E-NEWS UPDATE VOLUME 19 NUMBER 1106

MEXICO: SLOWLY BUT SURELY

Is the headline in an article in this week's Latin Business Chronicle - which begins with the statement: "Mexico's business and economic outlook is improving, albeit at a slow pace, key challenges remain, including uncompetitive energy and labor markets."  The article mentions Mexican President Felipe Calderon's recent visit to Miami where he received Latin Trade's Bravo Business Award as Leader of the Year. He spent a lot of time talking about Mexico's recovery, stating: "Mexico is stronger than ever". Despite a dramatic fall in the GDP this year, he said the government's efforts have been able to reduce the impact on poverty and unemployment compared with previous crisis. The country's GDP will likely fall by 7.3% this year compared with 1.3% growth in 2008. However, there are some small signs that Mexico is taking the first steps toward improvement. "The third quarter results of the year presented a progressive performance of 9%" according to Brian Smith, Mexico president of Coca Cola. He also stated that Coca Cola is betting on the recovery, planning to invest $1 billion next year and a total of $5 billion during the next five years. For the complete 'must read' article, go to www.latinbusinesschronicle.com.

THE AVIANCA/TACA JOINT VENTURE IS GENERATING MEDIA INTEREST

As local media reports and guesses on the impact of the Efromovich engineered Avianca/TACA, and now Aerogal, joint venture - it is really fascinating to follow the opinions and reports in local media within the region. Most recently Luis Alejandro Rizzi, writing in Portal del Uruguay (one of our favorite sources for up to the minute news and commentary on airlines and tourism) covers a whole scenario of different points of view, including comments by Pluna's Matias Campiani who stated: "In the world of business and much less in commercial aviation, no hypothesis is too crazy or too conventional". Matias, we couldn't agree more! Rizzi goes on to comment on the possibility of a COPA/LAN joint venture or alliance of some kind; as well as a possible TAM or Varig-GOL alliance with the Chilean based "model" airline- and one of the largest and most successful in the Americas. He also talks about the small domestic and regional carriers led by Pluna (which is already operating domestic flights within Chile and international service between Chile and Paraguay); as well as ANDES, SOL, PAL, AEROSUR, and SKY. The article is a 'must read' for fascinating commentary and insight. Go to www.portaldeluruguay.com - Consolidation is what it is all about - stay tuned for more.

THE E-FUEL MANAGER BY LARRY S. WEAVER

For the first time in several weeks, crude inventories decreased in the US per the DOE report...and they dropped by 4 million bbls despite refining runs dropping under 14,000 bpd for the first time since April. Even with this decrease in refining, inventories of gasoline, jet and heating/diesel oil all increased indicating that demand is still not there. Even though Jet fuel usage is down, inventories are still 8.5 million bbls higher than they were a year ago...but prices are still climbing. Much of the price increase however is due to the continuing sag of the U.S. Dollar but they were also aggravated by the US Federal Reserve Board holding interest rates down and indicating that they are not going to increase them for some time which means the dollar will likely not be strengthening soon.

Other news, briefly

American Airlines October 2009; RPMs down 2.6%, Latin America down 0.6%

American reported an 83.1% system load factor for the month of October, a 4.0 pt increase versus the same month last year. Traffic decreased 2.6% year over year as capacity decreased 7.3%. Domestic traffic decreased 3.2% year over year on 7.3% less capacity. International traffic decreased 1.6% on a 7.2% decrease in capacity. American boarded 7,122,518 passengers in October, a 4.2% decrease over October 2008. American experienced a 0.6% decline in its Latin American traffic in October on a capacity decrease of 5.8%. Latin American load factor for the month was 80.4%, up 4.2 pts over October 2008.

Continental Airlines October 2009; RPMs up 1.7%, Latin America up 9.1%

In October, Continental flew 7.3 billion consolidated revenue passenger miles and 8.8 billion consolidated available seat miles resulting in a consolidated traffic increase of 1.7% and a capacity decrease of 2.6% compared to October 2008. Consolidated passenger revenue per available seat mile (RASM) is estimated to have decreased between 14.0% and 15.0% compared to October 2008. Latin American traffic grew with RPMs increasing 9.1% on an ASM increase of 6.7% moving the load factor up to 80.2%, 1.8 points higher than in October 2008.

Delta Air Lines October 2009; RPMs down 6.5%, Latin America up 6.0%

In October, Delta flew over 15.3 billion system revenue passenger miles and almost 18.2 billion system available seat miles resulting in a traffic decrease of 6.5% and a capacity decrease of 18.3% compared to October 2008. International traffic decreased 9.7% year over year on a 13.6% decrease in capacity. The international load factor was 84.6%, up 3.6 pts over October 2008. 

Delta's Latin American traffic was up in October with RPMs up 6.0% while ASMs were up 1.6% compared to October 2008. Latin American load factor for the month was 76.4%, up 3.2 pts over October 2008.

Brazilian tourists to the Dominican Republic up 23% through August 2009

A total of 11,162 Brazilians visited the D.R. through August of 2009 for a 23% increase over the same period last year. The Department of Tourism Promotion reported that in 2008 a total of 14,609 Brazilians visited the D.R. and the goal for 2009 is to achieve 20,000 visitors from Brazil. Tourism is the driver.

Mexican tourism to recover in 2010

According to Miguel Gomez Mont, Director General of Mexico's National Agency for Tourism Promotion, tourism investments have dropped 50% in 2009, but will recover

completely in 2010 based on the US economic recovery. His agency is investing $2 billion in tourism infrastructure and promotion. Optimism is what it is all about.

US Airways to launch daily nonstop service between Philadelphia and Barbados

The airline, which began four-time weekly service on October 1 is increasing the service to daily on December 19. The daily flights will be operated with A319 aircraft and the news was welcomed by the Director of Tourism for Barbados, David Price, stating the new service will provide connecting flights to important markets in the US. It's all about tourism and the economy.

Chilean airlines are getting ready for rising demand in 2010

Led by Chile's "model airline", which is forecasting growth of 10% in passenger and 16% in cargo traffic next year. LAN's chairman, Jorge Awad, has stated it will be adding new destinations like San Francisco in the US; as well as reducing fares on short haul region markets like Mendoza and Sao Paulo. The airline has a plan of $5 billion for adding new aircraft to its fleet. Other Chilean airlines are also betting on the increased demand in 2010, including Sky Airlines which is adding capacity in key markets like La Paz, Bolivia as well as recent startup Principal Airlines which is adding flights in the northern part of the country. A country to watch.