quarter of 2015, fuel price was down over 40% compared to the third quarter of last year, and that provides some benefit on the cost side.

If you turn to Page 3 on our webcast presentation, you can see a summary of the numbers that we published for the third quarter and for the 9 months period, January through September. On the revenue side are the results of these more challenging macroeconomic conditions.

We're seeing revenue declines in the range of 20%, both on the passenger and cargo side, and this has been more than offset by the reductions on the operating costs. Part of this has -- having to do with the lower fuel costs; part of it also having to do with the effect of the devaluation of the currencies; and also a significant part having to do with our cost efficiency initiatives, which we have been implemented already since the end of last year; as well as our fleet renewal, which allows us to have a fleet that has a lower cost per ASK.

As a result of this, our operating income increased by 1 percentage point, reaching 4.8% in the third quarter and reaching 4.7% so far for the first 9 months of the year. This is very much in line with the guidance that we have already provided, which is to reach an operating margin of between 3.5% and 5% for the full year.

Regarding the bottom line. We continue to see the impact on our nonoperating results of the devaluation of the Brazilian currency on the balance sheet of TAM mainly -- or as a result of the TAM balance sheet being in a -- denominated in reals.

The devaluation of the Brazilian currency has a negative impact that needs to be adjusted, and that results in a nonoperating cost of $242 million in the third quarter of this year, which affects very significantly our bottom line and results in our negative bottom line of $113 million for the quarter. If you turn to the next slide to talk a little bit more in detail about our passenger operations.

You can see that, during the quarter, we grew in terms of capacities in our passenger business by 5%, with different growth rates by market, and maintained a relatively high load factor at close to 84%. If we look at it by market, on the international side, our ASK growth for the quarter reached 8.5%.

And our growth in -- and we'll talk a little bit later also about our guidance. But in general, our growth on international routes is focused on taking advantage of certain opportunities outside of Brazil and on strengthening our hubs, especially in the Spanish-speaking markets, and is offset by capacity reduction that we have been implemented on certain routes from Brazil and specifically from Brazil to the United States.

Overall, on our international passenger business, the revenue per ASK declined 17%. This number is mostly impacted by the reduction of revenue per ASK on the Brazil routes, which is a result of the devaluation and the volatility of the Brazilian currency, which obviously had an impact on international demand from that country.

Looking at the domestic Brazil operations, which is approximately 32% of our total passenger ASKs, we were the only carrier this quarter to reduce capacity in the domestic Brazil group. Capacity adjustment reached 0.5% as compared to last year, and that resulted in a 6% improvement in revenue per ASK when we look at it in the Brazilian currency.

When we factor in the devaluation of the Brazilian currency in U.S. dollar terms, revenue per ASK is down over 30%.

And then, on the bottom of the slide, when we look at the Spanish-speaking market, you can see that capacity was up 5.6% in these markets, with growth being driven mainly by Peru and Chile, with load factors remaining very healthy at 81.4%. Revenue per ASK decline on these routes are mainly a result of the devaluation of the local currency.

When we look at Chile, for example, we had a devaluation of the peso of 17%, and that was mainly the impact there in terms of revenue per ASK. When we look at the yields in local currencies, they are remaining very healthy compared to the third quarter of last year.

If we turn to the cost side, you can see that, overall, we had a reduction in our cost per ASK equivalent of 23%. An important part of this, obviously, had to do with the reduction in terms of fuel prices.

Fuel prices were down 42% as compared to last year. And overall, our fuel bill was down 37% as compared to last year.

In addition to that, we had a 14% reduction in our cost per ASK equivalent, excluding fuel, and this was driven by a series of different efficiency initiatives that we have already implemented and that we continue to see the benefit of each quarter. On the wages side, wages are down 16.5% or over 17% when we look at it on a cost per ASK equivalent basis.

Aircraft costs are down 1.7% or almost 4% when we look at it on a cost per ASK basis. And the build [ph] aircraft costs include rentals, depreciation and maintenance expenses.

And then, all the other costs, which include basically passenger service costs, commissions, certain distribution expenses and others, are down approximately 15% and almost 17% on a cost per ASK basis. All of these numbers basically reflects the cost efficiency initiatives that we implemented and that we estimate.

