Latam unveils plans for low-cost South American network

Latam unveils plans for low-cost South American network

Details have emerged of a new Latam Airlines low-cost travel model for domestic services across six South American countries.

The first stages are due to be introduced in the first half of 2017, with fares to be cut by 20% up to 2020.

But the new model will need cost cuts driven by a “significant reduction” in selling and distribution expenses, increases in fleet utilisation and operational productivity.

The initiative emerged as the carrier revealed a return to the black in the third quarter of the year.

The airline achieved net income of $4.7 million against a loss of $113.3 million for the same period in 2015.

This came despite capacity cuts in Brazil of more than 13% and 31.5% on routes from the country to the US.

The new domestic initiative “represents another step in transforming the group to address the changing dynamics of customers and the industry, and increasing its competitiveness,” the airline said.

“Latam is determined to continue providing increasingly competitive fares and an improved travel experience for its customers by granting them greater flexibility and customization throughout their journey.”

The main aim of the project, which includes 78% of Latam’s passengers and 45% of capacity, is to increase competitiveness and ensure the sustainability of the domestic business model in the long term.

Latam Airlines Group chief executive Enrique Cueto said: “Our objective is that fares continue to decline, making air travel accessible to more people and to those who wish to fly more frequently.

“The new travel model seeks to satisfy the needs of today’s passengers, who value fast, convenient and seamless travel, as well as the ability to manage and personalize their own travel experience, only paying for the services they require.”

Latam has cut its lowest fares on domestic routes by up to 50% over the past decade, resulting in air travel expanding by three times in the region.

This saw passenger numbers in Chile rise from three million to 10 million over the period.

Latam saw a 1.7% decline in passenger carryings in October to 5.7 million over the same month last year.

Overall passenger traffic decreased by 0.2 while capacity was trimmed by by 1.7%.

As a result, the load factor for the month increased 1.2 points to 85.6%.

International passenger traffic accounted for about 56% of the month’s total passenger traffic.

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