TAM Airlines: Brazil’s carnival carrier24 August 2012
Hosting large-scale, global events such as the Rio Carnival, FIFA World Cup and Olympic Games can place enormous strain on a country’s airports and airlines. TAM Airlines discusses its recent merger with LAN and how it is preparing for a hectic few years in the international spotlight.
Brazilian flag carrier TAM Airlines may be the nation's and the continent's largest airline, but it still needs to cope with the expected surge in Brazilian air travel over the next decade. With 133 aircraft on order, plus its recent merger with Chilean airline LAN, LATAM Airlines Group has become a global force to be reckoned with.
As domestic demand continues to grow throughout Brazil and Latin America, however, more work is needed to maintain its commanding market share and fend off the advances of other global players in the industry. Here, TAM Airlines discuss the merger, plus the likely interest that will be generated for Brazil internationally as a result of the 2014 FIFA World Cup and 2016 Olympic and Paralympic Games.
With air traffic in Brazil growing in line with economic expansion, how is TAM increasing its fleet to keep pace with demand?
We believe the market will grow this year, but at a slower pace than in previous years, especially in relation to domestic Brazilian flights. On the international front, however, the pace of growth in 2012 remains strong. Our plan is to finish this year with a fleet of 157 aircraft.
Where is most of this new demand coming from - domestic or international traffic?
Our research shows that there are many customers flying for the first time, both on domestic and international flights. Since 2006, we have adopted a strategy of expanding air travel access to a far greater proportion of the Brazilian population.
We launched a new retail programme in August 2010. Initiatives range from the installation and expansion of kiosks - for which there are easy methods of financing - in the stores of leading Brazilian retailer Casas Bahia; the São Paulo and Rio de Janeiro metro stations; and at Feira de São Cristóvão, a popular Rio fair. Products such as Giro TAM, which allows passengers to make three stops in one trip, and the www.tam.com.br/comoviajar website, which provides information for new passengers, have also been developed.
What new routes are you planning to meet demand?
There are no plans to open new routes this year, but we will work to consolidate and raise the productivity of existing flights, and increase frequencies to some of our international destinations. We expect to end the year with a load factor of between 83% and 85% on international flights, and expand the supply of seats on routes by between 1% and 3% this year.
International carriers are regularly announcing new routes in and out of Brazil; how are you handling this increasing competition?
Consolidation in the airline world is inevitable, and the merger with LAN is a result of this vision. It is the only way to compete against a backdrop of open skies. IATA predicts that within four decades there will only be about ten to 12 airline groups.
Ours is a capital-intensive industry and, therefore, large groups are able to offer better services at more competitive prices. The creation of LATAM is important for the integration of South America and is maintaining the momentum of growth in the region.
After the recent merger of TAM and LAN, is there overlap between the two airlines in terms of routes? Could efficiency savings be made by cutting some destinations?
The merger of LAN Airlines and TAM concluded on 22 June 2012, giving rise to the LATAM Airlines Group. This new holding company offers customers more flights to more destinations than any other airline group in South America, servicing approximately 150 destinations in 22 countries and transporting cargo to 169 destinations in 27 countries, with a combined fleet of 312 aircraft. We have joint operations in 17 airports. For now, we will keep the operations separate and will work the same way as we have done to date. In the short term, efforts will be focused on improving operational coordination at these airports to provide our passengers with a better service.
How are you preparing ahead of the World Cup and Olympics?
Our research predicts that during the 45 days of the 2014 World Cup, we will see about 2.5 million additional passengers enter the Brazilian market, including international arrivals and domestic flights.
To give you an idea of volume, in just the first week of the World Cup there will be around 330,000 arrivals in Brazil; the current weekly average of international arrivals is 150,000. The air traffic during the World Cup will reach levels predicted for 2020, and will create a new permanent flow of 500,000 international passengers a year to and from Brazil. At our end, we have our fleet plan prepared to meet the demand during the World Cup and Olympic period, and are quite optimistic about the changes the government is adopting.
Beyond these big events, do you see Brazil maintaining its current traffic growth? How do you see TAM's route offering evolving in the long term?
As mentioned previously, we believe in a growing market, but at a slower pace this year than in the past, particularly in relation to flights within Brazil. On the international front, however, 2012 will see high growth. Furthermore, TAM does not expect to open new routes this year; instead, we will work to consolidate and up the productivity of existing flights, and increase frequencies to some international destinations.