LATAM Airlines Group's international passenger operations include both regional flights within South America and the Caribbean and long-haul flights connecting the region with the rest of the world.
LATAM Airlines Group's international passenger operations include both regional flights within South America and the Caribbean and long-haul flights connecting the region with the rest of the world. In 2014, the airlines that make up LATAM served a total of 24 international destinations (in addition to its domestic network) using a total fleet of 106 aircraft. During the year, they carried 13.6 million passengers, an increase of 0.8% as compared to the previous year, of which 7.9 million corresponded to regional routes and 5.7 million to long-haul routes.
In 2014, the international operation of LATAM occurred in a complex environment, resulting from the weaker global macroeconomic scenario; the increase in competition from operators to and within South America (where we highlight capacity redirections from Venezuela), with the resulting pressure on yields; and the decrease in demand for air travel due to the depreciation of some local currencies, principally the Argentine peso. In addition, the Soccer World Cup, which took place in Brazil, affected business and tourist demand not only domestically but also on routes to and from Brazil in June and July.
In order to address this situation, LATAM continued to focus on capacity discipline and deepened its revenue management strategy. As a result, consolidated passenger traffic on international flights increased by 1.2% in 2014 while capacity measured in ASK was reduced by 2.4%, resulting in a healthy load factor of 85.4%, up by 3.1 percentage points as compared to the previous year.
In 2014, important initiatives were implemented to improve the travel experience for international passengers.
In 2014, important initiatives were implemented to improve the travel experience for international passengers. These included the beginning of the process of retrofitting TAM's Boeing 777 fleet to include an improved business cabin and the increase in utilization of the Boeing 767s aircraft with a full-flat business cabin in order to offer corporate customers a better comfort on their long-haul flights. In addition, there was also a significant increase in the number of long-haul routes served by the new Boeing 787s, the largest and most modern aircraft in the category.
In October, following the expansion of Sao Paulo's Guarulhos airport, where LATAM Airlines Group is building its principal international hub, LATAM moved all of its international operations to the new modern Terminal 3, with significant reductions in connection times. Also, in November, LATAM opened its first VIP lounge at Guarulhos. With an area of over 1,800 m2 and a capacity for up to 450 people, this is the largest lounge in South America and represents another important contribution to improving passengers' travel experience.
At the regional level, the airlines that make up LATAM served 27 destinations in 2014, using a fleet that mainly comprises aircraft from the Airbus A320 family and Boeing 767s. LATAM’s broad network of coverage allowed it to achieve a 44.0% market share measured in terms of capacity (ASK) on the regional routes it operates (according to Miio Di), consolidating its position as the leading airline in South America where its main competitors are Avianca, Aerolíneas Argentinas and GOL, with market shares of 22.6%, 11.4% and 9.8%, respectively.
In 2014, new regional routes were launched including Rosario-Sao Paulo, Córdoba-Sao Paulo and Montevideo-Rio de Janeiro, essentially with a feeder role but also in a bid to achieve leadership in secondary cities. In December, LATAM also increased its presence in the Caribbean with the launch of the Sao Paulo-Cancún-Rosario and Bogotá-Cancún routes.
In addition, it stimulated routes such as LAN Colombia's Bogotá-Lima route, where the number of flights increased from two to three per day, as well as the Santiago-Lima route, with an increase to nine flights per day, and the Santiago-Rio de Janeiro route, with one flight per day.
In September, LATAM Airlines Group launched a direct service from Lima to Asunción, Paraguay, with three flights per week, in order to stimulate the low air traffic between the two countries.
LAN's and TAM's differentiated value proposition as regard to service was once again recognized in the World Airline Awards where, in 2014, they won the first two places, respectively, in the Best South American Airline category. This award is based on the World Airline Survey, carried out annually by the prestigious British market research company Skytrax, and reflects the opinion of more than 18 million passengers of over 160 different nationalities. This was the third consecutive year in which LAN was recognized as the Best South American Airline.
