Brazilian airline TAM has decided to slash its domestic network by between 8- and 10 percent in reaction to sagging traffic and yields attributed to growing inflation and the depreciation of the Brazilian real versus the U.S. dollar. As a result, the company has revised its domestic capacity guidance for this year from a flat rate of growth to a contraction of 2- to 4 percent compared with its 2014 available seats miles (ASMs).

The carrier said it would achieve the reduction solely through frequency adjustments, meaning it will not remove any of its domestic destinations from its network.

TAM said the reductions would prompt it to reduce its total workforce by less than 2 percent, thanks to what it called several measures to limit the plan’s effect on its employees and the results of normal turnover. It also said that its mid-term growth plans call for maintaining its current level of employment among flight crew personnel.

“TAM is taking this measure to face the difficult economic scenario of the country,” said TAM CEO Claudia Sender. “It is necessary to make adjustments to our network while maintaining the connectivity we offer our passengers, and strengthening even further the company’s competitiveness in Brazil.  

“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 northeastern hub and the continuous strengthening of our hubs in Brasília and São Paulo/Guarulhos.”

The Brazilian airline industry has suffered from declining demand, according to National Civil Aviation Agency (ANAC) data. Meanwhile, data from a report released by the Brazilian Central Bank on July 10 indicates that the market projects a further decline of Brazilian GDP this year. Revised estimates show an adjustment from a contraction of 1.3 percent to a 1.5-percent decline. They also show that inflation should end the year at more than 9 percent, while the U.S. dollar continues to strengthen against the Brazilian real.