Almost two years after it was first announced, the merger, of LAN Airlines of Chile and TAM of Brazil, was finally concluded last Friday, with a 3 billion US Dollar share-swap.
Newly-created Latam Airlines Group is now the largest airline in Latin America, controlling 40% of the market, and a major player worldwide, providing some 6% of global air transport capacity. The combined airlines have a workforce of 51,000, and already serve 150 destinations in 22 countries.
The first Latam CEO, former LAN chief, Enrique Cueto, confirmed that “The creation of this group of airlines is an opportunity to take South America to the world and to allow us to position ourselves to operate in an increasingly competitive environment due to the continuing consolidation of the global airline industry,”
The Cueto family is believed to control 70% of the newly merged airline, which is being reported in Chile as a takeover of TAM by LAN. Nevertheless, both airlines will retain their brand identities, and their separate headquarters in Santiago and Sao Paulo. This is becoming an established model for international airline mergers, that seems to be working well in Europe for Air France / KLM and for British Airways / Iberia.
At present, LAN is a member of OneWorld, while TAM belongs to Star Alliance. We will therefore be watching with interest to see how this conflict is rationalised.
The merged airlines expect to achieve up to US 700 million dollars in cost savings through synergies, and there is already speculation that the Latin Amercian mega-airline will now seek further acquisitions. Copa of Panama is being discussed as a possible target...