In regard to long-haul routes, the airlines that make up LATAM Airlines Group served 12 destinations in 2014, using a fleet consisting mainly of Boeing B767s, B787s and B777s. On routes between the United States and Latin America, LATAM reached a market share of 22.8% measured in terms of capacity (ASK) according to Miio Di. On these routes, its main competitors are American Airlines, United Continental and Delta with market shares of 36.3%, 11.5% and 11.4%, respectively. On flights to Europe, LATAM had a 10.8% market share, also measured by Miio Di in terms of capacity (ASK). In this case, it mainly competeswith AirFrance-KLM and Iberia-British Airways, with market shares of 23.0% and 20.1%, respectively. On routes to Oceania, LATAM had a market share of 39% measured in terms of traffic where calculation of the competition's market shares includes indirect routes such as via Dubai in the Arab Emirates.
TAM's entry into the oneworld alliance on31 March 2014 represented an important milestone for the LATAM's international passenger operations. As a result, all LATAM Airlines Group's passenger transport companies are now members of this global alliance, which brings together the world's most prestigious airlines and is currently experiencing the largest expansion of its history.
Other important milestones for LATAM's international passenger operations in 2014 included new code-sharing agreements between LAN Colombia and Iberia and between LAN Perú and Korean Air on the Lima-Los Angeles-Seoul route, and the reinforcement of the existing code-share agreement between LAN and Qantas to boost flights between Australia and South America.
LATAM Airlines Group has announced that -in line with its strategic plan and its network pillar- it will be opening other new international routes from Latin America to North America and Europe in 2015 such as the Brasilia-Orlando, Sao Paulo-Toronto via New York, Sao Paulo-Barcelona and Santiago-Milan via Sao Paulo.
LATAM Airlines Group and its subsidiaries are the largest air cargo operator in Latin America and, especially in Brazil. LATAM offers its clients the most extensive connectivity within the region and the rest of the world, with 144 destinations in 26 countries.
LATAM Airlines Group and its subsidiaries are the largest air cargo operator in Latin America and, especially in Brazil. LATAM offers its clients the most extensive connectivity within the region and the rest of the world, with 144 destinations in 26 countries. LATAM transports cargo in the bellies of 307 passenger aircraft as well as in 13 freighters as of December 2014 (four B777-200Fs and nine B767-300Fs, one of which will be leased to another cargo operator in 2015).
LATAM's cargo business model is based on the optimization of the belly capacity of its passenger planes which, combined with the efficient operation of freighters, allows it to operate routes profitably, adjusting its operations to the economic cycle and increasing load factors. The scope and connectivity of its network, the flexibility of being able to transport cargo in passenger aircraft as well as freighters, and LATAM's modern infrastructure are advantages that enable it to offer services tailored to market needs.
In 2014, LATAM, at a consolidated level, transported 1.1 million tons of cargo, down by 3% compared to 2013, while its capacity measured in ATK dropped by 5.6%. As a result, the load factor rose by 1.4 percentage points, reaching 59.8%.
The reduction in tons transported was mainly a result of the challenging context faced in the region's air cargo markets.
The reduction in tons transported was mainly a result of the challenging context faced in the region's air cargo markets. In 2014, demand for imports on routes from the United States to Latin America decreased by 3% as compared to the previous year, with Brazil being the most affected country due to the impact of the SoccerWorld Cup, the uncertainty related to the presidential election and the country's low economic growth. In addition, export markets from Latin America showed a contraction of 2%, explained mainly by a weak seed season in Chile that, where tons transported decreased by approximately 75% as compared to 2013. Apart from this specific case, other commodities showed healthy growth as in the case of asparagus from Peru, fish from Chile, flowers from Colombia and Ecuador and fruit from Argentina and Chile which, in the latter case, had an excellent season with very important traffic growth to Asia.
The ATK reduction was explained by structural changes in the itinerary of passenger planes used to transport cargo and by discipline in the cargo fleet in the face of aggressive global and regional competition. This was a result of excess capacity on both passenger and cargo flights in the region.
In response to this situation, LATAM's strategy in 2014 focused on the integrated optimization of the belly and freighter network, combined with a constant quest for efficiency in its operating costs and support areas, and the development and improvement of the processes, systems and infrastructure of its cargo business.
In regard to its international cargo operations, the network was optimized by enhancing connecting cargo, mainly at Sao Paulo's Guarulhos airport (where connecting tons increased by 13%) and expanding the network's coverage.
