Brazil airlines stay cautious even as demand seen bottoming out

SAO PAULO, Sept 22 (Reuters) - Brazilian airlines remain cautious over the outlook for year-end air travel in the country, as fallout from a recession, the weak job market and still-high inflation are offsetting signs that demand might have bottomed out, industry leaders said on Thursday.

In a statement, LATAM Airlines Group SA, the country’s largest carrier by capacity, has noted early signs that air travel demand may have stopped slumping. Still, at this point it is uncertain when purchases of tickets will start picking up.

According to Abear, the group that represents airlines in Brazil, domestic flight demand dropped 6.6 percent while the number of seats available dropped 6.2 percent in the year through July. While those falls are a fraction of the declines since earlier in the year, it might be too early to talk about a recovery, Abear president Eduardo Sanovicz said.

“It has been a complicated year, but we prefer to see how demand will behave in September before doing any predictions for the end of the year,” said Frederico Pedreira, Avianca Holdings SA’s top executive in Brazil.

Tourism agencies say eroding household income is taking a toll on demand. Clients at CVC Brasil SA, Brazil’s No. 1 tourism operator, are inquiring about prices but have been slow to buy tickets - a sign they are waiting until the last minute to purchase them, said Chief Executive Officer Luiz Eduardo Falco.

The situation underscores how local carriers, once bitten twice shy, are coping with the impact of Brazil’s longest recession in eight decades. The crisis, which has led some of them to return plane leases and refinance debt, could spark some to sell stakes to larger rivals.

Earlier this year Gol Linhas Aéreas Inteligentes SA failed to convince investors to swap costlier bonds for new ones that are cheaper to service.

A stronger Brazilian currency has provided LATAM, Gol and Avianca some relief, by reducing dollar-denominated operational and financing costs, and bringing down fuel expenses.

The bright side is Brazilians were traveling abroad more as the real currency strengthened. Latam Travel Brasil, a unit of LATAM, reported a 15 percent rise in international package sales in the year through August. (Reporting by Paula Arend Laier; Writing by Ana Mano; Editing by Guillermo Parra-Bernal and Phil Berlowitz)