LATAM makes gains with Brazil domestic capacity discipline

Washington DC
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LATAM Airlines Group has made progress in improving load factors and unit revenues in the domestic Brazil market in the first quarter, as the carrier continues with its capacity discipline strategy in the South American country.

Brazil's TAM, part of LATAM, reduced domestic capacity in Brazil by 9.2%. Domestic traffic grew 3.4%, resulting in a 9.5 percentage point growth to 77.7%.

This led to a "significant increase" in revenue per available seat kilometre in Brazilian reals. LATAM's chief financial officer Alejandro de la Fuente says in an earnings call today that RASK grew in the low double digit range.

"We remain convinced that capacity discipline and an adequate segmentation of the market will provide the basis for continued healthy load factors and a significant improvement in operating results in 2013," says LATAM.

TAM expects to continue growing Brazil domestic load factors and unit revenues in the double digit range for the rest of 2013, says Claudia Sender, vice-president of TAM's domestic business unit on the call today.

The carrier will reduce domestic Brazil capacity by 5% to 7% in 2013. LATAM groupwide capacity will grow 2% to 4% in the year, says the airline, reiterating the guidance it provided earlier this year.

TAM is not the only carrier adopting a strategy of capacity discipline in the Brazil domestic market. Its low-cost competitor Gol slashed domestic capacity by 15.7% in the first quarter and aims to cut domestic capacity by about 7% for the full year.