Brazilian airline TAM posted a large fourth-quarter loss on Tuesday, reversing a profit in the year-earlier period because of steep losses on fuel hedges and a weaker currency.
The net loss reached BRR1.12 billion reais (USD$480.3 million) in the fourth-quarter under US generally accepted accounting principles, compared with profits of BRR118.5 million a year ago, TAM said in a statement.
TAM cut its estimate for domestic air travel demand growth in 2009 to between 1 percent and 5 percent, from a previous forecast of 5 percent to 9 percent because of an expected slowdown in Brazil's economy.
"The year of 2009 is certainly challenging, but we believe in a recovery for the market at the end of the year," TAM's chief executive David Barioni Neto said in a statement.
The company plans to increase domestic seat capacity 8 percent, while international capacity should rise 20 percent as it adds new planes to meet the increased travel demand.
TAM had net financial expenses of BRR1.96 billion in the fourth quarter because of a drop in Brazil's currency and as the cost of fuel hedges rose. The airline had financial gains of BRR46.2 million in the year-earlier quarter.
Brazil's currency sank nearly 24 percent in 2008, with most of the decline in the second half of the year as global financial market turmoil intensified.
The company said it renegotiated its West Texas Intermediate hedging contracts to reduce cash disbursements and expects to save USD$48 million in payments already in the first quarter of 2009. TAM said it has an average strike price for 2009 of USD$109 a barrel.
TAM said the number of passengers it transported in the fourth quarter rose 1.8 percent from a year earlier to 7.38 million people. Net sales jumped 28.2 percent to BRR2.92 billion.
Operating profit, as measured by earnings before interest and taxes, rose to BRR326.8 million in the fourth quarter from BRR90.5 million in the fourth quarter of 2007.
For all of 2008, the loss totaled BRR1.4 billion under Brazilian accounting standards, compared with a profit of BRR505 million a year ago, the company said.
