LATAM outlines plans to cut freighters

Santiago-based LATAM Airlines’ cargo division had another rough quarter during 3Q16, and in response to the twin forces of overcapacity and persistently challenging market conditions, has outlined plans to further reduce its freighter fleet.

From an operational standpoint, after eleven consecutive quarters of falling gross revenues, Santiago-based LATAM Airlines finally caught a break, with total revenues up a slight 0.2% y-o-y during 3Q16, to US$2.5 billion. The group reported net income of US$4.7 million, a great improvement over the net loss of $113 million during the same period last year. Cargo however, continued to suffer,  with traffic down 9.2% y-o-y in 3Q16, to 824 million RTKs, and cargo load factors down 1.8pts to an abysmal 49.6%.

Persistently disappointing traffic results have prompted LATAM Cargo to outline plans to reduce its freighter fleet, but how many units are to be removed? Recall first that LATAM was formed from the merger of Chile-based LAN Airlines, and Brazil’s TAM, and that while LAN focused heavily on freighters, TAM did not. Directly following the merger, LAN’s freighter fleet was distributed across the new group’s subsidiary carriers, ABSA (Brazil), MAS Air (Mexico), and Linea Aerea Carguera de Colombia. These subsidiary airlines have since been swallowed by the LATAM Cargo brand, becoming LATAM Cargo Brasil, Mexico and Colombia.

The chart at right shows the number of freighters currently in LATAM’s cargo fleet, along with the proposed fleet cuts in 2017. As it stands now, LATAM operates a total of ten freighters: three 777Fs, and seven 767-300Fs (three additional 767-300Fs and a 777F are already sub-leased to other carriers).

What might the freighter fleet of LATAM Cargo’s subsidiary carriers look like in 2017 and beyond? Join us next week for part II.