Latin America Airlines Plunge as Earnings Show Currency Weakness

Latin America’s largest airlines tumbled this week after carriers reported disappointing earnings that were hurt by lower demand and weaker currencies.

Latam Airlines SA, which reported a wider-than-expected loss Thursday, is down 10 percent this week to a nine-year-low. Colombia’s Avianca Holdings SA has plunged 15 percent to a record low, Panama City-based Copa Holdings SA lost 19 percent, and Brazil’s Gol Linhas Aereas Inteligentes SA is also down for the week after losing as much as 3.9 percent Friday.

An index of Latin American airline stocks reached a six-year low Friday, a day after a gauge of the region’s currencies fell to a record. Weaker currencies are making travel more expensive for Latin Americans amid a regional economic slowdown and offsetting the benefits the airlines would have normally seen from the bear market in oil.

“Massive depreciation of currencies and economic slowdown in the region is affecting demand,” said Daniel Guardiola, an analyst at Larrain Vial. “Most airlines increased their guidance at the end of 2014 with the fall in the price of oil. They didn’t foresee other risks that could affect the region.”

Citing “challenging macroeconomic conditions,” Latam cut its operating-margin guidance this year and said it may postpone delivery of some planes. Copa also slashed guidance on Aug. 12 after its quarterly results reflected weak demand. Gol CEO Paulo Kakinoff said in a call Friday it was the most adverse scenario he’s ever seen in Brazil. Avianca will report earnings next week.