LATAM’s 4Q2012 yields are damaged by aggressive competitive expansion in the US-Brazil market

Competitive pressure in long-haul markets between the US and Brazil was a major driver in the 10.3% year-over-year decrease in yields during 4Q2012 for the powerful newly minted LATAM Airlines Group, which is the combination of Brazil's leading carrier TAM and South American group LAN. The performance in long-haul markets is likely disappointing for the group as its performance in Brazil's cooling domestic market improved during the last three months of 2012.

In some ways the competitive pressure on long-haul markets from the US and Brazil will be short-lived as TAM and American Airlines are working to forge a codeshare partnership that will see the two historic rivals team up in the market now that LATAM has selected oneworld as its alliance of choice. Once all the regulatory approvals for the tie-up are in place, TAM will be able to benefit from onward connections in Miami and New York that it currently does not enjoy. Based on current schedules in Innovata (24-Mar-2013 to 30-Mar-2013) TAM and American presently account for 69% of the capacity between the US and Brazil.