August 18, 2017 / 3:17 PM / a year ago

LATAM Airlines 'very cautious' on Brazil demand outlook

SANTIAGO (Reuters) - LATAM Airlines Group SA, Latin America’s largest airline, is still “very cautious” on the outlook for its key domestic Brazilian market, with demand volatile, a top executive of the company said on Friday.

FILE PHOTO: A LATAM Airlines plane takes off at Santiago International Airport, Chile March 30, 2017. REUTERS/Ivan Alvarado/File Photo

“We have seen some very positive weeks in terms of demand in Brazil,” Chief Financial Officer Ramiro Alfonsin told investors on a conference call following the release of second-quarter earnings.

“But we’re still very cautious because we’ve also seen that certain weeks are not very good,” he added.

“Internationally, we’re doing very well but domestic in Brazil I would say we’re cautious still on the second half of the year,” he said.

Alfonsin added the company had “some concerns” on Argentine domestic demand, without elaborating on the reasons.

The company did not plan to change margin guidance of 6 percent to 8 percent at the current time, due to the cloudy Brazilian and Argentine outlook and one-off payments linked to an ongoing cost reduction plan, he said.

Late on Thursday, Santiago-based LATAM LTM.SN (LTM.N) reported a larger-than-expected second quarter net loss, hurt by currency effects.

However, investors were cheered by rising operating income and growth in its international operations.

Shares rose around 4 percent Friday.

The airline, formed in the 2012 merger between Chile’s LAN and Brazil’s TAM, has been buffered by economic woes in its biggest markets in recent years. But signs of an economic recovery in Brazil have helped its shares in 2017 and led it to a more positive outlook.

It is also fighting off increasingly cut-throat competition from low-cost entrants into the Latin American market by rolling out a change to its business model that reduces basic fares while charging for services such as food and checked luggage.

“We have the tools and ability to face the new low cost competition in each of the markets,” said Roberto Alvo, the company’s commercial vice-president.

“We feel very confident with what we’ve done; we still have lots of opportunities in terms of reducing our costs,” he added.

Reporting by Rosalba O'Brien; Editing by Chizu Nomiyama and W Simon

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