Continuing weakness in Brazil pressures 3Q earnings for the country’s major airlines
Prolonged weakness in the Brazilian domestic market resulted in a depressed 3Q2012 financial performance for the country's major airlines Gol and TAM even as the carriers have continued to cut domestic capacity throughout 2012. Both airlines believe they are taking the necessary steps to combat the continued sluggish demand that prevails in Brazil, but challenging conditions continue to be a significant threat heading into 2013 as the country's stagnant economy struggles to regain momentum.
Both Gol and TAM's parent LATAM recorded losses during 3Q2012 that were in part fuelled by the Brazilian economic slowdown and a 24% depreciation of Brazil's currency against the US dollar. LATAM, the merged entity of Chile-based LAN and TAM, also recorded integration charges of USD20 million and a one-time USD70 million tax charge related to an increase in the Chilean income tax rate which resulted in a net loss of USD64 million. Excluding those items LATAM recorded a USD21 million net profit.
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