TAM, part of the LATAM airline group has announced that it will be reducing its domestic activity by up to 10 percent.

Given the impact of the challenging economic climate in the country, cause by an increase in inflation and an appreciation of the US dollar versus the Brazilian real, the airline industry has reportedly slowed down in the area.

The airline estimated that is would layoff around two percent of its 28,000 employees, though crew members will not be affected.

“TAM is taking this measure to face Brazil’s difficult economic situation,” Claudia Sender, the company’s CEO, said in a statement. “It is therefore necessary to seek network adjustments, further boosting our competitiveness in the country, and preventing any harm to our passengers’ connectivity.”

The routes affected are still under discussion though the coverage of the country will not be affected and no destination currently served will lose its flights, in order to guarantee the best service to passengers, said the airline.

According to the National Civil Aviation Industry (ANAC), the Brazilian airline industry has suffered from declining demand. Data from the Market Readout of the Brazilian Central Bank indicates that the market projects a further decline of the Brazilian GDP in 2015, with estimates of a 1.3 percent to 1.5 percent decline.

“We continue to believe in the country’s recovery and this adjustment in no way affects the Company’s long-term strategy, which include the renewal of the fleet, the feasibility study for the North-eastern hub and the continuous strengthening of our hubs in Brasília and São Paulo/Guarulhos”, she added.

TAM is the largest Brazilian airlines by market share and fleet size, and the LATAM group is one of the biggest airline groups in the world, as a result of the merger between Chilean LAN Airlines and Brazilian TAM Airlines in 2012.

Despite the apparent economic downturn, Brazilian start-up Flyways Linhas Aéreas has taken delivery of its maiden aircraft and plans to operate scheduled flights from Rio de Janeiro to São Paulo Guarulhos, Belo Horizonte Pampulha, Brasilia, and Juiz de Fora Francisco de Assis using its ex-Azul ATR72-500.

Avianca Brazil will join the Star Alliance network today (July 22), Star Alliance CEO Mark Schwab confirmed at a press conference.

Avianca Brazil operates to 24 airports in Brazil and offers 210 daily flights within Brazil from its hubs at São Paulo, Guarulhos, Rio de Janeiro, Brasilia and Salvador.

The airline carried more than 7 million passengers in 2014 and expects the number to rise to 8.6 million this year. “In 2014, we had a load factor of 84% with a market share in Brazil of about 9.8%,” Jose Efromovich, Avianca Brazil CEO said.

Our analysis of OAG Schedule Analyser data shows that Gol Transportes Aereos is the leading carrier in the Brazilian domestic market, followed relatively closer by TAM. The third largest airline in terms of domestic capacity in Brazil is Azul, which has rapidly grown since 2009 when it first commenced operations. Domestic capacity for the low-cost carrier has increased from almost 2.6 million in 2009 to just over 27.2 million in 2014.

Between 2005 and 2012, domestic capacity within Brazil has significantly increased, from just over 62 million in 2005 to almost 135 million in 2012. However, since 2013, domestic capacity has somewhat decreased, falling almost 2.5 percent between 2012 and 2014.