In regard to its international cargo operations, the network was optimized by enhancing connecting cargo, mainly at Sao Paulo's Guarulhos airport (where connecting tons increased by 13%) and expanding the network's coverage. For example in Asia, LATAM expanded its coverage through agreements with Asian airlines and also opened a new office in Hong Kong. In addition, the good season for exports of fruit meant a 21% increase in the volume transported of this product as compared to the previous year.
These efforts were reflected in the constant use of the bellies of passenger aircraft on international routes where the load factor increased by 7 percentage points in two years, reaching 67.4% in 2014.
The freighter fleet was also resized in line with the objectives of supporting belly and maximizing profitability. Four Boeing 767-300Fs with a low utilization level were taken out of service, including one whose lease contract expired and three that were sub-leased to another operator outside Latin America starting in the end of the year. With the remaining fleet, priority was given to those operations that generate direct and indirect revenue synergies (for example, regional cargo operations between Brazil, Argentina and Chile or the Tucumán-Guarulhos route for connecting fruit cargo to North America and Europe). As a result, the contribution of cargo to belly profitability showed an increase of 67% on 2013.
In the case of domestic cargo operations, Brazil is particularly important. TAM Cargo continues to be the leading player in that market with a market share of around 50%, despite increased competition.
In the case of domestic cargo operations, Brazil is particularly important. TAM Cargo continues to be the leading player in that market with a market share of around 50%, despite increased competition. In order to maintain its leading position, TAM Cargo invested around US$18 million in Brazil in infrastructure, service and security, including the construction of a new freight terminal at Guarulhos airport and the acquisition of state-of-the-art technology to minimize delivery times and have greater security at key freight terminals.
In an intent to increase competitiveness throughout its network, synergies were also achieved with LATAM Airlines Group's cargo subsidiaries (LAN Cargo, Mas Air and TAM Cargo), taking advantage of each subsidiary's key strengths and finding synergies in LATAM’s operational and corporate support areas. This resulted in annual efficiency gains of US$5 million. In addition, processes were simplified using the LEAN methodology to obtain important operational efficiency gains and, similarly, organizational structures were simplified taking into account the long-term challenges.
In all, 2014 was a year of value construction for the LATAM Airlines Group's cargo business, which is in line with its long-term strategy of strengthening competitiveness, optimizing the integrated network of freighters and passenger aircraft, increasing the agility and efficiency of connectivity, improving the value proposition for itsclients, optimizing its product portfolio and striving for excellence and operational efficiency.
Our main facilities are located near the Comodoro Arturo Merino Benítez International Airport.
Our main facilities are located near the Comodoro Arturo Merino Benítez International Airport. The complex includes office space, conference space and training facilities dining facilities and mock-up cabins used for crew instruction.
Our maintenance base is located on a site inside the grounds of the Comodoro Arturo Merino Benítez International Airport. This facility contains our aircraft hangar, warehouses, workshops and offices, as well aircraft parking area capable of accommodating up to 30 short-haul aircraft or 10 long-haul aircraft.
We occupy site at the Miami International Airport that has been leased to us by the airport under a concession agreement. Our facilities include corporate building of around 4,450m2, a cargo warehouse (including meter cooling area) of around 35,000m2 and aircraft-parking platform of around 72,000m2, apart from totally equipped offices. In addition, during 2014, LATAM began the construction of its first maintenance hangar in Miami, with an estimated surface of 6,200m2; 1,600m2 of wharehouses and workshops; and 1,350m2 for administrative purposes.
We own a flight-training center on the side of the Comodoro Arturo Merino Benítez International Airport. We have also developed a recreational facility for our employees with Airbus’ support. The facility, denominated “Parque LAN,” is located on land that we own near the Comodoro Arturo Merino Benítez International Airport.
LAN Peru has approximately 19,000 m2 built. All facilities are leased and are distributed as follows:
Administrative Offices: 7,000 m2
Sales Offices: 2,000 m2
Concessions airports: 10,000 m2
LAN Colombia has approximately 27,500 m2 built. All facilities are leased and are distributed as follows:
Administrative Offices: 4,500 m2
Sales Offices: 1,700 m2
Concessions airports: 21,300 m2
LAN Ecuador has approximately 14,500 m2 built. All facilities are leased and are distributed as follows:
Administrative Offices: 1,600 m2
Sales Offices: 1,000 m2
Concessions airports: 11,900 m2
LAN Argentina has approximately 18,000 m2 built. All facilities are leased and are distributed as follows:
Administrative Offices: 6,600 m2
Sales Offices: 2,600 m2
Concessions airports: 8,700 m2
TAM’s main facilities are located in São Paulo, in hangars within the Congonhas Airport and nearby. At Congonhas Airport, TAM leases hangars belonging to INFRAERO (the Local Administrator Airport): Hangar VII, Hangar VIII, Hangar III. The Service Academy is located about 2.5 km from Congonhas Airport, is a separate property which TAM owns, exclusively for the areas of Selection, Medical Service, Training, and Mock-ups.
