MercoPress. South Atlantic News Agency

Lan Chile and Gol airlines engage in price war.

In markets where firms have little with which to differentiate themselves, one way to lure more business has been to drive prices lower. This is exactly what Brazilian Gol Airlines and LAN are doing to international flights originating from Chile.

"Every time we enter a new market the competition lowers their prices," said Tarcisio Gargioni, vice-president of marketing for Gol, in response to LAN's plummeting ticket prices.

LAN, the principal carrier in Chile, has lowered fairs on the destinations Gol began offering this past month, in an attempt to lure international travelers away from the Brazilian airline, causing the bottom to drop out on ticket prices to Sao Paulo, Rio de Janeiro and Buenos Aires.

Gol offers roundtrip flights from Santiago to Buenos Aires for US$98 and to Sao Paulo and Rio de Janeiro for US$139.

Previously, LAN charged US$300 for these destinations, but in an attempt to dry gulch their competition, it began offering redeye flights and trips over three days for US$169 to Rio and Sao Paulo.

Tickets to Buenos Aires, the principal destination for Chilean passengers, now cost US$129 with LAN if costumers buy before October 14; after that the price will return to its traditional level of US$300.

Soon Gol will be offering service from Chile to Bolivia, Uruguay and Paraguay, meaning LAN will most likely have to lower fares on those routes as well.

By Matthew D. Silverman The Santiago Times