Tam cuts domestic flights in Brazil by 10 pct citing adverse economy

Tam Linhas Aereas, the Brazilian airline owned by the Chilean-Brazilian Grupo Latam, will cut operations in Brazil between 8 percent and 10 percent as it faces adverse local conditions which include projections for economic contraction in addition to rising inflation and a weakening local currency.

¨Tam is taking this measure to face a new difficult economic context in Brazil and this is why it was necessary to seek adjustments,” said Claudia Sender, president of TAM SA, according to a document filed on Monday with the Brazilian stock and bond authority.

¨(Tam) is working so that this situation will have the lowest possible impact. The expectation is that the total workforce will be reduced less than 2 percent, ¨ the filing added.

The company said it will not stop covering any of its destinations and that workers to be dismissed, none from cabin crews, will receive training.

¨The Brazilian air travel industry has been showing a slowdown in demand,” according to information from the National Agency of Civilian Aviation.

In addition, according to data from the Central Bank, the industry projects a contraction even deeper than that anticipated for the Brazilian gross domestic product,¨ Tam added.

The inflation rate may close the year above 9 percent, while the U.S. dollar will keep its trend of rising against the domestic Real currency, it said.

¨This adjustment does not affect our long-term strategy which includes our fleet renovation, our project to study the viability of the Northeast Hub and the ongoing strengthening of the hubs of Brasilia and Sao Paulo,¨ Tam added.

Officials from the Brazilian Association of Airline Companies, known as ABEAR for its Portuguese language acronym, declined to provide comment as to whether other members of the group may also cut operations or workforce.

The issue only relates to one company, while ABEAR has five members which besides Tam also include the local unit of Avianca, Azul Linhas Aereas Brasileiras, Gol Transportes Aereos and Trip Linheas Aereas.

According to information on the ABEAR website, the current occupancy rate for the Brazilian air travel industry is 78.2 percent while the number of passengers has increased 3.3 percent from last year.

Latam Airlines Group was created in 2012 when Chilean Lan airlines, with affiliates in Peru, Argentina, Colombia and Ecuador, became the majority partner in an association with Tam (Transportes Aereos del Mercosur SA), creating one of the world´s biggest groups. The airline covers 135 destinations in 27 countries with a fleet of 327 airplanes and 53,000 employees.

Lan officials declined to provide additional comment to the information in the filing.