Cost efficiency for LATAM and Avianca takes on a higher priority as yields continue to fall

Weak economic conditions are hovering over Latin America well into 2016, forcing the region's airlines to adjust their capacity, and expectations for a recovery in yields. Those airlines are also strengthening an already laser-sharp focus on controlling cost, which becomes even more important as revenue softness persists.

Latin America's two consolidated airlines LATAM and Avianca Holdings have recorded favourable unit cost performances during 2015, driven in part by lower fuel expense, while yields have remained under pressure. LATAM is in the midst of an initiative to shed millions in operating costs by 2018 and fuel hedging headwinds Avianca faced in 2015 should settle down in 2016.

Maintaining a flat or decreasing cost structure takes on a different level of importance in an environment where revenues and yields continue to be squeezed. But LATAM and Avianca are working to wring out inefficiencies in their cost base, and working to scale back fleet growth in order to reduce financial commitments.