TAM & GOL see load factors fall while holding on to over 85% share of domestic market

Image: CEO David Neeleman presented the Azul corporate identity in May. The logo is a representation of the map of Brazil. “The map is the clear, categorical representation of our pride in serving Brazil,” said Neeleman. “It clearly signals our intention, not only to serve but also to integrate the whole country.”
CEO David Neeleman presented the Azul corporate identity in May. The logo is a representation of the map of Brazil. “The map is the clear, categorical representation of our pride in serving Brazil,” said Neeleman. “It clearly signals our intention, not only to serve but also to integrate the whole country.”

Logo: AzulAzul is the name finally chosen for David Neeleman’s new Brazilian airline which plans to start operations early next year after placing an order for 76 Embraer 195s. It is hoping to become the third major player in the Brazilian domestic market which is currently dominated by TAM and GOL, which between them accounted for 87.4% of all revenue passenger kilometres (RPKs) flown within Brazil in the first six months of 2008. If we add in Varig (which is owned by GOL) then the market share increases to almost 95%.

However, while RPKs for all Brazilian domestic carriers have grown by 10.8% in the first half of the year, ASKs (available seat kilometres) have grown by 14.7% resulting in average load factors dropping from 69.8% in 2007 to 67.4% in 2008. TAM has seen its load factor fall from 71.7% to 70.0% while GOL’s has fallen five percentage points from 71.3% to 66.3%.

Chart: Brazilian Domestic Market
Source: ANAC

Logo: WebJetAmong the smaller carriers Rio-based Webjet has increased its domestic share to over 2% for the first time in June. The airline was formed in 2005 and operates a fleet of seven 737-300s configured with 136 seats. According to the airline’s website it operates from 12 domestic airports.

Domestic passengers up 4%, international up almost 7%

Based on passenger numbers through airports domestic traffic is up 4% in the first half of 2008. Individual monthly growth rates varied between 9.1% growth in May and just 1.2% growth in April.

Chart: Brazilian airports domestic traffic 2005-8
Source: Infraero

International passenger numbers are up 6.9% in the first half of 2008. Growth rates have fallen in recent months possibly affected by Varig’s decision to drop its recently introduced long-haul services from Sao Paulo to London Heathrow, Rome Fiumicino and Frankfurt.

Chart: Brazilian Airports International Traffic
Source: Infraero

As a result Varig’s share of international traffic among Brazilian carriers has fallen from almost 20% in February to less than 16% in June. Meanwhile TAM’s share has increased from 67% at the beginning of the year to over 75% in June. In the first half of 2008 international RPKs operated by Brazilian carriers have increased 40% while ASKs have increased just 30%, resulting in load factors improving from 63.8% to 68.5%.


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