TAM To Cut Fleet As Air Traffic Slows

February 1, 2012

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Brazil's largest airline TAM is cutting back its fleet and focusing on the profitability of existing routes as it sees 2012 air traffic growth slowing to half of last year's pace.

TAM plans to end the year with 157 planes, according to a securities filing, as it trims its domestic fleet. The prior fleet plan called for 159 aircraft at the end of 2012.

The airline sees demand for domestic flights up 8 percent to 11 percent in 2012, after growing near 16 percent last year. TAM said its own capacity, measured in ASK, would not increase more than 2 percent for domestic routes and would rise 1 percent to 3 percent internationally.

More modest growth in Brazil is still on pace to beat the expansion of civil aviation globally. But the sharp slowdown reflects a harsh new reality of congested airports, high fuel prices and a glut of new capacity in a Brazilian industry that was flying high for years.

The head of TAM Airlines, Libano Barroso, said the company would focus this year on controlling costs and boosting passenger yield.

"We're going to aim our efforts at increasing the company's profitability, continuing a trend of recovering yields started in the second half of last year," Barroso said in a statement

In 2011, the airline expanded its seats available by 9.5 percent, while the industry in Brazil as a whole expanded by 12.9 percent.

TAM said its occupancy rates on domestic flights should rise to between 72 percent and 74 percent from 68.8 percent in 2011.

TAM reports fourth-quarter financial results on February 15.