GOL gaining ground on TAM in domestic market

Brazil’s domestic traffic has returned to double-digit growth levels after a difficult spell following the fatal crash of a TAM A320 in July 2007. Despite BRA, the third largest domestic airline, failing in October 2007, the dominance of the two leading carriers TAM and GOL is such that their growth more than compensated for the loss of an airline that had a mere 5% market share in August 2007.

Chart: Brazilian Traffic Growth
Source: Infraero

In January 2006 TAM and GOL had a combined 71.5% of the domestic market followed by Varig (19.9%) and BRA (6.2%). By December 2007 TAM and GOL’s combined share had risen to 89.8% with Oceanair (3.8%) and VRG-Lin Aereas (3.4%) the nearest challengers. During the same period TAM’s market share lead over GOL has fallen from 17.9 percentage points in January 2006 to 7.4 percentage points in December 2007.

Chart: TAM v GOL - the fight for supremecy
Source: ANAC

Capacity growing faster than demand

For 2007 as a whole domestic ASKs grew by 16.3% whereas RPKs grew by just 11.9%, resulting in average load factors falling nearly three percentage points from 71.5% in 2006 to 68.8% in 2007. GOL’s ASKs grew by 37% in 2007 while TAM’s ASKs grew by a more modest 18%. Both airlines experienced load factor reductions from around 73% to around 70%.

According to Infraero total passenger numbers at Brazil’s airports for the first 11 months of 2007 was 100.5 million, up 7.7% on the same period in 2006.

International capacity up despite Varig’s collapse

Despite the collapse of Varig in July 2006, its re-launch in 2007 under GOL’s ownership, plus the international ambitions of TAM meant that international ASKs actually grew in 2007 by 6.8%. However, RPKs fell by 5.1% resulting in load factors dropping dramatically from 74.1% in 2006 to just 65.8% in 2007.

In 2007 TAM had a 67.5% share of international RPKs followed by GOL (14.2%), VRG (13.1%) and BRA (4.7%). In December TAM’s share had reached 70% followed by VRG (17.6%) and GOL (11.1%).


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