At Hangars II and V in Congonhas Airport, which TAM has offices and hangars. This site also houses the areas of Aircraft Maintenance, Procurement and Logistics of Aeronautical Materials.
In São Paulo, TAM has other facilities such as: Commercial Headquarters, Uniform Building, Morumbi Office Tower and a Call Center Building. Besides, in São Paulo, TAM has the offices belonging to the Group as: Multiplus Office, TAM Viagens Office, one store of TAM Viagens and Bahia state. In Guarulhos, TAM has a Passenger Terminal, Operational Areas such as Check-in, Ticket Sales, Check Out, Operations Areas, VIP Lounges, Aircraft Maintenance, GSE, Cargo Terminal, Distribution Centers, etc.
In 2014, LAN and TAM continued to operate their respective loyalty programs - LANPASS and TAM Fidelidade - independently.
In 2014, LAN and TAM continued to operate their respective loyalty programs - LANPASS and TAM Fidelidade - independently. However, passengers registered with the two programs were able to earn and redeem kilometers/points on any flight in the network administrated by the two airlines and their associated airlines.
At the same time, LATAM Airlines Group continued working in order to standardize the two programs in line with the process of homogenization to which LATAM is committed across all areas of its operations. At a service level, top tier members in each program are already recognized by the other program so, for example, LANPASS members can obtain upgrades on TAM flights and members of TAM Fidelidade on LAN flights. In addition, both may have access to the same airport services.
LANPASS is the frequent flyer program created by LAN in 1984 to reward the preference and loyalty of its passengers through different benefits. Members of the program can exchange LANPASS kilometers for free tickets as well as different products from the program's catalogue or other options such as gift cards from certain retail stores. The program includes four "elite" categories - Comodoro Black (“Black” as from March 2015), Comodoro, Premium Silver and Premium, which offer exclusive benefits to reward the loyalty of those members who are frequent flyers of the oneworld alliance. These categories have their equivalents in this alliance where Ruby corresponds to the Premium category, Sapphire to Premium Silver and Esmerald to Comodoro and Black.
Members of the program earn LANPASS kilometers every time they fly with LAN, TAM or any of the airlines in the oneworld alliance as well as when shopping with or using the services of companies around the world which have an agreement with it. In 2014, Santander and LANPASS renewed their exclusive cobranding contract in Chile for five more years (2016-2020). Over the past 20 years, this agreement has allowed thousands of LANPASS members to earn kilometers that may be used for flights within Chile and around the world.
As of December 2014, LANPASS had 9.8 million members, an increase of 15% compared to 2013, principally in Chile, Peru, Argentina, Colombia, Ecuador and the United States.
TAM established TAM Fidelidade, Brazil's first frequent flyer program, in 1993. The program is also designed to reward those passengers who fly regularly with the airline, through different benefits and exclusive offers. Members earn points each time they fly with TAM, LAN or any of the airlines that form part of the oneworld alliance which TAM joined on 31 March 2014 (after previously belonging to Star Alliance).
Points can also be exchanged for an upgrade if there’s seat availability. As of December 2014, TAM Fidelidade had 11.7 million members, which represented an increase of 8% as compared to 2013. The program includes four elite categories - Azul, Vermelho, Vermelho Plus and Black - which now have their equivalent categories in the oneworld alliance - Ruby for Azul, Sapphire for Vermelho and Emerald for Vermelho Plus and Black - giving members access to more benefits, including that of priority on the waiting list of any airline in the oneworld alliance.
TAM Fidelidade is administrated by Multiplus, a company listed on the Sao Paulo stock exchange in which LATAM Airlines Group is the main shareholder with a 73% stake. Multiplus is Brazil's largest and best loyalty network and allows members to accumulate Multiplus points in a single account, directly or indirectly (by transferring from an affiliated program) at more than 13,000 stores. Points can be exchanged for over 550,000 different products and services. As of December 2014, the Multiplus network comprised over 400 partners and had around 13.8 million members.
