MercoPress. South Atlantic News Agency

Successful LAN business plan exceeds expectations

LAN Chile officials disclosed this week that its plan to increase air traffic by 50 percent through the addition of new daily flights was too low an estimate. Halfway through the plan's implementation – which will run through the end of 2008 –LAN officials now believe that the actual figure will be 65 percent by the time the plan is fully applied.

The plan, known by the name Plan Láser, was clear: to reduce costs by optimizing efficiency. Despite the difficulties of competing against Chile's multiple bus lines, LAN showed that this could be done with higher capacity airplanes. As a result, by March 2008 the domestic air fleet will be fully composed of Airbus 318, 319 and 320 models planes. "Although these airplanes are very expensive, they are more efficient and that makes it necessary to use them," said Armando Valdivieso, LAN's passenger manager. In order to accomplish its goal the company launched new daily and nighttime flights, changes that have increased LAN's domestic share from 62.9 percent in 2006 to 70.5 percent at the end of September 2007. "I never thought the figure would increase by eight percent. The plan has been very strong. And the new model, a complete success," said Cristina Acle, CorpResearch's director of research. With the implementation of Plan Láser, direct flights have increased from 30 percent in 2006 to 70 percent thus far in 2007. Seven destinations now enjoy increased daily flights. The most recent addition was a nighttime flight from Santiago to Arica – the first direct route – inaugurated earlier this month. In addition Calama, Antofagasta, La Serena and Concepción are now serviced by increased daily, non-stop flights. The plan also included the first direct flights to Punta Arenas, a destination which until 2006 lacked service. The plan does not just cover Chile, but also the regional market as well as other domestic markets where LAN operates. For example LAN Peru has now has 67 percent of its market. "LAN is stimulating demand via price," Santander Investment's Felipe Mercado said. "They have created special prices that are absolutely competitive with those of Premium class bus service." The model has not been without some problems. The situation in Argentina has been more complicated since the industry is subject to price bands or controls that involve "an additional restriction on the implementation of this model," Valdivieso said. Especially since one of the pillars used to stimulate traffic – in fact the principal objective – is price reduction. Without being able to fully implement the model, it has been difficult to increase LAN's current 13 percent market share. The Santiago Times