When in June the merger between LAN Group and Brazilian operator TAM was finally completed, it created the largest airline group in fast-growing Latin America.
LATAM Airlines would have generated combined revenues in excess of $13 billion last year based on their individual returns. This would have made it the 16th biggest airline group in the world, underlining its importance on the global stage.
Small wonder there has been a tug of war from alliances for the merged carrier. A decision is still to come, but as a competition ruling attached to the merger blocks LATAM being in the same alliance as recent Star Alliance recruit AviancaTaca, LAN's existing relationship puts Oneworld in the box seat.
The new partners are initially concentrating on integrating their networks and fleets, says LATAM chief executive Enrique Cueto. The two airlines, in the meantime, will continue to operate separately under their individual brands. "TAM is a very strong brand in Brazil so we want to keep it as it is," says Cueto, who expects 27% of LATAM's overall revenue to come from TAM's domestic Brazil operations. "It would be a little risky to begin with a new brand now," he adds, although he envisages a single brand to be a possibility in about two to three years' time.
Cueto says LAN and TAM overlap on about 3% of the routes, meaning significant potential for new routes such as Sao Paulo-Cordoba. "TAM could not fly to Cordoba, but we are very strong in the Argentinean market," he says Cueto, pointing to LAN's presence in the country through its Argentinian affiliate.
Cueto expects the route integration between LAN and TAM to take place this year and stretch into the first half of 2013.
The creation of LATAM marks the second recent big-ticket merger in the region. The combination of Avianca and Taca consolidates a pool of carriers in Central American countries such as Colombia, El Salvador and Ecuador. It estimates synergies resulting from the merger will top $219 million in 2012.
One of the group's first tasks was to streamline a combined fleet that comprised 135 aircraft across 11 aircraft types. The fleet now consists of 155 aircraft and six aircraft types. It has also just completed its entry into Star Alliance, alongside Panama's Copa Airlines.
Next is an effort to consolidate the airlines in the group under a single branding of Avianca, explains chief operating officer Estuardo Ortiz. The group has signed an IT deal with Amadeus to roll out a common customer management system across its airlines to integrate operations, and hopes to be able to operate all flights under a common airline code, AV, in the first half of 2013. But there is no definite plan yet to bring Avianca Brazil, run separately from the group and owned by AviancaTaca's majority shareholder Synergy Group. into the group.
Elsewhere, Brazil has been at the centre of consolidation activity. After the region's second-largest carrier, GOL, acquired fellow low-cost operator WebJet, fast-growing regional carriers Azul and Trip have announced plans to merge. The deal could, based on 2011 revenues, create an operation which would already be the sixth largest in the region.
Source: Air Transport Intelligence news
