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LATAM warns of tough conditions in 2019

LATAM Airlines Group's chief executive Enrique Cueto has warned of challenging macroeconomic conditions for the region's airlines in 2019, even as he is cautiously optimistic that a change of government in Brazil could benefit the country's businesses.

"The Brazil currency devaluation is improving because of the election results," Cueto tells FlightGlobal at the ALTA Airline Leaders Forum in Panama City. "But in any case, 2019 will be a challenge for the region."

Speaking shortly after Jair Bolsonaro was elected Brazil's next president, Cueto says of the country's incoming administration: "I think it might be more pro-business."

His comments largely reflect general sentiments in the business community, but Cueto was quick to add that it is "yet to be seen" what the new government will actually do to support businesses. "Like for many things in Brazil, it can be unpredictable," he adds.

LATAM's outlook on Brazil could be a bright spot in an otherwise sombre forecast for the region, which has been impacted by currency devaluation and softer travel demand in some countries. LATAM ended the second quarter with a net loss of $114 million and operating profit in the period slid 86.6% to $6.48 million.

Despite the second quarter being the most seasonally challenging quarter for Latin America's carriers, Cueto indicates that conditions are unlikely to improve dramatically anytime soon. "The third quarter will be more challenging for the industry," he says. "We saw a mix of weaker local currencies, impact on international demand especially in Argentina and Brazil, and higher fuel prices."

Uncertainty continues to loom in the fourth quarter, adds Cueto. "It's not clear what's going to happen with traffic, in Brazil and Argentina."

LATAM had previously trimmed 2018 capacity after reporting its second quarter results, cutting full-year capacity growth to a range of 4-6%, down from 5-7%.

Cueto indicates that more capacity cuts are being considered. "The conditions are difficult to deal with in the short term," he says. "We might need to review capacity in certain markets and be more cautious."

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