Brazil Airlines in a Spin: US$ 684 Million in Losses

Aviation in Brazil Regular Brazilian airlines incurred losses of 1.27 billion reais (US$ 684.4 million) in 2007. The negative operational result was published in the 2007 Air Transport Directory – Economic Data, disclosed last Friday (26th) by the National Civil Aviation Agency (ANAC). Losses were much greater than those recorded in 2006, which totaled 173 billion reais (US$ 93.2 billion).

According to the ANAC, in the domestic market the result is due to an aggressive tariffs policy, characterized by promotions and discounts offered by companies, and also because, in 2007, the growth in seat supply (19.3%) surpassed the growth in demand (14.2%), leading to a lower occupation rate.

In the international sector, the main impact was caused by the end of operations by the Varig Group (Rio Sul, Nordeste, and the former Varig), which led companies Gol and TAM to concentrate operations.

The losses are calculated by subtracting companies' expenditures from the revenues posted. In the domestic market, whereas revenues in 2007 totaled 10.67 billion reais (US$ 5.7 billion), expenditure reached 11.24 billion reais (US$ 6 billion), representing loss of 563.72 million reais (US$ 303.8 million).

In the international market, revenues totaled 3.652 billion reais (US$ 1.9 billion), whereas expenses reached 4.359 billion reais (US$ 2.3 billion), leading to losses of 706.83 million reais (US$ 380.9 million).

The profitability index was also negative among air taxi companies. Out of the regions surveyed, the one that comprises the state of São Paulo presented the lowest profitability index (-57.06%). The region that comprises the states of Mato Grosso, Mato Grosso do Sul, Tocantins, Goiás and the Federal District achieved a positive result, with almost 15% of profitability.

The directory brings, for each company, figures pertaining to expenditures, revenues, seat supply and occupation rates, kilometers flown, profitability, profitability index, and break-even point. Performance information was obtained from Cost Reports and Financial Reports sent in by 23 companies.

ABr

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