March 9, 2016 / 6:55 PM / 4 years ago

LATAM Airlines sees Brazil demand weak, upbeat on Argentina

SANTIAGO, March 9 (Reuters) - LATAM Airlines, Latin America’s largest airline, said on Wednesday it did not foresee demand recovering soon in recession-hit Brazil, but sales were still strong elsewhere in the region.

Argentina was a particularly bright spot, company executives told investors on a call after reporting full-year results late Tuesday.

LATAM posted a net loss for the third year in a row, but maintained margin guidance as a cost-cutting program continued.

The airline, formed in a tie-up between Chile’s LAN and Brazil’s TAM in 2012, has failed to live up to the promise of the merger, dragged down by economic problems in Brazil and elsewhere.

“We are quite conservative in how we are seeing the macro outlook in Brazil; we feel it’s important to stay focused on having very disciplined capacity in that market given the current conditions,” investor relations director Gisela Escobar said on the call Wednesday.

LATAM said on Tuesday it would reduce fleet spending by $2.9 billion through 2018, and cut more capacity in 2016. That would be driven mainly by reducing flights between Brazil and North America, especially Miami, it said Wednesday.

The capacity cuts would help boost yields, given “we don’t see a lot of changes on the demand side” in Brazil, TAM Chief Executive Claudia Sender said.

Regional demand was “relatively healthy,” the company said. It noted that the sting of the Argentine peso’s devaluation in December has been partly offset by the benefits of a relaxation on capital controls, and that the cancellation of a tax on credit card use made air tickets cheaper.

Reports on the spread of the Zika virus in South America have not yet hit bookings, LATAM said, even though industry analysts have said tourism would likely be affected.

Reporting by Rosalba O'Brien; Editing by Richard Chang

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