So far this year, have produced savings in the range of $240 million in addition to the savings coming from the lower fuel prices and the savings coming from the exchange rate devaluation. A couple of other elements to highlight during the quarter.

We announced this quarter a series of adjustments to our international network. When we look at our planned growth for international routes, this is a growth that's very focused on taking advantage of certain opportunities that we see, especially in strengthening our main hubs in the region and especially also on adding capacity on certain routes from our Spanish-speaking countries to the United States and Europe.

The new routes that we have announced or additional frequencies are on the slide that you can see in the webcast presentation. And you can see that they are all focused on our main hubs of Lima, Santiago, Guarulhos and Brasilia airports.

When we look -- turning to Page #7 at the evolution of the domestic market in Brazil. We announced in July of this year a new -- certain adjustments to our capacity growth plan for the domestic market in Brazil that were going to result in a reduction of about 8% to 10% in terms of ASKs in the fourth quarter as compared to the fourth quarter of 2014.

We are already moving towards that reduction. We published our October numbers already this week.

And if you look at our third quarter numbers, we already showed a 0.5% reduction in terms of capacity, which actually includes almost 6% reduction in terms of capacity in the month of September. So as a result of this, we were the only operator to reduce capacity in the domestic Brazil during this quarter.

We were able to maintain a load factor that were higher than the industry average during this quarter at 81.9%. And we were also able to see an improvement in our revenue per ASK denominated in BRL, which was an improvement of 11% as compared to the previous quarter.

This strategy in the domestic Brazil market continues to leverage the connectivity of the LATAM Airlines Group network through connectivity in our hubs, especially in Guarulhos and Brasilia. And we also continue to focus on providing the best service to the corporate passengers, and we continue to see improvements there in terms of our market share of revenues of the corporate passenger segment.

Turning to Page #8. We announced this quarter a reduction in terms of our total fleet commitments for the period between 2016 and 2018.

What you can see on this slide is a reduction of $1.8 billion, which is what we have already accomplished. If you look at the fleet plan that we had at the beginning of this year, which is the fleet plan that we also published in our 20-F which was filed in April of this year, we had total fleet commitments that reached $7.7 billion for the period between 2016 and 2018.

Our target is to reduce the $7.7 billion to $4.7 billion. So we are a little over halfway there in terms of the fleet plan that we have, but we still have ongoing negotiations which -- through which we expect to achieve the remaining reduction.

What's on this slide is basically the fleet plans that we have so far. And this adjustment responds to the new -- the current demand environment in the region.

So we are seeing weaker demand levels, especially in the Brazilian market, and as a result, we really see the need to adjust our fleet deliveries. And we also are focused on maintaining a very healthy balance sheet and on preserving our liquidity levels.

So the revision of the fleet plan basically responds to those 2 [indiscernible]. If you look at our current fleet plan for 2016 and 2017, we expect a $2 billion fleet commitment for 2016.

Of this, approximately half will be financed through sale and leasebacks and half through a financial lease. So the actual CapEx for 2016 will be close to $960 million, not the $2 billion, which also include the sale and leaseback.

And as result, in 2016, we expect to end the year with 331 aircraft. Basically, the -- and for 2017, with 345 aircraft.

For 2016, the increase is coming mainly from narrow body aircraft. In regards to the wide body suite, we will be taking deliveries of wide body aircraft, but we will also be phasing out our Airbus A330s.

So as a result, we should end the year with a similar number in terms of the total passenger wide body aircraft. And we also expect to continue our reduction in terms of our freighter fleet.

We have already, during this year, negotiated the sublease of 4 freighter aircraft and we expect a reduction of 2 additional freighter aircraft during 2016. Turning to the next page.

You can see that our credit metrics for the quarter remain at similar levels than what we had at the close of the June quarter and remain stronger than what we had at the close of last year. We have reduced somewhat our leverage with respect to December 2014, and we maintained it at levels similar to June.

And we also maintain our target, $1.5 billion, in terms of cash and cash equivalents, which, at the close of this quarter, amounts to about 14% in terms of total revenue. And regarding our fuel hedging strategy, this slide shows our current fuel hedge position.

