LATAM Airlines Group predicts that demand will rise between 60 and 70% by December 2020, after the slump world airlines have faced due to the coronavirus pandemic. Is this an optimistic point of view? Let’s dive into the story.
How long it will take to recover?
Santiago Álvarez, LATAM Airlines Colombia’s CEO, talked with local newspaper La República. Álvarez added that LATAM expects the demand to be fully restored by the end of 2021. He said,
“We are expecting the next three to four months to be at an all-time low. Then, by December, we expect to have 60 to 70% of the daily operations we had before the COVID-19 crisis. It will take us 12 more months to fully recover the demand.”
Currently, LATAM is just operating five international routes. It is also facing difficulties in its domestic operations as some countries like Colombia, Argentina, and Peru have closed their airspace.
Other airlines in the region that have entirely closed its operations are: Aerolíneas Argentinas, Avianca, Avior Airlines, Conviasa, Copa Airlines, Cubana de Aviación, Sky Airline, and TAME Ecuador.
Meanwhile, companies in Brazil and Mexico are still operating with varying degrees of success. GOL, Azul, and LATAM Brazil are operating a network established by the Brazilian government. In Mexico, Volaris reduced 80% of its capacity, Viva Aerobus 70%, and Aeromexico reduced 60% of its international capacity and 50% of its domestic.
LATAM is negotiating with the governments
To face the crisis, LATAM Airlines Group is working on three initiatives, said Santiago Álvarez. In Colombia, the airline proposed to its employees a 50% wage reduction, in order to guarantee their jobs throughout the crisis.
The airline also said that every employee earning less than two and a half times the minimum wage in Colombia (approximately $608) will not suffer the 50% wage reduction.
LATAM Colombia is also renegotiating its terms with its providers. Finally, it is also negotiating with investors, Álvarez said.
In Brazil, LATAM is having an easier negotiation with the government. But, in Chile, things aren’t so easy for the South American carrier.
For example, Lucas Palacio, Economy Minister in Chile said that the government will prioritize helping the people. He added that it is rushed that one company, such as LATAM, is asking for government help.
The international market is going to take longer to recover
René Armas Maes, an aviation consultor in Latin America, said to me that the domestic markets will be the first to recover. This, he says, will take a maximum of 36 months. But the international markets will take more time to come back to its 2019 levels.
With this in mind, LATAM could be one of the hardest-hit airlines in Latin America, Armas Maes pointed out.
The last few years haven’t been easy for LATAM. In 2016, the airline was born, after the fusion of Chilean LAN and Brazilian TAM. Recently, Rosario Altgelt, LATAM Argentina’s CEO said the airline was very likely to post its fourth consecutive year with financial losses.
Armas Maes added,
“LATAM is an airline focused on its international market and its expansion. We currently don’t know what is going to happen with COVID-19 and the impact it will have. We don’t know when the international borders will open and what will the impact be. With such, airlines with the biggest international operations will be the most affected.”
Do you think international demand and capacity will recover by 2021? Let us know in the comments.