Chile LAN reviewing investments, ready for slowdown
By Antonio de la Jara
SANTIAGO, Nov 27 (Reuters) - Chile's dominant airline LAN is reviewing investment plans as it faces a slowdown in global traffic next year as demand weakens in a slower world economy, company Vice-president Enrique Cueto said on Thursday.
LAN LAN.SN (LFL.N), one of the region's largest air carriers with operations in Argentina, Chile, Ecuador and Peru, has been expanding aggressively, but Cueto said the company was reviewing next year's budget with an eye to a slowing global economy.
"We're starting to look at next year's budget, and we'll obviously review investments that are not absolutely necessary. We're going to be careful," Cueto told a seminar of corporate executives and government officials in Chile's capital Santiago.
"Nobody knows yet what the impact is going to be on traffic and how much that is going to affect financial results."
He said that although the recession that has hit a number of developed economies has spared the company so far, it was prepared for a more sluggish outlook.
"Until now there hasn't been much impact, but going forward industry traffic is expected to fall about 15 percent," Cueto said.
In the first nine months of the year LAN's profit rose 5.4 percent to $218.6 million, on brisk revenue growth and effective offsets to rising fuel costs.
In the same period LAN saw revenue expand 35 percent to $3.354 billion.
Although the company has been in an agressive fleet renewal plan, Cueto said next year the company was not expecting a significant rise in new aircraft.
LAN Chief Executive Ignacio Cueto said at the event that capacity growth would slow to between 0 percent and 5 percent, compared with 15 percent to 18 percent growth in other years.
"We haven't seen radical drops in demand, but we do believe a drop in 2009 is imminent," he said.
Even though the dramatic drop in oil prices has been a boom for airlines, Cueto said the rise of the dollar versus other currencies was making airfares more expensive for many.
"Without a doubt these situations make flying more expensive and consequently, airfares have to get cheaper. We'll look for ways to make the best offers," he added. (Additional Reporting by Rodrigo Martinez, Writing by Lisa Yulkowski)