We have hedged currently 37% of our total estimated consumption for the next 5 quarters. That's basically a 50% hedge position that we currently have for the fourth quarter of this year, and then reducing for the next 4 quarters of 2016.

We are also -- we also hedge our BRL exposure. We have an estimated operating exposure to the BRL of approximately $800 million per year, of which we currently have a hedge of over $400 million for the next 6 months.

And finally, we also introduced our preliminary guidance in terms of capacity growth for 2016. As you know, for this year, we expect total passenger capacity growth to be in the range of 2% and 4%.

For 2016, we are expecting total passenger capacity growth to be between 0% and 3%, with growth coming mainly from international markets and Spanish-speaking markets, and being offset by important capacity declines in the Brazilian domestic market. So for the domestic Brazil, our estimate is to reduce capacity between 9% and 6% for next year.

On international routes, the 4% to 6% increase in ASKs is coming mainly from the market -- from growth outside of Brazil market. And on the Spanish-speaking markets, growth of between 6% and 8%, being driven mainly by growth in the Peruvian and the Chilean market.

On the cargo side, we expect to continue to see reductions in terms of cargo capacity growth. This 0% to negative 2% growth is basically a continued reduction in terms of our freighter ATKs, offset by some growth in our belly capacity, driven by the growth in our wide bodies.

But we continue very committed to seek opportunities to adjust the freighter ATKs. That's all the slides that we have prepared.

And that concludes our prepared remarks for today. We'll be happy to answer any questions that you have for the team.

Could you talk a little bit more about, on 2 fronts, the domestic Spanish-speaking country RASK, I was wondering what that might be on kind of a constant-currency basis? And then, also on the international segment, just ex-Brazil, what it might be?

And the reason I'm asking for this is because it seems the capacity growth in 2016 is quite high given the revenue declines that you're seeing, and I'm wondering maybe, based on where you're growing, if you're expecting maybe the RASK to be better next year than this year.

Yes, Savi. Regarding the Spanish-speaking markets, basically we see, in general, there's obviously different realities in each of the 5 different markets where we operate.

But generally, the revenue per ASK in local currencies is flat -- is relatively flat with different percentages by market. But generally, in our main market, it's pretty flat compared to the third quarter last year.

And the negative number is almost purely explained by the devaluation of the currency.

Okay. And then, on the international front?

On international front, the RASK in the Spanish-speaking countries is -- follows pretty much the same dynamics than in the domestic countries. We have currencies in local currency that have not depreciated, but we have the effect of devaluation as well.

Got it. And then, so, I guess, I'm a little surprised by the level of growth in international and domestic SSC.

Could you talk a little bit more, especially why the exploration and the kind of the capacity growth next year?

Yes. In the Spanish-speaking -- let me talk a little bit about the Spanish-speaking markets, and then I'll let Roberto talk about the international side.

In the Spanish-speaking markets, we continue to see healthy markets in terms of demand. These are markets where GDP growth is growing at between 2% and 4%, depending on the market.

So there are markets that are still growing. And where we have seen, if you look at our -- the breakdown in 2015, growth picking up a little bit in the second half of the year, 2015 versus the first half.

So for next year, basically what -- the plan is to take advantage of these growth opportunities in the main markets where we operate, which is not really going to be a change in trend with what you've been seeing in the third and fourth quarters of this year.

Okay.

And these are markets where, historically, our growth rates have been 10%, 12%. So this number is, if you look at it sort of on a longer-term basis, it's not a very high number.

Helpful. Okay.

And international?

International, you see the guidance we have for next year is already a slowdown from the growth we've had in the last months. And like in the Spanish-speaking side, we're taking opportunities, particularly on the Pacific side, where we're focusing on looking at new routes that add to our network.

I would have sampled this our newly launched route to Washington from here.

Got it. All right.

And if I may, I'd just ask one last, just on the CapEx, a quick one. So the remaining target to get to that $3 billion in reduction, could we -- is it fair to assume that that's probably weighted more towards 2017, 2018 and probably not a whole lot of room to kind of reduce the 2016 CapEx?

That's correct.

