TAM Airlines Banks on New Flyers to Boost Growth

Brazil’s leading airline, TAM SA, expects the country’s domestic aviation market to grow by up to 12 percent next year as incomes and employment levels continue to rise in Latin America’s largest economy and new promotions attract first-time, lower-income fliers.

Brazil’s domestic air traffic has nearly doubled since 2003, growing between 8 percent and 22 percent a year through 2008. This year, even though airlines had expected the economic slowdown to curtail demand, the latest data indicate passenger traffic grew 15 percent.

Demand has been bolstered this year by the expansion of smaller airlines, led by Azul Linhas Aéreas Brasileiras, which offered alternative routes at lower prices, prompting the main players TAM and Gol Linhas Aéreas Inteligentes to react with price cuts and expanded service.

But the bedrock was the strength of internal demand throughout the economic slowdown, which was driven by rising working-class and middle-class salaries and spending.

TAM and the other airlines are now seeking to tap deeper into this up-and-coming consumer group by offering tickets in installments.

Earlier this month, TAM announced agreements with banks Itau Unibanco and Banco do Brasil to offer payment plans on tickets. Account holders can obtain tickets by making a small down payment and then making installment payments for up to four years after flying.

The goal is to make it flying an alternative to taking the bus—the most common way average Brazilians travel. Since the 1940s, Brazil has experienced mass migration from the rural northeast to far-off urban centers such as Sao Paulo and Rio de Janeiro in the southeast. As a result, at Christmas and other holidays it is common for workers to travel two or three days by bus to visit relatives.

Although plane tickets are still more expensive than bus fares, they offer value in time saved. The average price for a ticket for the 1,680-mile flight between Sao Paulo and Recife, for example, is between $120 and $200; the average salary in Brazil is about $770 a month.