LATAM Making Big Global Push
Chile-based LATAM Airlines is one of the world’s youngest major carriers. It was founded in 2012 when Chile’s LAN and Brazil’s TAM completed a merger deal. The two carriers still use their own liveries, though they have begun the process of uniting under a single brand. The changeover should be completed by 2018.
A new logo and fresh paint jobs might be the most visible changes for LATAM, but a lot of growth is happening behind the scenes. The South American carrier has announced more than one major joint venture agreement recently. These deals will help it expand beyond South America and gain greater traction in both European and North American markets.
LATAM’s transcontinental ventures
LATAM’s deals are with American Airlines and European giant IAG, which owns British Airways and Iberia. (IAG also has a majority stake in Aer Lingus). These carriers are all part of the Oneworld alliance. However, the new agreements would go beyond the usual airline alliance cooperation.
American and LATAM are seeking immunity from antitrust laws. If regulators agree to allow this, the two carriers would be able to work together to set schedules and prices for flights between the U.S, Canada and Latin America. LATAM has subsidiaries in Argentina, Colombia, Ecuador, Paraguay and Peru and a presence in other countries on the continent as well. Unfortunately, the approval process for this kind of joint venture could take 12-18 months. The airlines must apply for exemptions to the rules in both the US and in each South American market that they plan to operate in.
Using each other’s networks
According to American Airlines CEO Doug Parker, intercontinental travelers should benefit from the partnership: “Customers will benefit from more frequent and convenient schedule options than the carriers could offer individually. Travelers headed to Latin America will soon have more seamless access to more than 100 additional destinations with LATAM beyond American’s already extensive network.”
Ideally, passengers from the U.S. would have access to destinations throughout South America via LATAM’s hubs, while Latin American travelers could easily reach secondary cities in the U.S. via connecting flights in American’s hubs. The criticism of this kind of enhanced alliance is usually that a lack of competition can lead to higher prices on certain routes. Antitrust laws are meant to protect against this, but they can also stifle the kind of growth that American and LATAM are hoping to experience.
A chance at European success
A similar joint venture deal between LATAM and IAG will mean increased access to European destinations for South American travelers and, perhaps more importantly for South American tourism, easier access to Latin America for European travelers. In Europe, LATAM has limited presence outside of Spain and Portugal. The new joint venture will change that almost immediately (once it is approved by regulators).
There is already a precedent for this kind of deal. IAG-owned British Airways' partnership with American Airlines took years to iron out before it could even begin the lengthy approval process. However, it is now seen as one of the most successful partnership of its kind in the industry, mainly because it helped both airlines secure a greater share of the transatlantic market.
LATAM is hoping for the same kind of intercontinental success with its two new deals. The ventures will certainly help it compete in a growing South American market. It will take quite a bit of time to get the necessary approvals and antitrust waivers, but, when all is said and done, LATAM could have a stranglehold on first place when it comes to transcontinental travel to and from South America.
More by Josh Lew
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