LAN Airlines will not issue interim dividends in 2012 for the first time since 2003, according to a report by Diario Financiero, as the carrier purses a more conservative financial strategy following the loss of its investment grade credit rating after the merger with TAM. The conservative strategy will also reportedly help absorb TAM's debt into the combined LATAM Airlines Group and help fund expansion plans.
LAN will not issue 2012 interim dividends
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The Viva Group settles on Peru amid changing competitive dynamics in Latin America
Peru has emerged as the country of choice for the third airline of the Viva Group, which aims to launch its Viva Air Peru during the first half of 2017. In the past Viva has toyed with the idea of spreading its low cost brand to Peru, but chose to pursue an opportunity in Costa Rica that it later abandoned due to the high operating costs imposed on the country’s airlines.
Peru has numerous attractive attributes for a low cost start-up, including favourable economic growth, the absence of a true low cost airline and strong domestic passenger demand. Trips per capita for Peru are similar to the still-developing (and growing) markets of Mexico and Brazil, which each feature low cost competitors.
But the current iteration of the Viva franchise faces some changing dynamics in the Latin American market place – primarily the recognition by the region’s largest airline groups of the LCC threat, and their adoption of new tools to compete more effectively with existing and aspiring LCCs.
The Trump presidency casts a long shadow over a tentative recovery in Latin America
After battling dismal economic conditions for the past two years, Latin America is poised to begin pulling itself out of fiscal decay in 2017. Near the end of 2016, forecasts tilted toward a return of modest GDP growth between 1.5% and 2% for 2017 after the region endured an economic recession for the prior two years.
But the emerging optimism was significantly clouded when the US selected Donald Trump as its next president in Nov-2016. An already weak Mexican peso (MXN) plunged against the US dollar (USD) on fears of a Trump Administration abolishing NAFTA, engaging in mass deportation and following through on plans to erect a wall on the US-Mexico border. Economists have already issued revisions to Mexico’s projected economic growth for 2017, and the benefits of a new liberalised bilateral between the two countries are in jeopardy as airlines have to adjust their growth prospects to reflect a potential new era of protectionism.
Broader implications of Mr Trump’s presidency on Latin America will emerge over time; hopefully they will not be as sombre as the politicking noises might suggest.
But even so the current cloud of continuing uncertainty ushered in by his election could become an impediment to recovering economies and air traffic flows within, and to and from the region – just as demand was starting a tepid recovery near the end of 2016. Any downward revision to Latin America’s economic forecast for 2017 places airlines operating in the region in a precarious position.