Chile’s Antitrust Court approves LAN and TAM merger

[flying.monkeyz]

LAN Airlines announced (21-Sep-2011) Chile’s antitrust court, Tribunal de Defensa de la Libre Competencia (TDLC), approved the merger between LAN and TAM, but will require the companies to implement additional mitigation measures. The TDLC's approval was the last major hurdle for the merger in Chile, although a ruling from Brazil's top antitrust regulator, CADE, is pending, according to wire reports.

The 11 mitigation measures the TDLC is requiring include "exchanging four pairs of daily slots" at the Guarulhos International Airport in Sao Paulo with other "airlines that are interested in starting or increasing regular air transport service on the Santiago-Sao Paulo route", the court said.

Wonder who's giving up their alliance membership...

[flying.monkeyz]

LAN-TAM alliance decision would give Star bigger benefits but oneworld favoured with more at stake

The stage is set for the biggest global alliance selection of the decade as new airline group LATAM is being forced by Chile's anti-trust court to choose a single grouping. The decision by LATAM, the new parent company for oneworld’s LAN and Star’s TAM, will have huge ramifications as the winning alliance will be guaranteed a leading position in the fast-growing and increasingly important Latin American market. The more likely outcome is a oneworld victory, which would result in its share of capacity in the region increasing to 30% compared to approximately 15% for Star and 11% for SkyTeam. However if Star wins, its share would reach nearly 40% with oneworld’s share dropping to only 7% and SkyTeam, which is not expected to be a serious contender in the battle for LATAM, retaining 11%. Losing LATAM would be unrecoverable for oneworld, unlike for Star who is poised to grow intra-region traffic with forthcoming members Avianca-TACA and Copa.


The LAN-TAM merger is the first time major carriers from competing alliances have agreed to merge, which also for the first time forces global alliances to jostle for a merged carrier.


Oneworld and Star began courting LATAM almost immediately after LAN and TAM first unveiled in Aug-2010 their plans to merge and establish LATAM. But LATAM has so far elected not to address the alliance issue with LAN CEO Enrique Cueto and TAM CEO Libano Barroso initially stating that a decision may not be made until one or two years after the merger is completed. Mr Cueto, who will serve as CEO of LATAM and will control the largest single stake in the new entity, also repeatedly indicated over the last year that LATAM would consider retaining the status quo with LAN remaining in oneworld and TAM in Star.
Unprecedented two alliance option ruled out

But the door on the split alliance option, which in theory could have been pursued as the two airline groups will remain separate units under the new LATAM structure, has been shut by Chilean anti-trust court TDLC. On 21-Sept-2011 TDLC approved the proposed merger on the condition that 11 mitigation measures are adopted, including one that states LATAM must withdraw from one of the two global alliances. Allowing LATAM to potentially be part of two groupings – an outcome oneworld and Star would likely not have allowed anyway – could have stifled competition and made it challenging for other Latin American carriers to compete.


LATAM, which will include nine passenger carrier subsidiaries in seven South American countries, will account for about one quarter of total capacity (seats) to/from and within Latin America, according to current Innovata data. Such a large portion of a growth market, which is increasingly becoming a destination for global business travellers, would be attractive to any global alliance.


Based on data from Latin American airline association ALTA, LAN and TAM combined accounted for 38% of all passengers carried among Latin American and Caribbean carriers in 2010 and 43% through the first seven months of 2011. On an RPK basis according to ALTA, LAN and TAM have seen its share of total RPKs grow from 43% in 2010 to 46% through the first seven months of 2011. Both carriers have been growing much faster than the region’s average 5% RPK growth rate.
With annual revenues of over USD12 billion, LATAM will be more than double the size of the region’s next two largest airline groups – Gol and Avianca-TACA. Further increasing its appeal to the alliances, LATAM will be the largest or second largest airline group in six of South America’s seven largest aviation markets (the only exception is troubled Venezuela).


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