LAN, TAM Clear Last Hurdle to Merger

AIN Air Transport Perspective » December 19, 2011
LAN was first Latin American operator to order Airbus A320neo.
Chile's LAN Airlines became the first Latin American carrier to place a firm order for the Airbus A320neo, during the 2011 Paris Air Show. Its future sister airline, TAM, will serve as the A320neo launch customer in the region. (Photo: Airbus)
December 15, 2011, 5:29 PM

LAN Airlines of Chile and TAM of Brazil cleared the last regulatory hurdle to their merger December 14, obtaining approval from Brazil’s antitrust authority to create one of the world’s largest airline groups. The decision of the authority, known as the Administrative Council for Economic Defense (Cade), came with conditions similar to those imposed by Chile’s TDLC antitrust court in September.

The authorities of both countries require that Latam Airlines Group, the umbrella company created by the merger, relinquish participation in one of two global airline networks; LAN currently belongs to Oneworld and TAM to Star Alliance. Cade ruled that Latam must give up two slot pairs at Guarulhos International Airport in São Paulo for the São Paulo-Santiago route.

The merger, expected to close in the first quarter of 2012, awaits shareholder votes from each airline, planned later this month. The airlines have said TAM shareholders will be offered 0.90 shares of Latam common stock for each share of TAM. By terms of a memorandum of understanding announced in August 2010, LAN and TAM will continue to operate under their existing operating certificates and brands, and maintain their current headquarters in Santiago and São Paulo, respectively.

Assuming final approval, Latam will become Latin America’s leading carrier and one of the world’s largest airline groups in terms of market value, reported at $11 billion. LAN and TAM in 2009 generated combined revenue of $8.5 billion and carried more than 45 million passengers and 832,000 tons of cargo. The group will employ 40,000 people and operate flights to 115 destinations in 23 countries.

The airlines have appealed some of the conditions imposed by the TDLC antitrust court to the Supreme Court of Chile. The terms require Latam to submit for approval code-share agreements with airlines outside its chosen alliance; relinquish four flights from Santiago to Lima, Peru, to other Chilean airlines; and make records available to a consultant required by the TDLC. However, the airlines have said the appeal will not interfere with the merger process.

 

 

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