So just a couple of questions. One, on the 8% to 10% capacity reduction, I think in the past that you have said that, that reduction would just be in December, not for the quarter as a whole.

So I was just hoping you could clarify that. If we assume that, that reduction is in the quarter as a whole, we get to kind of a number of full year ASK growth number that's a little bit different than the one that you presented.

That's why I'm asking.

You're talking about the domestic Brazil, Josh?

Yes, correct.

We already published the October number for the domestic Brazil, and capacity was down 8.6%, and that follows the 6% reduction in September. So it's a number for the quarter, the 8% to 10%.

Okay. I think it happened in the past just for December, but we did see that good performance.

Do you think that, that means that your guidance for full year 2015 could be conservative? Because I think that's what we were having a little bit of a tough time reconciling.

We should be within the range that we announced, probably closer to the higher part of the range. But yes, it should be within the range we announced.

And yes, the reduction for the month.

Okay. That's great.

And then, just one other quick question related to your international capacity growth. Just wanting to -- if you could just remind us how much of your international originates in Brazil that would be great.

Approximately 50% of international capacity originates in Brazil.

Just a couple of questions here, some quick ones. Just on your fleet plan, your freighters go from 11 to 8 over the next few years.

What airplanes are leaving the fleet? Are those the 777 freighters that are leaving?

Yes. Well, plan is we reduced 3 -- 4, sorry, 767s, and the idea now is to reduce more in capacity on the 777s.

We already took away one of those, and we are looking forward to take away one or 2 more of the remaining ones.

Okay. Great.

So you'll, essentially, in addition to getting out of the A330s, so you're getting rid of one fleet type, it sounds like you'll be getting rid of 2, is the way to think about it, right? Just confirming that.

Well, the A330 passenger fleet, yes. On the 777 freighters, we do want to reduce the capacity, but we don't, at this point, express to get rid of the -- of all of them.

Okay. All right.

Just 2 other quick ones here. One of your new services is Toronto - New York.

I know that's a market you actually served in the past. My sense was that, in the past, the results were somewhat mixed.

So you're going back into the market. Right now, the Canadian economy isn't all that strong, given its dependence on commodities.

What's -- what do you see in the marketplace that gives you a feel that it will be successful this time around prior to the past?

Mike, differently from the past, now this flight connects our flights not only from Lima and Santiago, but also the traffic we have from Brazil. So now we have a much stronger base of passengers that we can seat from São Paulo, Santiago, Lima into Toronto.

So the international [ph] flight is mostly relying on that we have better source of passengers today than what we had at LAN in the past.

That's a really good point. Actually, will your flight from Ecuador connect to that as well?

At this point in time, it does not connect.

Okay. I know that's a very -- that's a big difference.

And then, just lastly, the Northeast Brazil hub or, I guess, the hub that you've talked about setting up, I know it's been pushed back. I think you will reveal the airport, I think, in the -- maybe June quarter or maybe later.

Is the focus of that city, is that Brazil to Europe? Or will there also be a Brazil to U.S.

and Caribbean connections? What's the focus of that city?

South America to Europe, mostly. We are looking to other opportunities for the hub, but this is the main focus of the hub.

I just wanted to ask the team about ROIC or return on invested capital as a measurement this team is focused on or if that's changing at all. And what are the long-term targets for LATAM in that regard?

And when does the company believe it can, again, achieve a return in excess of your cost of capital?

Duane, yes, we -- well, our target for the long-term in terms of return on invested capital is a 15% target, which is something that we've had in the past and that we aim to recover going forward. But looking at the next year or 2 years, we don't expect to achieve this number.

I think, currently, we are expecting, as we've already discussed, weaker demand trends in our most important markets during June 2016 at least, which will follow the trends that we already saw in 2015. So although it is our long-term plan, it's not something that we expect to be able to reach in the next year or 2.

Okay. That's helpful.

And then, as we think about capital allocation, how should investors think about the $2 billion in CapEx in 2016 versus other alternatives? Why is $2 billion in CapEx, given where your returns are and where they've been for some time, why should investors think that that's the best place for that capital to go?

