00:00You've raised prices, but you're saying demand has been OK. Are you surprised by that?
00:06I think it's good to see the resilience of demand we've seen, not only in the last few months, but
00:10over the last three or four years.
00:12I'm not surprised, because I think that what we are delivering in terms of product and experience to our passengers
00:17means that they want to fly with us.
00:20So we're happy with that.
00:21In terms of further fare hikes, the oil price is looking like it's up and it's going to stay up
00:26and could go higher.
00:27I think it might go down, but it's not going to go down a lot, it seems, certainly in the
00:31near term.
00:32Can you see yourself having to do this again?
00:36And what do you think would happen to demand?
00:37How close are you to the point where actually demand could be hit if you further raise prices?
00:43I think that it's not going to be a function of prices that demand could be hit.
00:47At the end of the day, if this continues, the industry in general will have to take out a little
00:52bit of capacity and find a new equilibrium.
00:55I think I'm a little bit more optimistic now with respect to the next few months.
00:59We'll still have high fuel prices for the remainder of the year, for sure, and hopefully not into 2027.
01:04But we're in a good place, and if you ask me, I look at the second semester in an optimistic
01:08way.
01:09Okay.
01:09But you think capacity is what would take the strain of further rises?
01:14I think so, yes.
01:14I mean, at the end of the day, when prices have come up everywhere, we have lost, everybody has lost
01:20just a few passengers.
01:21But if this stays for longer and we need to find another equilibrium, I mean, the natural way of doing
01:27this in the industry is by sizing down a little bit.
01:30So you would take out uneconomic routes? That would be the strategy?
01:33Yeah. In the case of networks like large networks like LATAM, what you can do is adjust frequencies.
01:38You don't necessarily need to cut routes in the beginning.
01:40In terms of what you have to do here, if you look at the numbers, LATAM, the region as a
01:47whole, you face one of the highest tax rates.
01:50Fuel is taxed. Everything is taxed. That must be really challenging.
01:54Do you feel that the government needs to maybe make life a little bit easier for you right now, given
01:59what is happening with fuel?
02:01Do you hear any talk of that? Have you asked for that?
02:04I wouldn't call it challenging. At the end of the day, what matters is that this is an industry that
02:09is immature in this part of the world.
02:10And, you know, the geographies are big. It's hard to move around. You don't have alternatives.
02:14And there's many people that could be flying that aren't because at the end of the day, the costs that
02:18are on top of the ticket are big.
02:20Countries like Colombia, for some fares, taxation and fees are higher than the ticket itself.
02:25So it's a matter of not being able to develop the economies for the better of the economies.
02:29This industry actually provides a lot of economic good. And if we could grow it more, it would be good
02:33for everyone.
02:34So you can't grow. You are struggling to grow this business. I use the word again.
02:38Given the taxation rate, you could be a bigger airline. You could service more customers if the tax rates came
02:43down.
02:44Yeah, we're not struggling to grow. LATAM is still growing close to double digits.
02:47But the potential is much bigger.
02:49I mean, if there's one passenger, one-fifth of the passengers per inhabitant in this part of the world as
02:55you compare it to the economies of the first of the northern hemisphere.
02:59So we could be twice as big in 10 years or three times as big in 10 years.
03:05It would depend basically on how public policies are developed.
03:09How's the economy doing right now? What do you see?
03:11Okay. They're not great, but they're okay. We're holding up.
03:15Most of the countries are in an okay way, probably 2% to 3% growth, which for the situation
03:21I think is not bad.
03:23Oil hasn't hit in a very significant way the economic activity where we are.
03:28If it stays for longer, there may be a little bit of an impact.
03:31What concerns me today is probably interest rates.
03:34If they go up higher, then that can have an effect.
03:37But for the time being, we haven't seen an impact that we can size in the demand side.
03:41Do you think rates will go up?
03:43The cost of money is already really high.
03:44It is. It is.
03:45If the inflationary pressures remain, I think that central banks will have to at least consider it.
03:51And we've seen in the last few days in the market the reaction to that.
03:54Do you think that the election that's coming up in Brazil will also have an impact on the economy?
03:58Do you think people stop spending as they anticipate that election?
04:01No, I don't think so.
04:02I think, I mean, Lula, everybody knows him.
04:05Bolsonaro, I think, as well.
04:07It's going to be a very tight election.
04:09We'll see what happens.
04:09But I think that from our perspective, we're ready to work with any government that comes to take power in
04:16the end of the year.
04:17And in the last 15 years, LATAM has grown a lot.
04:19In the last couple of years, actually, even more.
04:21So we'll be prepared to continue our investments in Brazil.
04:25You talk about the growth story that you're facing at the moment.
04:28Availability of aircraft, availability of engines, is that also an issue for you?
04:31It is. It is. And by the way, we still have a few aircraft on ground because we don't have
04:36the engines to operate them.
04:38What I can say is that the air framers and the engine manufacturers are doing a better job.
04:41It's still frustrating.
04:43But they're getting their act together little by little.
04:46But we could grow a little bit more had we had the airplanes delivered in time in the case of
04:52the new deliveries or the ones that have no engine.
04:54Which engines are you struggling with?
04:56So today, Prat is the one that we were struggling with the most.
04:59We had a few issues with 787s last year, but it normalized.
05:03Now it's in a place, in a good place with Rolls-Royce.
05:05In terms of what the fleet development now looks like, what are you looking for?
05:08So we have a large order coming in around 100 aircraft.
05:11But the most important thing is that we contracted Embraer's E-2s.
05:14And we're going to receive the first ones at the end of the year.
05:18I think it's a great airplane.
05:20It's going to be a great airplane for Prat.
05:21So how does that change the network?
05:23That's a sub-150 aircraft.
05:25It gives you a lot of kind of point-to-point access.
05:27It gives you a lot of flexibility.
05:29Yeah.
05:29How do you use that in the network?
05:30You know, if you see South America, there's 200 cities that are medium-sized cities.
05:34And they're very poorly connected.
05:36Big cities are well-connected.
05:37Small cities are poorly connected.
05:39So this is a great opportunity with E-2s to add capillarity to the network.
05:43Add new destinations.
05:44And in some cases, where we don't have enough frequencies because the planes that we fly are too big,
05:48we can actually increase frequencies as well by adding in the middle of the day, for example, flying with smaller
05:53planes.
05:54In terms of having that mixed fleet as well, does that give you flexibility too?
06:00When you're dealing with the oil price, is that how you're going to maybe take advantage of that mixed fleet?
06:04Eventually it does.
06:05I mean, in places where you think that the higher fuel prices will eventually hurt a little bit, the passenger
06:09flows,
06:09you can always resize down to a smaller aircraft, so it gives us that flexibility.
06:14In terms of where the organic growth takes you next, what are you looking at?
06:17Well, we just opened two destinations in Europe, Amsterdam and Brussels.
06:22We're starting Cape Town next month out of Guarulhos.
06:26We have 170 destinations.
06:28Nobody covers South America like we do.
06:30We connect it within itself and to the world.
06:32And I think that there's still a lot of things that we can do, particularly with the E2s, we'll serve
06:38new cities in domestic Brazil.
06:39We hope to announce that probably in the next few weeks and take this network, which is the best one
06:44in South America, to be even better.
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