Among the innovations done in 2014, TAM Fidelidade and TAM Viajens launched a new product, known as Points + Money, which allows members to redeem tickets as from 1,000 Multiplus points as well as increasing the number of redemption alternatives and providing access to better experiences and offers at TAM.
LAN Argentina, which has now been in operation for nine years, has established a position as the second largest player in the country's domestic passenger market, which is dominated by the state-owned flagship Aerolíneas Argentinas with over a 70% market share
LAN Argentina, which has now been in operation for nine years, has established a position as the second largest player in the country's domestic passenger market, which is dominated by the state-owned flagship Aerolíneas Argentinas with over a 70% market share. It has achieved this position thanks to its unfailing commitment to providing the highest safety, quality and service standards in the framework of a corporate strategy that focuses on offering customers the best travel experience.
In 2014, LAN Argentina served 14 domestic destinations, connecting Buenos Aires with the country's principal provincial capitals: Bahía Blanca, Bariloche, Calafate, Comodoro Rivadavia, Córdoba, Iguazú, Mendoza, Neuquén, Río Gallegos, Salta, San Juan, Tucumán and Ushuaia. In the second half of the year, operational rescheduling meant the temporary suspension of flights on the Buenos Aires-Bahía Blanca route until January 2015.
The 2.3 million domestic passengers that LAN Argentina carried in 2014 represented an increase of 0.5% on the previous year and were equivalent to a market share of close to 27% according to MIDT, down by 3.2 percentage points. Consolidated traffic measured in passenger-kilometers (RPK) was up by 2.8% while capacity (ASK) was down by 0.6%. This gave a load factor of 75.5% which represented an increase of 2.5 percentage points on 2013.
For its domestic flights, LAN Argentina uses a fleet of ten Airbus A320s which are considered the most efficient in the local industry for operations of this type and have the widest and most comfortable passenger cabin in the category.
At the end of 2014, Argentina's National Civil Aviation Administration (ANAC) authorized the incorporation into LAN Argentina's fleet of a new aircraft from this family to replace an older aircraft. This represented an important milestone for the LATAM's domestic operation because, since 2011, it had not been allowed to incorporate aircraft to modernize its fleet nor to bring in aircraft provisionally for maintenance purposes.
LAN Argentina is based in Buenos Aires at the Ministro Pistarini (Ezeiza) and Jorge Newbery airports. The latter, more commonly referred to as Aeroparque, is the country's most important domestic passenger terminal. At this airport, LAN Argentina has a hangar whose ongoing use by the Company was ratified by Argentina's Supreme Court on 30 December 2014 when it rejected a request from the National Airport System Regulator (ORSNA) which had sought to oblige it to vacate the premises.
With 93 million passengers flying within the country in 2014, Brazil is by far South America's largest domestic market and the fourth largest in the world after the United States, China and Japan, according to the International Air Transport Association (IATA).
In 2014, TAM carried 33.3 million passengers on domestic routes, up by 0.4% on the previous year, and maintained its leading position with a 38.1% market share measured in RPK according to ANAC. In addition, TAM maintained its leadership in the corporate passenger segment, with a share of 32.7% of total sales in this segment. Its principal competitors are GOL and Azul with 36.1% and 16.7%, respectively.
In order to serve its 42 destinations within Brazil, TAM used a fleet of 115 aircraft from the Airbus A320 family, including 16 A321s which allow it to cover the busiest routes with greater efficiency. In 2014, six new aircraft of this model, the most modern and efficient in the family, were incorporated as well as TAM's first A320 Space-Flex whose configuration significantly improves the pitch of the first four rows, maximizing space and offering passengers greater comfort.
Domestic passenger operations In Brazil faced complex macroeconomic conditions in 2014, due principally to the economy's deceleration (GDP grew just 0.14%), inflationary pressures (6.4% annual inflation) and depreciation of the real (9.1%), all of which had a negative impact on demand for air travel, particularly in the business segment. However, the single most important impact was that of the Soccer World Cup, which took place in Brazil in June and July. It meant an important reduction in business and tourist demand within Brazil during these two months to which TAM responded by reducing its capacity by 5% and 7%, respectively.