Particularly in the long haul fleet, we are replacing our 330s, which are quite old, 16-year-old airplanes with very bad low pass [ph] for 350s, that's the main source of arrival of planes. This is more than double-digit decrease in cost per ASK and a completely different experience to our passenger.

We think that, for the long haul routes, this is key in order to sustain the leadership that we have in between South America and the U.S. So the focus for next year is replacing the 330 fleet, which is old and is inefficient as compared to the new 350s.

Okay. And then, just I'll ask one more here.

As you're planning your network and thinking about where to grow -- and I applaud you on what you're doing in the Brazil domestic market. But if we think about Brazil versus international, unless the scheduling data is wrong, it seems like you grew high single-digits second quarter, low-teens third quarter.

And again, thinking about, from an investor perspective, in capital allocation and capacity allocation, how do we get confidence that that's the best place for that capacity? It seems like one of the weakest markets that we cover.

Duane, so as we said in our guidance, we expect to increase only 4% to 6% capacity this year. As you saw in our press release, we are decreasing capacity in certain routes, particularly from Brazil to the U.S.

And we are looking into where is the best place to balance our capacity. And we're very clear and very thorough in our process here.

And we're going to look at our capacity depending on market conditions, and we understand the situation of Brazil, and that's where we're cutting capacity of selectables.

But you're growing long haul international from Brazil?

I don't think that's what you'll see next year, just following our guidance.

I would like to start briefly on your new CapEx commitment adjustments in terms of the fleet plan you are restructuring. Your goal is now $3 billion.

Do you see that like as a maximum -- the maximum savings you could get? Or is there -- or could there be more for the CapEx reductions going forward in terms of postponing delivery?

We think that the plan to reduce $3 billion in CapEx, of which we already achieved $1.8 billion, is the adequate target we have set ourselves for the current economic situation. But, as you know, conditions vary and we will revise these if necessary.

Okay. My other question is regarding your new brand implementation.

How is that going? Have you seen any advances or any benefits so far?

I know it's going to take a while. But during this quarter, were you able to receive anything new?

We -- regarding the new brand, so far, as you know, we made the announcement of the new brand a few months ago, but the actual launch and the process of integrating the 2 brands will be more visible during 2016. So to-date, we have not yet made any changes to the existing brand.

We are working on the rollout of that for next year.

Just one or 2 for me. If you could refresh my memory, I see on the results that -- on the revenue line, other revenue, you're getting some revenue from third party lease activity.

Could you give us a view as to potential growth in that area over the next year? Or do you think it's going to be stable?

And how are you seeing the operation these days?

Yes. These activities you're seeing is basically a sublease of 3 767 freighter aircraft that we have starting this year.

We added a sublease of a 777 freighter that we also announced in this quarter, so you will see an increase in these. And we're looking into some additional opportunities, particularly in passenger airplanes, for seasonality reasons going forward.

Great. I mean, I would say one of -- it seems one of your Brazilian competitors seems to do that, and I was curious if you are contemplating doing something along the same lines, and it -- that sounds like...

We do.

Yes. Great.

Great. Okay.

And just one other quick question. Looking at the mix of 2016 ASK growth, kind of a very simple kind of dumb question on my front, but one can assume at least some modest increase in average space links when I look at ASK growth numbers?

Yes.

I just have a very big question. I was wondering if you could please -- I would like to know your thoughts on a possible JV or commercial alliance with either a North American or European carrier in order to enhance your exposure to less FX-sensitive passengers.

Sorry, what was his name?

Daniel.

Daniel, this is Roberto Alvo. As any airline does, we always look at opportunities for increasing the relationship we have with a partner that we are with.

And with new opportunities, it's a constant endeavor. We have nothing to announce yet.

Okay. So -- and if may I may have a follow-up question.

I like to -- maybe if you could please share with us, I mean, if you're taking any actions or what are you planning on doing once the Open Skies Brazil U.S. enters into operation?

I think I just have to repeat the answer I just gave you. We're looking constantly into opportunities.

And depending on regulatory situations or market situations, we may take decisions at any point in time.

Just another quick one on your 2016 CapEx number. You mentioned the 950 fleet number.

I was just hoping you could update us on what additional amounts you expect to invest next year and also in 2017? I know you've been investing in unifying the brand and also in upgrading customer experience.

