TAM Airlines

TAM plans US expansion in 2012 with B777-300ERs while Brazil domestic growth slows

Brazil’s TAM is planning further capacity expansion on US routes in 2012 as growth in the Brazilian domestic market shows signs of cooling down. The US expansion will be driven by the doubling of TAM’s B777-300ER fleet next year from four to eight aircraft. The B777-300ER, which is by far the largest aircraft type in TAM’s fleet, is now only used on European routes but will start to be deployed in the US during 2012.

Azul plans more rapid expansion, expects to capture 15% share of Brazilian market by end of 2012

Azul is planning more rapid expansion in 2012 despite the expected slowdown in the growth curve of the overall Brazilian market. The low-cost carrier, which so far this year has launched 14 new destinations while adding 17 aircraft, sees plenty of opportunities to further stimulate demand on secondary domestic routes where there is relatively limited service.

Azul is now Brazil’s third largest domestic carrier after Gol and TAM. Azul accounted for 8.4% of domestic RPKs through the first three quarters of 2011, according to data from Brazilian civil aviation authority ANAC. In 3Q2011, Azul’s share of the Brazilian market exceeded 9% for the first time.

Azul chairman David Neeleman told CAPA along the sidelines of the ALTA Airline Leader Forum in Brazil earlier this month that he expects the carrier will capture 15% of the market by the end of 2012.

Latin America, a bright spot for aviation, with continued growth and robust aircraft requirements

IATA, Boeing and Airbus have again noted the potential of the Latin American market, with IATA describing the region as a “bright spot in the aviation world” and Airbus commenting that Latin America’s aviation sector “has never been stronger”, following a boom in the sector over the past five years. Boeing has similarly noted the large potential in the Latin America market in its market forecast.

Latin America is “the only region generating aggregate profits for three consecutive years," IATA CEO and director general Tony Tyler noted at ALTA this month. On the outlook for the region, he commented: “Taking a long-term view of Latin American aviation, one can only be optimistic. The economic potential of this vast and varied geography can only be realised with a successful aviation industry”.

Brazil airport privatisation plan comes under attack at ALTA forum

Brazil’s new plan for privatising three of its largest airports has already started to draw criticism from Latin American carriers as well as IATA and the Latin American airline association ALTA. The upcoming privatisation of Brasilia, Sao Paulo Guarulhos and Viracopos-Campinas airports was a hot topic at last week’s ALTA Airline Leaders Forum in Rio de Janeiro.

ALTA, which represents airlines throughout Latin America and the Caribbean, and IATA are concerned the three concessions as currently outlined will result in higher fees and a large chunk of the generated revenues not being reinvested in modernising the airports. But ALTA, IATA and the airlines in the region widely recognise the potential benefits of airport privatisation as Latin America struggles to cope with infrastructure challenges that are now threatening to curtail continued growth.

LAN outlook brightens as strong 3Q2011 earnings are recorded and as merger with TAM nears

Latin American airline group LAN has reported a significant improvement in its third quarter earnings following a surprisingly weak second quarter. Latin America’s buoyant economy drove the strong showing and has LAN confident it can remain highly profitable in 4Q2011 and 2012 despite the challenging global market conditions. LAN’s planned merger with Brazil’s TAM, which will now almost certainly be completed in Mar-2012, further improves the group’s medium to long-term outlook as LAN gains access to Brazil, the region’s largest economy by a wide margin and one of the world’s largest emerging markets.

US carriers continue to dominate Latin America's international market

Although financially weaker than their competitors to the south, US carriers continue to dominate Latin America’s international market. As a result, US airlines are well positioned to exploit the anticipated growth in the region. Complacency, however, is not an option. US carriers should seriously consider making strategic investments in Latin America’s leading airline groups to ensure their place in this important emerging market.

Latin America is a natural playground for US carriers given the geographic proximity and economic ties between the two regions. US carriers have traditionally accounted for a large majority of capacity between the US and Latin America. This has always been a sore topic for Latin American airlines, who over the years have repeatedly complained about an uneven playing field and how difficult it is to compete against their larger and aggressive competitors to the north.