In annual terms, TAM reduced its capacity measured in ASK by 1.4% (which followed a reduction of 8.4% in 2013) in line with its plan of capacity discipline, improved market segmentation and revenue management practices launched in 2012. On the other hand, demand measured in RPK grew by 1.1%, giving a load factor of 81.7%, up by 2.0 percentage points on the already high level achieved by TAM in 2013 and above the industry average of 79.8%.
In 2014, TAM launched flights on three new routes: Joao Pessoa-Salvador, Brasilia-Macapá and Porto Seguro-Brasilia. Taking advantage of the modernization and expansion of the airport in Brasilia, which implied an increase in its capacity from 16 million to 21 million passengers per year, TAM also advanced with the development of its hub there, mainly for domestic operations. Following the opening of the new Terminal 2 (Pier Sul) exclusively for domestic flights, TAM moved its operations to that terminal in the second half of the year. This has allowed the reduction of stop-over times for passengers with connecting flights and, in this way, the development of connectivity in the domestic market. Today, TAM serves over 30 destinations from Brasilia, connecting it with more than 180 destinations around the country.
On the other hand, at the end of the year TAM announced its decision to operate in the regional market in Brazil, as part of the Group’s strategy, independent of any regulatory changes that may be implemented by the Brazilian government through the Regional Aviation Development Program (PDAR). TAM plans to add service to between 4 and 6 new regional destinations every year, starting in 2015. For this purpose, the airline is currently in advanced stages of negotiations with aircraft manufacturers for orders of new generation smaller aircraft to be delivered starting in 2018.
In addition, TAM and Passaredo signed a codeshare agreement, which will provide TAM with an even higher capillarity, continuing its strategy of widening its regional network.
In all, LATAM Airlines Group's operation in the domestic Brazilian market in 2014 was successful and profitable, with TAM maintaining its leadership and improving its punctuality indicators. This was reflected in increased customer satisfaction and, for the second consecutive year, TAM won the Top of Mind airline prize.
During 2014, and after 85 years of operation in Chile, LAN Airlines maintained its leading position in the domestic market.
During 2014, and after 85 years of operation in Chile, LAN Airlines maintained its leading position in the domestic market. In 2014, LAN carried 7.2 million passengers within Chile, up by 4% compared to 2013, and reported a 1.0 percentage point increase in its market share, reaching 77.9% according to the Junta Aeronáutica Civil. On domestic routes, its main competitor is Sky Airline, with a 20.2% market share.
Over the past five years, the number of passengers carried by LAN Airlines within Chile has shown a significant increase, with an average annual growth rate of 14%.
Although LAN showed a healthy performance in terms of traffic, it had to adjust its growth to reflect the reduced dynamism of the domestic market in 2014, which was a result of the deceleration of the Chilean economy and the suspension or postponement of investment projects which mainly affected routes serving the mining industry in northern Chile.
Consolidated passenger traffic (RPK) increased by 4.7% and capacity (ASK) increased by 1.5% as compared to the previous year. As a result, the average load factor increased by 2.5 percentage points to 82.5%, its highest level in ten years.
LAN Airlines serves 16 destinations throughout Chile, using a modern fleet of 28 aircraft from the Airbus A320 family to which, in December, it incorporated its first Airbus A321, the largest and most modern aircraft in this family
LAN Airlines serves 16 destinations throughout Chile, using a modern fleet of 28 aircraft from the Airbus A320 family to which, in December, it incorporated its first Airbus A321, the largest and most modern aircraft in this family. This will enhance the efficiency of the company's domestic operations as well as significantly reduce CO2 emissions.
In regard to service standards, LAN achieved a punctuality rate of over 90% on domestic flights in 2014, measured in accordance with the standards of the International Air Transport Association (IATA). This was its best performance in five years.
Among other initiatives implemented during 2014, LAN Airlines launched a new electronic boarding card system for smartphones in May, simplifying the check-in process. In addition, since November, passengers flying on domestic flights are authorized to keep their mobile phones and tablets switched on in flight mode throughout the entire flight, positioning Chile as the first country in South America to adopt this measure and improving passengers' travel experience.
