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Avianca Brazil (formerly known as OceanAir) is a Brazilian airline based at Guarulhos International Airport, São Paulo. Avianca Brazil is Avianca's attempt to tap into the growing Brazilian aviation market and reinforce its pan-Latin America expansion strategy. Currently, Avianca Brazil operates to destinations across Brazil with its fleet of narrow body equipment.
Location of Avianca Brazil main hub (Sao Paulo Guarulhos International Airport)
69 total articles
Avianca Brazil expects six million pax in 2013; will ensure enough aircraft in Brazil to meet demand
25 total articles
Brazil’s second largest carrier Gol recorded mixed fortunes during 1Q2013 as its overall losses widened year-over-year but yields and unit revenues improved at what appears to be at the expense of load factor. After recording annual losses for the last two years Gol is hoping an aggressive capacity reduction in the Brazilian domestic market place and a significant reduction in its workforce will help the carrier slowly improve its fortunes.
But Gol faces challenges in achieving its turnaround as company management believes it is uncertain that Brazil will record 2.5% GDP growth in 2013 while inflation is rising. The carrier feels positive about its position heading into the slow season in South America, but the timing of a full recovery for the carrier seems far from uncertain.
Gol pledges a financial turnaround as it records a second consecutive annual loss, of USD745 million
Brazil’s second largest carrier Gol was unable to turn its fortunes positive in 2012 and actually widened its loss for the year. Despite its attempts to combat the cooling Brazilian domestic market through marked capacity cuts and turning some of its attention to international services, Gol recorded a BRL447 million (USD222 million) loss for 4Q2012 and a BRL1.5 billion (USD745 million) negative result for the full year.
Gol believes the changes it has made with respect to its domestic supply and various cost-containment schemes should produce a positive operating result for 1Q2013. But the carrier made similar pronouncements during 2012 as it recorded four quarters of unprofitability, so the pressure is mounting on management to put some grit behind a pledged turnaround.
Unlike its major rival TAM, which is now part of the powerful LATAM Airlines Group, Gol does not have the benefit of large network to help it diversify from areas of weakness to more robust regions. Both Gol and TAM during 2012 had to combat softening demand that resulted from Brazil’s slowing economy. During 2012 GDP growth in Brazil was revised down to 2% from 4%, and during 2013 Gol is projecting growth of 2.5% to a maximum of 3%. This compares to GDP growth of approximately 7.5% growth in Brazil during 2010.
LATAM Airlines Group announced on 07-Mar-2013 that its TAM, TAM Paraguay and LAN Colombia subsidiaries would join its sister carriers in oneworld, confirming moves which had been considered a foregone conclusion for 18 months. The Star Alliance now faces the risk of not having a member in Brazil, one of the world’s most important growth markets, after TAM shifts from Star to oneworld in 2Q2014. But the void will not last long as Brazil’s fourth largest carrier, Avianca Brazil, will almost certainly join its sister carriers in Star, potentially by the end of 2014.
Meanwhile, Brazil’s second largest carrier Gol continues to be wooed by SkyTeam. With TAM moving to oneworld and Avianca Brazil expected to join Star, the stakes mount for SkyTeam while the benefit of maintaining independence for Gol diminishes.
The Portuguese government’s decision in late 2012 to reject the only second round bid it had for TAP Portugal cast doubts over the future for the loss-making and indebted Portuguese national airline group.
The government reportedly said it had a ‘Plan B’, involving shutting down and re-launching the airline after assuming its debt. German Efromovich, owner of Synergy Aerospace (the rejected bidder) has said that he remains interested until the end of 1Q2013 and there have been some suggestions that the government may be planning to re-start the privatisation process.
While a number of major airlines were reported to have considered bidding for TAP in the early phases of the process, including IAG, Air France-KLM, Lufthansa, Turkish Airlines, Qatar Airways and LATAM Airlines, none did so.
TAP’s strengths on routes to Latin America (in particular Brazil) and Africa should appeal to prospective bidders, but the group’s financial position may continue to offset this without some restructuring. Moreover, growing LCC competition in Europe may eventually undermine all-important feed into its key long-haul niches.
Domestic RPK growth in Brazil slowed to 6.8% in 2012, after growth of 15.9% in 2011 and 23.5% in 2010, and will likely remain in the single digits in 2013 as the country’s two major carriers continue to reduce capacity in response to challenging market conditions. But Brazil’s two other main domestic players, the new Azul-TRIP group and Avianca Brazil, will continue to expand and take market share away from the leading TAM and Gol groups.
Azul-TRIP and Avianca Brazil have each seen market share gains of between 2 and 3ppt over the last year. Their gains have come at the expense of Gol, which has been cutting capacity and struggling financially after acquiring smaller low-cost carrier Webjet. Gol saw its share of the domestic market slip by about 4ppt in 2012 while TAM has been able to keep its share relatively stable despite reducing capacity by lifting its load factors.
The 23-Nov-2012 decision by Brazilian low-cost carrier Gol to shut down its Webjet subsidiary falls in line with the larger scheme outlined by the company when it initially disclosed plans to acquire its smaller domestic rival in Jul-2011. Shedding Webjet’s smaller and older Boeing 737-300 narrowbodies has always been a long-term plan for Gol as it integrated Webjet into its operations.
The new timeline to eliminate 737-300s from the combined fleet by the end of 1H2013 allows Gol to closely match the capacity cuts planned by its major rival and Brazil’s largest carrier TAM, which earlier unveiled plans to shrink capacity by 7% during the first six months of 2013. The accelerated capacity reductions at Gol, as a result of its decision to close Webjet, continues consistent downward revisions by both Gol and TAM throughout 2012 in an effort to rationalise supply in Brazil’s depressed market, which began showing yield deterioration around the time Gol moved to purchase Webjet.
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