TAM to slash domestic capacity in 2013 in an attempt to help rationalise the Brazilian market

Brazil's largest carrier TAM is continuing attempts to address excess capacity in the Brazilian domestic market by declaring plans to cut seat capacity on routes within Brazil by 7% during 2013 after refining capacity guidance downwards throughout 2012. TAM executives conclude that Brazil's sluggish economic growth coupled with over-supply continue to make the operating environment within Brazil challenging.

TAM's largest rival Gol has also been reining in supply throughout 2012 by cutting 130 unprofitable flights from the combined Gol-Webjet network. Gol is in the midst of merging with its smaller domestic rival after acquiring Webjet in late 2011.

TAM has an advantage of leveraging the larger network of the now-combined LATAM to redeploy assets from the Brazilian domestic market onto more profitable routes within South America. This is not an option readily available to Gol, which is primarily a domestic carrier and does not have subsidaries or affiliates in other Latin American markets. But even as Brazil's two largest carriers have cut domestic supply and ceded market share, the country's smaller carriers have continued their explosive growth, which has counteracted some of TAM and Gol's efforts to neutralise the marketplace.