Avianca Brazil Update: Growth Of International Operation
Avianca Brazil chairman Jose Efromovich discusses the initial performance and upcoming growth of the airline’s international operation. Avianca Brazil launched flights to Miami, New York and Santiago in 2017 using a new fleet of four A330s. It plans to add a second daily flight to Miami and a third daily flight to Santiago in 2H2018 as two more A330s are delivered. Avianca Brazil also plans to continue rapid domestic growth with a focus on adding frequencies on existing routes. It has been the fastest growing airline in Brazil the last several years and plans domestic capacity growth of approximately another 20% in 2018.
Transcript
Jose Efromovich:We launched our international flights last year. In June, we started to fly to Miami. August, Santiago was our destiny, and we launched at once 2 flights a day to Santiago. And in December, we started to fly to New York. Miami is fully consolidated, so considering that, we decided to launch a second flight to Miami. So we will have a day flight and a night flight, 7 flights a week to Miami, starting now in November. In August this year, We will launch the 3rd flight to Santiago, so that will give us 3 flights per day. And this is what we have for the rest of the year. No more new flights for Avianca Brazil. We are going to wait. Brazil, it's— we have elections in the country. Brazil, it's just getting out of a situation of a couple of years ago, impeachment of a president, a new president that came in, the overall political situation kind of not totally stable. That reflects immediately in the economics, reflects immediately In all the businesses, mainly in the aviation. So we decided to wait until the end of this year to launch our expectations for the next following years. Yeah, but remember that a few years before, we have reduction on capacity. Okay? So what we are discussing now is what happened last year. Last year, it really came in some some more capacity. By the other side, we got other carriers, American carriers, cutting capacity. So it's kind of stable. Last year and this year is kind of stable. And this is why we want to wait until the end of the year to see where else we are going to fly. We are growing mainly in routes or locations that we are already attending. So we are not expanding. We are not going to open up 6 different bases per year. What we are doing is just picking up our products and make it better. Cities that we have 6 frequencies, maybe we will put a 7th. Cities that there is 4 frequencies, we'll put a 5th one. But there is no big incrementals, big incremental number of bases, number of cities. So our growth is based on our products where we are already, and mainly to make sure that our product gets better and better and better to support better the customers. It is sustainable, maybe not in the same ratio, but there is sustainable. Matter of fact, we still perform the highest load factors in the market for the last 5 years. So we may have some spills, important spills, and we may— there is still room for us to put some capacity, not maybe not in the same ratio that we were doing it in the last 5 years, but there is still room for growth. The best product in the market for a very reasonable price. The different product that we decided to put into the market, that was decided in 2008 when we were getting into the market with— at that time we had only 14 aircraft and we had to compete With two giants having more than 90% of the market, only way to do it was to do something different. Bring in a different product. Bring in things that will differentiate your product from what was in the market at that time. So remember, we brought back to the air to the to the to the to to to. To the flights, to our customers, we brought back food for free. When I say food, it's food, it's not snacks. We brought back space for them to relax. We brought back, or not back, we brought individual entertainment for every single passenger. Of course, if it's individual. But we differentiate our product. And today we are in a position to be able to offer more because we have people that would love to fly with us and in some of the flights they don't get the space. Culturally, the country, it's prepared to fly one class. Nobody flies business class in Brazil domestically. Okay? So having the largest pitch, the biggest pitch available, makes our seat very comfortable, enough comfortable for corporate customers to decide to fly with us. We don't look for market gain as a market share as an objective. Market share is a consequence on what we do on our day-by-day. So we are not going to give up profitability for market share, by no means. Matter of fact, last year we finally came up with— actually, it was the first year that we came up with profit, real profit in the bottom of the line. We are in a situation of 3 last years positive a bit, but not a positive bottom line profit. But last year we made it. Small one, but we made it. And could be much bigger if it wouldn't be the introduction of all the international flights that we did last year. So put us in a situation of big demand for cash in order to make it happen. But we decided to do it and it worked out well. And even though at the bottom of the line, we really came up with a profit. There is no— it's exactly what we already announced. We should end up this year with 58 aircraft, all of them Airbuses, quite new. And a couple of years ago already, we just gave up on the Fokkers that were flying domestically for us. Unfortunately, it's a great airplane. But a big consumer. So this is why we end up only with the Airbuses. And we roughly— 58 is the number that we're expecting to finish, to end this year. No, it's— that program is going pretty well since 2015. We are increasing passengers coming from the partner airlines month after month. Every two months, every month. Since we entered into Star Alliance, we we we most of the bases that we open were to attend the Star Alliance customers. We opened the the base of of Navegantes in Santa Catarina. We opened the base of Belo Horizonte. We opened the base of actually Santiago, one of the One of the biggest reasons why we started to fly to Santiago was to connect our partners in São Paulo, in Guarulhos, to Santiago. This year we started to fly to Victoria, and not only those bases that we opened, but the cities that we did attend before, today they are much much more used by our partners from Star Alliance. So this is growing constantly. This is the— we are in the 3rd year on the alliance, and I mean, that was a great decision to join the Star. We are very, very happy with that. I don't see any change. I mean, we We have a great relationship with United in Brazil. United is discussing what it's very much public with United and Avianca Holdings. This is going on. Nothing will change. Avianca Holdings should get into an agreement pretty soon. And Brazil, it's doesn't have any joint venture agreement yet. We're starting to talk also, but it will take more time. But we still have the co-chairs in place and increasing the cooperation year by year, more and more and more with United and with all the partners from, from South.
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