Clipped wings: Taca-Peru had hoped for a million passengers in 2001. But competition, poor market conditions, and Sept. 11 left that goal on the runway. Fortunately, airline president Daniel Ratti was prepared for the down draft

Latin CEO: Executive Strategies for the Americas, Jan, 2002 by Larry Luxner

Under terms of the concession, LAP has agreed not to increase user fees in the first two years, during which time the partners will build a new passenger terminal. A shopping center and a four-star hotel will follow, while a second runway is to be finished by 2010.

These projects are still years away, however, and in the meantime Ratti's mission as a cost-cutter continues. "I look at having a very fit, low-cost, high-value product," he says. "That's the basis of the business, and that's what we had at Carnival Airlines. We had to keep our costs as low as possible and not have unrealistic breakeven points. Right now, our breakeven point is around 60 percent [occupancy], though I wish it would be in the high 50s."

After the attacks, Taca-Peru's load factor dropped to 55 percent, but by December 2001 it was back up to around 70 percent.

Asked about this year, he says: "Things look a lot better. After Sept. 11, I was very cautious about 2002, and expected it not to be profitable at all. I now see Taca-Peru on a breakeven trajectory for the first half of the year, then profitable in the second half."

Yet even that may not be enough.

"Eventually, the major carriers in Latin America should be looking at creating some synergy in order to survive," he says. "We may be joining forces in order to create a more competitive product. That's something being discussed among all Latin American carriers." For that model, airlines need look no further than the Taca consortium that includes Taca-Peru.