The LATAM Airlines Group is to scale back its Brazilian operations and workforce in response to the country's weakening economy. The Group said in a statement that the sliding Brazilian Real was having an adverse affect on the country's aviation industry as a whole.
"Given the impact of the challenging economic scenario in the country, caused by an increase in inflation and an appreciation of the US dollar versus the Brazilian real, resulting in a slowdown in the airline industry, TAM Linhas Aéreas (São Paulo Congonhas) is now implementing a gradual reduction of its domestic operations in Brazil of approximately 8% to 10%," it said.
As a result, LATAM has revised its capacity growth (ASK) guidance for the domestic market in Brazil for this year from 0% growth to a contraction of 2-4% as compared to 2014.
Despite the negative outlook, TAM CEO Claudia Sender says her airline is focussed on longterm goals while hopeful of a recovery at some point in the near term.
“We continue to believe in the country’s recovery and this adjustment in no way affects the Company’s long-term strategy, which include the renewal of the fleet, the feasibility study for the Northeastern hub and the continuous strengthening of our hubs in Brasília Juscelino Kubitschek International and São Paulo Guarulhos," she said.
TAM's local operations also include ABSA Cargo (São Paulo Viracopos), Pantanal Linhas Aéreas (São Paulo Congonhas), and TAM - Táxi Aéreo Marília (São Paulo Congonhas).
Brazil's economy is expected to shrink 2.2% this year Banco Itau Unibanco said last week with projections inflation should end the year at over 9%.
Aside from the country's economic woes, President Dilma Rousseff is faced with the prospect of impeachment after a corruption scandal at local state-run petroleum giant Petrobras implicated her allies. Though she was chairwoman of the firm during the years when most of the graft took place, Rouseff has denied any knowledge of what happened.