Yes. In -- our total non-fleet CapEx or our total CapEx in addition to the fleet commitments that you see on the slide is approximately $400 million per year, and that's what we expect for 2016 and 2017 at this point.

I'd like to ask about leverage and just starting with -- when looking at your cash statement on Page 13 of the press release, we see that, operationally, LATAM was cash neutral according to our calculation -- operationally cash neutral according to our calculations in this 9 months. So you mentioned that $1.5 billion is the cash balance that LATAM feels comfortable with.

I would like to understand if this is a minimum cash balance and -- or is it exactly, like, an average cash balance that you feel comfortable? Also, like, with regards to leverage, the company reached now EBITDA, a net debt-to-EBITDA of around 5.2x.

It was higher in the last year. So what would be a maximum level that you'd be comfortable with?

And just following up on the CapEx, in 2016, you mentioned the CapEx -- fleet CapEx of $2 billion. But then, the actual commitment would be $900 million, I think, because part of that would be financed via sale leaseback.

If you could give the same data for 2017 and 2018.

Okay. On the level of cash, we mentioned $1.5 billion, $1.6 billion.

That, of course, is not an absolute number. But that number in that region, we believe, being 14% of customers [ph] revenues and given our repayment profile going forward, we believe that's the adequate number.

I think, we -- on top of that, that we have committed trade lines. We are working on possibly addition committed trade lines.

In terms of the leverage, we saw 5.4x end of December '14, 5.1x at June and 5.2x as we have just reporting. Going forward, and maintaining at a level of cash of 1.5x, 1.6x, that level should not be significantly different from what you're seeing today.

The last part of the question was...

CapEx.

With respect to the CapEx, typically, we don't have the fleet financing placed yet for 2017. For 2016, it was roughly 50/50 sale leasebacks and finance leases.

And going forward, I think it's a fair assumption to, I mean, think that would be roughly the same split, 50/50, for sale leasebacks and finance leases.

I have 2 questions here. The first one is a follow-up on international RASK growth in 2016.

What's the guidance for international RASK growth in Brazil? I mean, you mentioned that's around 50% is originated in Brazil.

So I don't know if you can give some more color on that. And my second question, also with regards to Brazil, can you comment to what happened with the domestic yield during September and October when you start to reduce capacity in the country?

And what -- I mean, I don't know if you can give some color on your forward booking.

Okay. I'll answer the international capacity, and then I'll pass on to Cláudia for domestic.

So we should -- so from this 4% to 6%, you should see flat capacity on the Brazil side approximately for 2016.

Okay. But, I mean, if we assume that's around 6% is Brazil, I mean, and flat year-over-year, so you will likely see a very high growth on the Spanish-speaking countries, right?

I mean, something -- I mean, 4% to 6% of international ASK growth in Spanish-speaking countries, you should expect something around to 12%.

That's correct.

Okay.

Cláudia?

Victor, just to make sure I understand your question, yes, you're asking about our forward bookings and how our RASK is responding to the capacity question this -- in this quarter, right?

Exactly.

So what we've seen is that we were able to slightly increase our load factors, so in terms of -- but not significantly. So I'll start from the end.

Our forward bookings are maintaining the same drop as the capacity, so we expect to maintain our load factor levels approximately in the next quarter. This is the expectation we're working with.

And regarding RASK increase, we have seen a significant yield pickup. And we're expecting to continue factoring this benefit from the capacity reduction.

One question I had was in the kind of domestic Brazil market. I appreciate what you're doing in managing the supply there.

I wonder how you are achieving that. And is there kind of a change in how you're doing it?

Because I know one of the concerns was maybe kind of maintaining adequate slots in Guarulhos and then not losing them. And so could you talk a little bit more about how you'll achieve those as cuts?

And then -- and maybe if there's any kind of strategic change in Brazil?

Sure. Let me start by saying that we recognize that the markets could go south a lot earlier than most of the other players.

TAM was the only company to reduce capacity at the domestic market in the third quarter of this year. And I think it's very clear that we did the -- we took the right decision.

