TAM to get Star treatment as international network expands supported by increasing domestic dominance

Image: TAM group photo
TAM gets the Star treatment. In October TAM was unveiled at a special ceremony in Sao Paulo as the latest airline to join the Star Alliance. “Thanks to TAM, Latin America will no longer be a white spot but rather a hot spot on our world map,” said Jaan Albrecht, CEO of Star Alliance.

Last month TAM Linhas Aereas, Brazil’s biggest airline, took delivery of four new Airbus aircraft (two A320s and two A330s) and one new Boeing (a 777). As a result, by the end of the year the airline will have a fleet of 125 aircraft, including 101 Airbus narrowbodies and 24 widebody aircraft. During the last year the airline has phased out the last of its Fokker 100s which formed the majority of the fleet as recently as 2002.

The new long-haul aircraft will help the airline to continue to grow its international network which currently stands at 18 destinations; three in North America, five in Europe and 10 in South America. Services to Orlando, TAM’s newest international destination, started this week with daily flights from Sao Paulo using an A330.

Passenger numbers have doubled in just three years

Passenger numbers have more than doubled between 2004 and 2007, reaching over 27 million last year.

Chart: TAM traffic 2000 - 2007
Source: TAM Annual Reports

In 2007 international traffic grew by almost 50% to 3.7 million, representing 13% of passengers carried. However, in ASK terms international operations represented 36% of the business. In 2008 this figure will be close to 40%.

According to the airline’s latest quarterly results, passenger numbers in the first nine months of 2008 are up 12.2% to 23.1 million, suggesting that the 30 million mark should be beaten this year. Domestic demand is up 9.5% while international traffic has grown an impressive 30%.

Domestic competition will grow in 2009

Image: TAM airline ascending
TAM took delivery of one new Boeing 777 and four new Airbus’ (two A320s and two A330s) last month. By the end of the year the airline will have a fleet of 125 aircraft.

TAM has been the domestic market leader in Brazil since July 2003 and according to ANAC statistics the airline had a 52.8% share of domestic capacity (as measured by revenue passenger-kilometres) in September. It serves 42 destinations with its own aircraft and a further 37 thanks to alliances with regional carriers. TAM’s biggest domestic bases are at Sao Paulo Guarulhos (688 weekly departures), Sao Paulo Congonhas (665), Brasilia (519), Rio De Janeiro (430) and Salvador (313).

While the airline has increased its lead in domestic market share over GOL the airline faces increased competition in 2009 from a re-focused GOL and new entrant Azul, the airline being created by jetBlue founder David Neeleman.

TAM tops international rankings

According to ANAC data TAM has an impressive 82% of the international market (share of RPKs in September) among Brazilian airlines, having increased its capacity by over 25% in the last year and seen its load factor climb to 80%. However, it should be noted that Brazilian airlines currently have less than 40% of international capacity.

In terms of total international capacity TAM is still the leader but with just 24% of the market if the international routes operated by its subsidiary in Paraguay, TAM Mercosur, are included.

Airline Frequency share Capacity share Routes
TAM + TAM Mercosur 25.1% 24.0% 27
TAP Portugal 6.9% 8.9% 10
American Airlines 6.8% 7.7% 6
Varig 8.3% 6.7% 6
GOL 6.5% 5.7% 7
Source: OAG Max Online for w/c 17 November 2008

In the last year TAM has added international routes to Montevideo (5 November 2007), Frankfurt (30 November 2007), Madrid (21 December 2007), Bariloche (14 August 2008), Lima (17 October 2008) and Orlando (21 November 2008). During 2009 the airline expects to add just one additional international route, while international ASKs are expected to grow by 20% compared with 8% for domestic ASKs. The total fleet will grow by just five aircraft to 130 with the addition of three further Airbus narrowbodies and two Airbus widebodies.

Ready to shine as a Star

In October it was revealed that TAM had been selected as the newest member of the Star Alliance. Integration procedures will take a while but should hopefully be concluded during 2009.


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