01 April 2008

Brazilian Market enters turmoil again

After the stellar growth of both TAM and GoL over the last few years – both airlines are now hitting some turbulence. Are we likely to see some major cutbacks or will they be able to ride out the storm before David Neeleman enters the scene?

Both TAM and GoL reported poor results this time out. GoL is now saddled with the rump of Varig which is probably now on business plan number 93. If the once national carrier sounds like the Hokey Pokey you would be forgiven for thinking so. Both airlines though need to rationalize their operations.

However the regulator ANAC needs to accept some responsibility here for playing fast and loose with the politics. They have to either get out or regulate. The quasi interference has not benefitted the public. Brazil is the largest market in South America and it still has a lot of possibility for expansion. Neeleman thinks so. If for no other reason than he has a ready market in the Mormon community!

For now though the regulators need to be looking at supporting the market with stimulus packages. This should include addressing some of the airport infrastructure issues particularly access to and from the airports in Rio and Sao Paolo. Of course it goes without saying that the Government needs to invest significantly in the ATC system.

So chaps – better get a move on – your days of fast growth without cost are now over. You don’t have much time before you get new competition – from a professional.



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