Since it started its operations as LAN Colombia in 2012, the company has gradually established a position as one of the leading players in a domestic market that is considered among the most competitive in Latin America
Since it started its operations as LAN Colombia in 2012, the company has gradually established a position as one of the leading players in a domestic market that is considered among the most competitive in Latin America. Thanks to different measures designed to achieve brand recognition and customer loyalty, LAN Colombia has achieved over 10% annual growth on the routes it operates and today carries around 43% more passengers than three years ago.
In its third year of operations as LAN Colombia, the company carried 4.4 million domestic passengers. This represented an increase of 10% as compared to the previous year and positioned it as the country's second largest operator with a 19.1% market share measured in passengers carried according to Aerocivil, after Avianca with 60.1%. Other competitors include VivaColombia (9.6%), Satena (4.0%) and EasyFly (3.5%).
Consolidated passenger traffic (RPK) increased by 20.1% in 2014 while capacity increased by 21.4%, resulting in a load factor of 78.7%, 0.9 percentage points below 2013. Colombia was the country where LATAM Airlines Group increased its capacity the most in 2014, in a context of GDP growth of 4.8%, which positioned Colombia as one of the region's fastest-growing economies.
LAN Colombia currently operates 24 routes within Colombia, serving 20 cities and offering a high level of connectivity from Bogotá and Medellín. The routes from Bogotá to Medellín, Cali, Cartagena, Bucaramanga and Barranquilla, in that order, account for over half of LAN Colombia's passenger volume.
Starting in July, the company expanded its domestic services, increasing its services to five cities including Cartagena, Cali, Santa Marta, San Andrés and Cúcuta as part of a strategy of penetrating cities where Copa Airlines had cut flights. This strategy aims to increase LAN Colombia’s share in the Colombian market by between 2% and 4% and, for this purpose, it incorporated an additional Airbus A320 aircraft.
In November, LAN Colombia also began to offer two direct flights a week (three as from February 2015) between Medellín and San Andrés, a route previously served by only one operator. This represents a further step in the decentralization of the company's domestic operations and serves to boost one of the country's most popular tourist destinations. In this way, LAN Colombia reached 24 flights per week to San Andrés from Bogotá, Cali or Medellín.
In regard to fleet, LAN Colombia ended 2014 with a fleet of 14 Airbus A320s, each with a capacity for 174 passengers. This followed the completion of its fleet renewal process with the incorporation of six aircraft from this family for its domestic operations and the withdrawal from service of its last Boeing 737s (inherited from Aires) during the first half of the year.
In regard to fleet, LAN Colombia ended 2014 with a fleet of 14 Airbus A320s, each with a capacity for 174 passengers. This followed the completion of its fleet renewal process with the incorporation of six aircraft from this family for its domestic operations and the withdrawal from service of its last Boeing 737s (inherited from Aires) during the first half of the year. The incorporation of this new Airbus aircraft represented an increase of 9.5% in seat availability and reduced the age of the fleet, with the consequent reduction in maintenance times and improvement in the punctuality of the company's operations.
LAN Colombia’s fleet renewal plan will finish in 2015 with the expiry of the lease contracts for the seven Dash 8-200s, with a capacity for 37 passengers, that it inherited from Aires and currently uses on the so-called regional routes within Colombia. As part of the process of returning these planes, LAN Colombia plans to start operations with Airbus A320s in Neiva and Villavicencio while operations on routes where it is not possible to operate Airbus aircraft will be gradually suspended during 2015.
In regard to service standards, LAN Colombia consolidated its position as the country's most punctual airline in 2014. This was a result of the investments and efforts deployed by the company since its arrival in the country in the framework of a strategy that focuses on offering passengers the best value proposition. According to the latest Airline Compliance Report of Colombia's Civil Aviation Administration, LAN Colombia won the first place in punctuality in January-September 2014, with an average 94% of compliance, 11 points ahead of the airline in second place.
Since it launched its domestic passenger operations in Ecuador in 2009, LAN Ecuador has gradually established itself as an important operator on routes within the country. This has been possible thanks to its constant efforts to offer passengers the best product in terms of safety, reliability and service.
It currently serves five destinations through the Quito-Guayaquil and Quito-Cuenca routes and the Quito/Guayaquil route to the San Cristóbal and Baltra Islands in the Galápagos, offering connectivity that seeks to promote tourism and the country's economic development. In the first half of the year, domestic flights were restructured in order to reinforce the corporate route between Guayaquil and Quito, and also to increase and improve services between Cuenca and Quito. This allowed LAN Ecuador to leverage its results and achieve its target in terms of margin.
