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LATAM likely to cut A350, B787 Orders as Brazil traffic slumps

2016 06 12

*Latam Airlines Group, the biggest carrier in South America, said it’s likely to cancel or delay some of the 53 widebody jet orders placed by constituent units before a 2012 merger
 

LATAM Airlines Group, the biggest carrier in South America, said a slump in Brazilian traffic means it’s likely to cancel or delay some of the 53 widebody jet orders placed by constituent units before a 2012 merger. LATAM is reviewing some of the 27 Airbus A350s going to São Paulo-based TAM and 26 Boeing 787 Dreamliners for Chilean arm LAN, which created the group through a takeover of its Brazilian rival. The lease of a further six 787s from Aercap Holdings could also be at risk.

“TAM bought the A350 10 years ago and we bought the 787 seven years ago,” LATAM Chief Executive Officer Enrique Cueto said in an interview, adding that Latam had expected Brazil’s economy to grow about 4 percent a year, when it’s actually shrinking by that degree.

With approximately 150 aircraft currently deployed in Latin America’s most populous nation, LATAM needs to shrink the fleet there about 10 percent this year to match capacity to demand, with a 2 percent cut due in 2017, he said.

The company isn’t alone in paring its exposure to Brazil after two years of recession. The country’s other main carriers, Gol Linhas Aereas Inteligentes and Azul Linhas Aereas Brasileiras, are planning to get rid of 53 aircraft this year. While most will be narrow-bodies, that’s still more than the total fleet of fourth-ranked Avianca Brasil.

LAN has so far taken 10 of 14 ordered 787-8s and five of 12 larger 787-9s, according to Boeing. TAM received the first of three delivered A350-900s out of 15 on order in December and is due to take 12 -1000 variants from 2019.

LATAM said separately that the remaining 787-8s have been upgraded to the bigger variant, while the Aercap lease deal covers six 787-9s, also at Lan.

It’s not clear whether the remaining Airbus planes are more vulnerable to cancellation, or if surplus A350s could be deployed away from Brazil and the 787 order cut. Boeing and Airbus referred calls regarding the jets to Latam.

Benjamin Katz - The Seattle Times

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