Avianca Holdings:under pressure in the region, but believes yield declines could stabilise in 2H2016

After recording sequential quarterly improvements from 4Q2015 to 2Q2016, the Latin American airline group Avianca Holdings believes that its yield performance should stabilise in 2H2016. However, despite improving trends on a sequential basis, Avianca’s year-on-year yield declines remain in the double digits, and currency fluctuations could affect its current outlook for yield stabilisation.

Although the airline group’s largest market – Colombia – is facing economic pressure the challenges are not as severe as Brazil’s dire economic circumstances, and at present Avianca believes that the Colombian domestic market and routes from Colombia to North America are beginning to recover.

The duration of a recovery in those markets remains unknown, and Avianca and its Latin American rivals continue to adapt to the overall weakness in the region. A major focus for all airlines in Latin America is decreasing costs, as yields and unit revenue remain under pressure. Avianca’s unit costs excluding fuel have also fallen in the double-digit range for the last three quarters, and the company has outlined a cost-cutting scheme to save millions annually by YE2018.

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