And we're forecasting that the market is probably not going to recover in the short-term. When we look at the way we adjusted capacity, we're very confident that we're doing it without any precedent to our main passengers, which are the corporate passengers.

TAM remains the leader in the corporate segment and also the leader in top-of-mind. So the way we're addressing this capacity reduction is by protecting the Guarulhos, so we're not reducing capacity there, and maintaining the very high level of productivity to our main passengers, which are the corporate passengers.

Also we are able to -- I will take the second part, at least work very well with the connectivity that we have with the other companies in our group. So the connectivity that we have with Argentina, with Chile, with Peru, we have somehow protected the slowness that feed into these markets to make sure that we keep leveraging the strength of the LATAM Group.

That's helpful, Claudia. And is -- are you seeing your other competitors, and we heard from one of them yesterday, but are you seeing kind of others being -- starting to be rational now as well?

It's kind of hard to talk about our competitors. All I could say is that we're ready to address the market changes.

We see a complicated economic year for Brazil, economically speaking. That's why we're forecasting another -- or a further reduction for next year as necessary.

So we -- the way we're addressing the market is for the same conservatism that we did in the past year.

That's helpful. And just one last question on the cost side.

I know you've achieved the cost efficiencies maybe a little bit more than you had anticipated. Is that coming from just earlier realization of the cost efficiencies?

Or are you kind of finding additional cost efficiencies that weren't in that -- the target you had outlined for 2018?

Savi, it's a little bit of both. I mean, basically, what we have been looking at is opportunities to accelerate as much as possible all of our cost saving initiatives that we had already identified at the end of last year.

So we have been able to -- we've been looking at opportunities to do what we had planned, but faster on as many fronts as possible. And also, in pursuing some of those initiatives, we've seen opportunities to have savings that were larger than what we expected.

So for example, in terms of renegotiating all of our procurement initiatives, we had an estimate that we have been able to surpass on certain fronts. And those are the numbers that you're seeing reflected in our cost per ASK decline.

And are you ready to kind of revise the 2018 target?

No. We continue to maintain it because I think that, I mean, we still -- for now, we continue to work with -- along the same plan.

Just a follow-up question regarding M&A. There was an interview earlier this week with the CEO of IAG, and he is saying that he's pursuing some M&A alternatives and he had a clear desire to work closer to LATAM Airlines.

I was just wondering if you could provide more detail here. If it would make sense for you to make an alliance or even an M&A with this specific airline, given that both of you are part of one world?

If you could give more color on that front would be helpful.

Yes. We made a public statement earlier this week where we explained that we have no conversation with IAG regarding them entering into the ownership of LATAM Airlines.

I don't know if you saw that. And with respect to opportunities, as I mentioned before, of course, we're looking into opportunities all the time.

If we think that there's something that is good for the company, we'll look at it in detail.

So we apply that LATAM is taking the lead in -- just in capacity in domestic Brazil. But the industry, in our opinion, also needs to cut capacity on Brazil's international routes, especially those between Brazil and the United States.

When we look at forward seat availability for the first half of next year, Delta and American are cutting ASKs out of Brazil in the teens compared to the same period of 2015, United in the high single-digit range and Copa by more than 20% year-over-year. LATAM, on the other hand, points to a low single-digit ASK contraction on Brazil U.S.

capacity. So following up on Duane's question about the best allocation of the company's resources, wouldn't a higher capacity cut be needed to try and restore fares and profitability in international routes out of Brazil?

As I explained before, we're constantly looking into this. We just published the decrease of 4 frequencies from Guarulhos, New York this week.

So this is an ongoing process that we look at. And if at some point in time we believe that we need to take further action, we will.

Okay. So the level of cuts that you see in the industry right now, you believe that fares will be able to rebound from the current level of $300, $400?

I think it's very difficult to foresee in the recent environment what will happen in the next months. And we believe -- we don't believe this is a healthy level, but we believe that we need to cut more capacity.

We'll take those decisions at the right time. We just told you [indiscernible] published a decrease of 4 frequencies from Guarulhos to New York.

Great. Well, thank you very much for your questions and for participating on the call today.

And as always, we'll be happy to take any additional questions or calls if you want to contact our Investor Relations department after the call. Thanks very much, and have a good day.