South America Economies Struggle – Showing Great Impact on LATAM Air Cargo Revenues


Worse economic conditions in South America have shown their impact on air cargo revenues which were declined in the high range. According to the source, Latin America (LATAM) is facing a great decline in air cargo services recorded during the second quarter. It is the newly rebranded air cargo group belonging to Latin America. It is seen that second quarter revenues of cargo declined in great percentage of about 21.3 percent with 334 million dollars. Whereas, compared to previous records, cargo revenues decline was 12.5 percent with 919 million revenue ton kilometer (RTK). If terms measured in RTK, it was declined by 21.95 cents which was recorded as 23.22 cents during the same period last year. In 2014, 421 million dollars are recorded as LATAM cargo revenues in the first quarter whereas it is 425 million dollars recorded in the second quarter. In 2015, it was 350 million dollars recorded in the first quarter and in the second quarter it is declined to 334 million dollars.

From the statistics, it is clear that air cargo revenue got highly affected in the second quarter. It is because of eight days strike took place at Santiago Customs office. During the strike, air cargos were stopped at Chile, by the people participating in the strike. Another reason for revenue decline is the lack of cargo demand seen in domestic areas of Brazil as well as in international markets. Some other reasons aided towards fall of air cargo revenues are high pressures on cargo revenues during quarter period, fall of local currency value especially Brazilian Real and Euro and low fuel surcharge of cargos due to decrease in fuel cost. These made a great impact on cargo revenues. Due to which cargo revenues available per ton kilometer are declined in the second quarter by 20.2 percent compared to previous year records.  From the records, it is seen 1,072 cargo returns per available ton kilometers recorded in the first quarter of 2014 whereas in the second quarter it is declined to 1,050. In 2015, first quarter, it is recorded as 969 cargo returns per available ton kilometers which has declined to 919 in the second quarter of the same year.

In order to balance the decline in traffic, airline diminished the capacity to 1.2 percent against last year which was 1.7 billion/ATK. Freighter capacity is reduced by 7.1 percent due to capacity reduction. Last year at the end, it announced to give out three Boeing 767-300 freighters to lease in order to maximize the fleet capacity for passengers. Nine similar freights belonging to air cargo group are working under other company for a period of three years which are out of Latin America. Capacity reduction is not enough to balance demand declines which aided to drop load factor from 59.5 percent to 52.8 percent during the second quarter of 2014. LATAM load factor is recorded hiked from 58.6 to 59.5 in two quarters of the year 2014, whereas, in 2015, it is declined from 54.8 percent to 52.8 percent. It is acted as a bad quarter for airline group as revenues got declined by 20.8 percent to 2.4 billion dollars. 49.7 million dollars was recorded as a loss though net income improved. Revenues recorded reflecting the economic conditions of Brazil and currency devaluation of Latin America.


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