TAME, forged by the military, extends its commercial franchise from domestic to global
TAME was founded as Transportes Aereos Militares Ecuatorianos and its affiliation with the military has had a deep influence on how it is run. Now, after 50 years as an affiliate of the Ecuadorian military, TAME is attempting to relaunch itself as a strictly commercial entity.
TAME has long been Ecuador's largest domestic airline and now is the country's only airline. Its key competitors,Ecuador and Aerogal, have become subsidiaries of multinational airline groups—Latam (with hubs in Chile and Brazil) and (with hubs in Colombia, El Salvador and Peru). TAME remains state-owned, but formally cut its ties to the military a little more than a year ago. “It is a different airline now,” says Rafael Farias. The new CEO was appointed in late 2011 to oversee the airline's transformation into a public company. Essentially the entire top management was replaced. Farias began his career in the industry at Saeta, a now-defunct Ecuadorian airline, and most recently worked for rival Aerogal.
“We brought in the key people we needed with a lot of industry experience,” Farias says. “We were able to quickly make the airline more efficient. The biggest change was in introducing transparency. TAME used to be managed secretively.”
The key objective behind the government-sanctioned initiative has been to turn TAME into a profitable operation. That goal was achieved Jan. 1, 2012, in spite of the rescission of the Ecuadorian fuel subsidy, which allowed local airlines to operate at about one-third of the fuel prices common in the world market.
“2013 is going to be a challenging year,” Farias says. The airline is facing additional costs related to the move to Mariscal Sucre International Airport, the new facility, in February. Also, the airline is concerned that domestic traffic—particularly on the busy Quito-Guayaquil route—will suffer if travelers choose not to make the now far longer commute to the new airport, which is situated in an valley outside of the city limits. The situation is unlikely to improve until late 2014 at the earliest, when a new direct road will open and cut down on commuting times. While many airlines had been concerned that the domestic market would experience a 20% plunge in demand, initial figures indicate the drop-off is not that dire.
Partly because of its military background, TAME has had limited exposure to international routes and hardly any links to other carriers, but that is now changing. The airline will even be entering the widebody and long-haul market for the first time, when it introduces its first-200 in July. The aircraft will be flown on the New York-Quito route.
“The nice thing about widebodies is their cargo capacity,” Farias says. “We have identified that as an opportunity.” TAME is looking at adding a second or third A330 at some point, mainly for longer routes within Latin America and to destinations with heavy cargo demand. European services are an option for the medium term, but Farias says the airline needs to gain experience in long-haul flying before it can turn its attention to other markets.
Closer to home, the carrier has added Bogota, Sao Paulo and Lima, Peru, to its network. The strategic aim is to realize about 40% of revenues internationally, up from the current 10-20%. TAME plans to open new services to Buenos Aires in May, using Airbusfor the 6-hr. flight.
As the airline's presence grows internationally, partnerships with other airlines are also on the agenda. “We need each other, we can complement their networks,” Farias says. With Latam soon to be solidly ensconced in Oneworld, and the Avianca group of airlines linked to the, many Skyteam members are finding it difficult to line up local partners for Latin America feed. TAME already cooperates with and and it is finalizing an agreement with , which serves Quito daily from Amsterdam. But Ecuadorian airline also plans “close relationships” with Brazilian carrier Gol and Aerolineas Argentinas. The Argentinian airline is a Skyteam member, whereas Gol has links with Delta. TAME itself “is not even close to joining” an alliance, but wants to focus on bilateral deals for the time being, its CEO notes.
Farias says the carrier is likely to add a fourth-500 for its new domestic regional operation. TAME has introduced the ATRs for services to secondary markets. Large losses were posted on these routes when they were served by or Airbus narrowbodies. “Some of the routes are still not profitable, but we are almost there,” he says.