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Brazilian TAM to reduce domestic capacity next year

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SAO PAULO, Brazil – TAM Airlines’ chief executive said in a newspaper interview published on Friday that Brazilian carrier plans to cut domestic routes in 2013 to restore profitability in the face of

SAO PAULO, Brazil – TAM Airlines’ chief executive said in a newspaper interview published on Friday that Brazilian carrier plans to cut domestic routes in 2013 to restore profitability in the face of high fuel costs and cooling demand.

The outlook reinforces a continued emphasis on cost-cutting under LATAM Airlines Group , the regional giant formed in a takeover by Chile’s LAN Airlines.

Reuters reports that TAM plans to cut its domestic routes by 7 percent in 2013, following a 2 percent reduction this year, Chief Executive Marco Antonio Bologna told newspaper Valor Economico. A spokeswoman for TAM in Brazil confirmed the details of the interview.

TAM’s fleet in the country will shrink to 109 from 114 next year, easing pressure on ticket prices that plunged last year amid a battle for market share with Gol Linhas Aereas , Brazil’s second largest airline.

The more cautious stance at the country’s biggest carrier also opens space for smaller airlines to continue robust growth, including Avianca Brasil and rivals Azul and Trip, which are merging to form the country’s No.3 airline.

According to Reuters, TAM expects domestic passenger traffic to grow up to 8.5 percent in 2013, versus about 7 percent this year, Bologna said in the interview, down sharply from recent double digit growth.

The airline’s projections consider an exchange rate holding near 2 Brazilian reais per U.S. dollar, crude between $130 and $135 per barrel and economic growth between 3 percent and 4 percent in the country.

Those factors contributed to TAM’s net loss of 335 million reais ($165 million) in 2011. The company’s net income fell 22 percent from a year earlier in the first quarter of this year, the last period in which TAM reported earnings independently.

About the author

editor

Editor in chief for eTurboNew is Linda Hohnholz. She is based in the eTN HQ in Honolulu, Hawaii.