Brazil airlines poised for fast growth

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  1. jbcarioca
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    jbcarioca Gold Member

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    This is a Google translate version of this mornings report of the state of Brazil domestic airlines.

    elissa Costa - O Estado de S. Paulo
    In Brazil, few industries face a competitive scenario as closely as aviation. Is it for years: TAM and Gol dominate the market. The concentration is such that in February, the two companies transported together, almost 80% of passengers in the country but a major change begins to take shape. A group of four mid-sized firms - Blue, Webjet, and Trip Avianca - has been gaining strength since last year.
    In 2010, Webjet has reached the profit for the first time in six years of operation.Avianca said to have reached the balance between costs and revenues and expects to be profitable in 2011. The Blue said it will record its first profitable quarter between January and March. The Regional Trip, in turn, is profitable for three years and is now preparing for a jump in growth.
    The data show that each company has been able to build a sustainable strategy to grow - the question is which one will come out ahead. "These are companies with different models and defensible. It's hard to know which one will fire," said Paul Sampson, a consultant at Multiplan Air "This is the highlight of aviation in the last decade." In a demonstration of the size of your appetite, the group of medium-sized companies will increase by more than five thousand the number of seats available for passengers in 2011 - compared with less than two thousand in the provision of TAM and Gol.
    In the race of emerging companies, one of the most aggressive is the regional Trip. The company will add 14 planes to its fleet. With revenues of $ 740 million, is among the latest group in market share, but disputes the rate of 2.7% is attributed by ANAC (National Civil Aviation Agency). "The agency measures the participation in volume, not value. If they were to compare the revenues would be at the level of Blue and Webjet" said Jose Mario Caprioli, shareholder and president of the Trip.
    Regardless, the fact is that the company will need money to enter the big time. As a strategy to connect small and medium cities, Trip plan to arrive in 2013 with 81 aircraft and $ 2.4 billion in revenue. There are three alternatives capitalization ahead. The first is the use of equity and debt issuance. The other consists of an IPO, although no date set. The third, according to the state found, is the entrance to Latam (result of the merger between TAM and LAN Chile) in the capital of the company.
    Negotiations began in late 2010 and should culminate in a share of Latam around 30%.In a statement, TAM did not deny the talks and said the companies hold talks "aimed at improving the existing codeshare agreement and identify possible opportunities for strengthening and expanding the business." A Trip is not expressed.
    Oil. The attempt to cap more than the market was mobilized from Webjet. She was the first to file the IPO application with the CVM (Securities Commission) and, depending on the outcome of the bid could shoot in front of others. His plans, however, had to be delayed in the face of crises in Libya and Japan and high oil prices. Sought, Webjet not granted an interview because he is still in quiet period.
    After going through three owners in six years, Webjet has decided to adopt a model of very low cost Ryanair-style - the Irish company has already announced that even charging for the use of the aircraft toilets. One executive in particular has worked to align the two. It's Charles Clifton, who worked 16 years in Ireland.
    Clifton is a partner in Aviation Ireland, investment fund of the founding family of Ryanair. In 2009, Ireland has studied the possibility of buying a stake in Webjet. The negotiations have not progressed, but Clifton has just invited to join the board of the Brazilian. Today he lives in Rio and gives hours in the company, according to industry sources. With your help, Webjet began to charge for the marking of seats on the plane and does not serve free water.
    In the dispute between the companies means no grow as fast as the Blue, David Neeleman. In two years of operation, has reached almost 8% of the market and became the third largest in the industry. His intention is to hold 20% of passenger transport up to eight years linking medium and large cities with nonstop flights.
    Since it started flying, Azul has faced criticism. Competitors say the company committed to grow its margins. Furthermore, the announcement of Webjet's IPO was seen as an extra pressure for the company, which also plans to go public - after all, the number of investors interested in emerging business aviation in Brazil is finite.
    "We have achieved break-even (balance between costs and revenues) in December and still have $ 100 million from U.S. $ 350 million raised to start the company. We do not need money and our investors are in no hurry to leave the business," says Neeleman."And no one competitor having more money. That does not mean he will be able to put the aircraft in place."
    "Honey." Near the end of the dispute is the local operation of Colombia's Avianca. The company was the least grown in market share in 2010 and said it would increase its offer in just over 720 seats this year. "For us, the market share is not the most important," says Joseph Efromovich, president. "We want to become the most beloved."
    Guided by this mission, the company engaged in increasing the space between seats and offer treats as outlets and individual TVs. But make no mistake. Their intentions are not so innocent. Avianca The group as a whole must receive 40 Airbus aircraft by the end of 2014 - and has not yet decided where they will be allocated. This is just a sample of what the competition is just beginning.


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