LATAM Airlines Chief Executive Roberto Alvo said the industry may be compelled to make additional capacity reductions if high fuel prices remain through 2027.
Speaking in an interview on the sidelines of the International Air Transport Association’s annual meeting in Rio de Janeiro, Alvo warned that a sustained fuel shock would force the sector to re-evaluate available seat capacity. He said airlines already face higher funding costs, and that persistent difficulties in aircraft and engine supply chains are expected to continue for two to three years.
Alvo emphasized the uneven impact across carriers, noting that companies with weaker balance sheets and a larger share of passengers who are sensitive to price changes will come under growing pressure. Those operators, he said, could be more likely to reduce service or otherwise adjust capacity if elevated fuel costs do not abate.
The CEO framed the outlook as a function of how long supply-side cost pressure endures. If fuel prices remain elevated into the 2027 time frame he referenced, the market-level response would likely include further capacity adjustments - a development that would interact with financing conditions and ongoing supply-chain constraints for new aircraft and engines.
Alvo also pointed to rising airline funding costs as a compounding factor. Higher financing rates can limit carriers’ flexibility to absorb operating cost shocks and to invest in fleet renewal or expansion, particularly when coupled with delays or shortages in aircraft and engine deliveries.
Context limitations: The comments focus on the potential need to cut capacity if fuel prices stay high into 2027, the relative vulnerability of weaker-balance-sheet carriers and the prospect of two- to three-year supply-chain persistence for aircraft and engines. Details beyond these specific points were not provided.