Chief executive Neuhauser sees the Avianca and Gol holding company as well placed to adjust capacity if required.
Abra Group chief executive Adrian Neuhauser says the flexibility of the Latin American airline group’s balance of aircraft deliveries and lease redeliveries will allow it to adjust capacity as required by market changes.
Neuhauser made that point during the Avianca and Gol parent’s first-quarter earnings call on 20 May, a period in which Abra boosted operating profit 76% year on year to $305 million and net profit 26% to $208 million.
Brazilian carrier Gol, which emerged from Chapter 11 restructuring last summer, increased its operating profit to $202 million in the first quarter, from $27 million the prior year. Operating profit at Colombian carrier Avianca for the same period declined about one-quarter to $111 million.
The improvement came as the group’s first-quarter passenger traffic (measured in revenue passenger kilometres) jumped 12.5% year on year, outpacing a 7% year-on-year bump in capacity (in available seat kilometres) and driving a nearly four-point rise in load factor, to 83%.
By operating entity, Gol’s capacity increased 13% year on year in the first quarter as it restored operations post-restructuring, while Avianca lifted capacity 3.5% year on year.
“We are very proud of the first-quarter results we delivered and we are proud of the progress we are making,” Neuhauser says. “We are also proud of how our thesis is working in driving synergies, giving us more commercial and operations flexibilities, helping us reduce costs.”
The first-quarter performance comes amid heightened market uncertainty following the Middle East crisis that has disrupted traffic flows and increased fuel costs.
Abra’s subsidiaries have been dynamically making short-term capacity adjustments in response to the changes, and the company expects fare hikes will enable it to recapture about 60% of this year’s additional fuel expense.
Neuhauser sees no immediate need for structural capacity cuts.
“Obviously, we are all cautious and we continue to look at it and we make tactical adjustments because they are opportunistic,” he says. “But we are not really seeing demand destruction and we are heading into the strongest part of the year.
“It has been a much stronger demand environment than I think any of us would have predicted given geopolitical risk, which tends to decrease interest in flying,” he adds. “You are seeing pretty substantial price increases with pretty marginal impact on demand. Does that hold? That is the big question.”
Neuhauser says the group can align incoming aircraft deliveries and lease redelivery dates to adjust capacity as required.
“We are monitoring it pretty closely, and as we start seeing where fuel stabilises, where GDP growth stabilises, you’ll see us adjust allocation,” he adds.
“In the meantime, we are comfortable with the growth we have set for this year, we are comfortable with the tactical reductions we are taking out, and we are very happy to have the flexibility in both our lease redeliveries and our order book to adjust capacity as the environment evolves.”
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