Just kick them where it hurts most - this is standard parental advice given to daughters the world over to arrest ardent advances. Translate the formula into airline terms and the equivalent way to stall an airline's overzealous advances is to damage its safety record.

Well, TAM (Transportes Aereos Regionais) has certainly suffered a bruising this year. The public image of the rapidly expanding Brazilian domestic carrier is suffering following an explosion on 9 July, which tore a hole in a TAM Fokker 100 fuselage. The accident, in which one passenger was killed and six others injured, comes only eight months after another TAM aircraft crash in which 98 people died. Speculation that the latest accident, currently under investigation, was caused by a bomb is worsening the damage to TAM's image.

Fanning the flames, the newly created Washington-based Air Travellers' Association (ATA) gave TAM a low safety rating in July, classifying it as one of the most unsafe airlines and adding to numerous reprimands and fines by Brazil's Department of Civil Aviation in 1997 for safety issues.

And this from a carrier synonymous in Brazil with top-quality service and whose key strength is in its marketing and image. 'What I treasure most in my business life is TAM's image,' says president Rolim Adolfo Amaro.

While accidents cannot be reversed, allegations can. TAM has requested a public retraction from ATA and failing this has threatened to sue the body for damages in the UScourts. 'We're a victim of mishandled statistical data,' says vice president commercial and marketing Luiz Eduardo Falco Pires Correa.

The setback to TAM's safety record comes at a time when the regional carrier has been revelling in rapid expansion. Last year TAM and its affiliatesacquired management control of Paraguayan flag carrier Lapsa; launched TAM Meridional on trunk routes; won the right to become Brazil's fourth international carrier with a daily Sïo Paulo-Miami service; signed a codesharing agreement with American Airlines; and ordered five Airbus A330-200s. TAM group is now planning a stock exchange flotation in September.

Indeed, TAM has been developing so rapidly that sources speculate that the recent aircraft explosion was caused by a bomb planted by either a rival airline or a disgruntled ex-employee. If the accident was caused by a bomb, TAM's finances could suffer a knockback, as such accidents do not benefit from insurance cover.

TAM's finances are in sufficiently robust shape to cushion the blow. Revenues increased by 7 per cent to US$570 million in 1996 and should reach US$650 million in 1997. A net profit of US$50 million is targeted in 1997, following 1996's result of US$47.7 million.

The TAM group plans to bring its airline companies under one holding company which it will float on the Sïo Paulo stock exchange in September 1997, and probably on the New York stock exchange in 1998 or 1999, reveals José Martinelli, air transport consultant at EuroLatin. TAM group's balance sheet will be bolstered by floating 22 per cent of its existing shares, which should bring in US$80 million, says Falco. Currently TAM group holds 89.6 per cent of the regional airline while the remainder is held by Vasp.

While floating its own shares, TAM group is rapidly acquiring stakes elsewhere. It signed a US$40 million management contract to run the Paraguayan airline Lapsa in September 1996. TAM now holds 80 per cent of the former Lapsa, with the remaining 20 per cent in the hands of the Paraguayan government.

The renaming of the carrier as TAM Lineas Aereas del Mercosur exemplifies TAM's desire to create a multinational flag carrier and increase services within the growing Mercosur southern cone region.

The steps implemented by TAM include cutting the former Lapsa's fleet back from three Fokker 100s to two and reducing employee numbers by 170. The downsizing seems to be paying off. TAM Mercosur is now breaking even for the first time in its 40-year history, with projected annual income of some US$40 million, says Falco. However, debts of some US$8 million still remain, despite TAM's investment of US$20 million, he adds.

In addition to regional services out of Asuncion, TAMMercosur operates a codeshare on Asuncion-Buenos Aires with Aerolineas Argentinas and another codeshare, with LanChile to Santiago, is imminent.

Both the regional operation and TAM Mercosur have also signed codeshare agreements with American Airlines, and the latter is due to start on Asuncion-Miami on 1 September. While operations to Miami remain a longed-for future aim, TAM Mercosur is restricted by Paraguay's Category III safety rating by the USFAA. A Category I listing is needed to start services into the US.

There are no such problems for TAM Transportes Aereos Meridional. TAM established its trunk and intercontinental arm in December 1996, initially operating eight Fokker 100s on major domestic routes. This TAM subsidiary is due to start Sïo Paulo-Miami services in November with a pair of leased Airbus A310s. TAM plans to extend the Miami service to Asuncion and bring TAM Mercosur on to the route.

In October 1998 the next international stop for TAMMeridional will be Europe, preferably Paris. At the same time, Meridional will start taking delivery of the five firmly ordered Airbus A330-200s which will form the mainstay of its fleet; the carrier has options on five more.

TAM continues to operate 22 Fokker 100s, nine Fokker 50s and five F27s on regional routes within Brazil, and its Brasil Central subsidiary, now renamed Helisul, flies Cessna Caravans in remote regions.

Now that TAM has all the segments in place with a regional, national and intercontinental operation, all that remains is to resurrect flagging public confidence in its safety. For an airline dedicated to creating a quality personalised image, the task should not be too arduous. President Amaro greets passengers at 6.30 on TAM's first flight of the day. 'Flying with TAM in Brazil is seen as something very special. It's like being in a VIP club. In marketing terms Rolim is a genius,' says Martinelli.

Source: Airline Business