Brazil’s economic crisis keeps LATAM Cargo in the weeds

LATAM Airlines’ cargo business, along with the regional economy, got pounded in 2016, and the latest January numbers suggest that the beleaguered Santiago-based carrier isn’t out of the woods yet, despite a 1.9-percentage-point increase in its cargo load factor. According to the carrier’s monthly report, out yesterday, revenue tonne kilometers fell 2.4 percent, year-over-year, to 281 million.

One sign that LATAM is taking a proportional response to the decline is its move away from freighter flights and towards belly capacity, which the carrier was carrying out throughout the latter half of 2016. LATAM reduced its third quarter 2016 freighter operations by 16.4 percent over 3Q 2015.

Final statistics for 2016 aren’t due until this March, but 3Q 2016 cargo revenues decreased by 14.3 percent, y-o-y, driven by a 9.2 percent decline in cargo traffic and a 5.6 percent decline in cargo yields, compared to 3Q 2015. The same quarter saw y-o-y cargo revenues per ATK decline by 8.9 percent.

The carrier continues to face strong headwinds that depress its results, as the regional economy, led by former powerhouse Brazil, remains in the doldrums. With the impeachment of former Brazilian President Dilma Rousseff, the country’s turbulent economic situation was compounded by political instability and seemingly endless evidence of corruption at the highest levels.

Despite the assurances of Fabio Kanczuk, the secretary of economic policy for Brazil’s Finance Ministry, the outlook remains gloomy. Brazil’s government lowered its forecast for economic growth from 1.6 percent to 1.0 percent in 2017, as the country struggles with its worst recession in at least eight decades.

For carriers like LATAM, the tide won’t turn until Brazil’s consumers start buying imported products, and that won’t happen until they have increasing incomes and consumer confidence. In the meanwhile, carriers will be flying in empty on their way to pick up agricultural exports routed to North American and European markets.

Those interested in learning more about air freight in 2017, should join us at Cargo Facts Asia in Shanghai, 25 – 26 April.  To register, or for more information, go to CargoFactsAsia.com