In 2014, LAN Ecuador transported 1.1 million domestic passengers, a decrease of 15.6% as compared to the previous year. This occurred in a market in which domestic commercial flights showed a drop of over 8%. In this context, however, the company positioned itself as the leading airline, with a market share of 36.5%, ahead of the flagship Tame airline, with 34.58%, and Avianca, with close to 29%.
LAN Ecuador's consolidated passenger traffic was down by 9.5% in 2014. However, a 21.5% reduction in capacity meant that average load factor reached 81.2%, up by 10.8 percentage points as compared to 2013. In line with this capacity adjustment, the Airbus fleet used for domestic and regional flights was gradually modified, replacing its five Airbus A320s with five A319s with fewer seats. Three of the A319s are used exclusively for domestic services.
In a sign of its commitment to the country, during 2014 LAN Ecuador signed a collaboration agreement with the Cuenca Municipal Tourism Foundation for the second consecutive year. This agreement seeks to promote tourism in one of the country's most popular destinations. At the beginning of the year, it also launched a strategic operation with Silversea, a luxury cruise operator, in the Galápagos.
Over the past six years, Peru has been South America's fastest-growing economy, achieving an average annual growth rate of 5.2% as compared to a regional average of 3.8%. In 2014, Peru's growth was 2.4%.
The combination of economic modernization, a healthy level of inflation, a positive trade balance, an abundance of natural resources, ongoing improvements in economic management and political stability are helping Peru to emerge as one of Latin America's most stable economies.
In this context, the domestic airline industry grew by 8% in 2014 in terms of domestic passengers transported in Peru. LAN Perú carried around 5.7 million people, with consolidated passenger traffic (RPK) increasing by 7.3% and capacity (ASK) increasing by 6.8% as compared to 2013. The load factor also increased in the year reaching 81.3%, up by 0.4 percentage points as compared to 2013 and ahead of the industry average.
In 2014, LAN Perú completed 15 years of operations and, to celebrate its anniversary, launched internal and external corporate branding campaigns in both the written press and on television. After six years in which it had not opened new routes, the company also started operations in Ayacucho and Talara, increasing the total number of domestic destinations it serves, which totalled 16 as of December 2014. The opening of these routes reinforces LAN Perú's commitment to increasing connectivity and mobility within the country.
LAN Perú continues to be the leading airline in the Peruvian market, with a 63,2% market share according to the DGAC. On domestic routes, its main competitors are Avianca (13,0%), Peruvian Airlines (12,2%) and Star Perú (7,0%). However, LAN Perú stands out for its greater variety of destinations, frequencies and services, as well as its high level of punctuality. In 2014, it achieved the highest punctuality of the last five years, thanks to the incorporation of “Operational Rules”
In addition, during 2014 the company began to sell "Favorite Seats" on all domestic routes to and from Lima and continued to offer an extended schedule of flights to Cusco, one of the region's most important destinations. This extended schedule is one of the competitive advantages of the LAN Perú's services for both local and international travelers and is in line with the objective of stimulating passenger traffic to this tourist destination.
In 2014, LAN Perú operated a fleet of 18 aircraft, comprising 11 Airbus A319s and seven Airbus A320s. In line with efficient management of the business, important fuel consumption efficiency projects were implemented and are expected to deliver annual savings of 3.2 million gallons on the domestic operation.
In order to maintain close ties with clients, one of LAN Perú's objectives is to increase its face-to-face points of sale around the country. In line with this, the company efficiently expanded its infrastructure and reach in the domestic market during 2014, increasing the capacity of modules and sales offices by 10%.
Like the other airlines that constitute LATAM Airlines Group, LAN Perú has a focus on providing its customers with the best service. In this context, it continued to implement changes related to the LEAN work philosophy in 2014, seeking to improve and simplify airport processes and achieve operational efficiency gains, strengthening the value proposition for its offers customers.
In 2014, LAN Perú also continued to make progress in its objective of being a socially responsible company by compensating its carbon footprint and conscientiously managing its CO2 emissions, which it has reduced by 25% since 2012.
