TAM and Gol continue to rein in capacity as Brazil's economy slows

Continued downward revisions of Brazil's economic growth for 2012 have weakened domestic demand in the country, forcing its two largest carriers Gol and TAM to continue to trim capacity to ensure their supply growth is in line with the moving GDP target.

Gol's new CEO Paulo Kakinoff in a 14-Aug-2012 discussion with investors outlining the company's 2Q2012 loss of BRL715 million (USD409 million) stated the Brazilian economy "has disappointed many of us during the first half of the year", noting that originally GDP growth was projected at roughly 4% for 2012. During 1H2012 growth was essentially flat, said Mr Kakinoff, and now GDP is expected to grow in 2012 by only 2%.

Gol, which has been reducing domestic capacity throughout 2012 has further refined its guidance as Brazil's economy appears to be slowing. Previously, Gol has estimated its domestic capacity would drop by roughly 2%. Under its latest revision Gol now expects its domestic supply to decrease between 2% and 4.5% during 2012.