LATAM Airlines May Recover In Three Years

25th Oct 2014

It is projected that Latin America's biggest airline group may fully recover in three years' time to see finally see profit. This according to its Chief Financial Officer, Andres Osorio.

 

LATAM Airlines Group was formed in 2012 when LAN Airlines and TAM Airlines merged.

Prior to the merger TAM Airlines was then Latin America's and Brazil's biggest carrier by any measure. LAN Airlines, meanwhile, is a consortium of ten South American carriers with operations in five different countries.

LATAM Airlines Group is still on the honeymoon period since their union in 2012. The group's official added that structural work on the group's fleet has already been completed. The airline group is now facing a daunting challenge as market has contracted while their European and American rivals aggressively expand into the region. All these have affected greatly the group's performance.

During the announcement of the merger between the two biggest airline groups, Brazil's economy was experiencing an exponential growth that rivaled China, hitting 7.6%. When the union was sealed two years later, Brazil's economy spiraled down to just 1% amid weak export demand.

Fast forward to 2014. According to analysts, Brazil is projected to grow by 1%, which is even below South America's average of 1.4%. contracted to 0.1% during the 2nd quarter of this year, a far cry from the 14% in 2010.

Based on the Standard & Poor’s and Fitch Ratings, LATAM Group got a BB, a rating two levels below the investment grade. The airline even has a bleak future according to Fitch.

The group is expected to reduce capacity by 1% in Brazil this year as market demand continues to stagnate. It will, however, recover slightly next year. LATAM shares lost 17% of its value this year.

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