LATAM Airlines Group has to undergo a delicate balance of short term pain for strategic gain

Latin America's powerhouse LATAM Airlines Group marked the third anniversary of the merger between LAN and TAM with worsening conditions in one of its largest markets, Brazil. The country's currency devaluation and soaring inflation is dragging down the results of airlines operating into and within Brazil, and LATAM is no different. Its top line revenues fell nearly 22% in 2Q2015 as it faced deteriorating conditions in Brazil.

Similar to other Latin American airlines, LATAM has opted to cut its 2015 capacity forecast for Brazil while refining its operating margins downwards as it adjusts to the lingering challenges in the country. LATAM is seeing some positive demand trends outside of Brazil, but at the same time is navigating continuing currency pressure in other geographies.

Since the close of the merger, LATAM has faced a downward spiral in Brazil as the country's economy started sinking. The pressure will likely continue for the short to medium term, as most forecasts for 2016 indicate a further contraction in the country's economy.