MercoPress. South Atlantic News Agency

LAN will seek another partner to expand globally if merger with Brazil’s TAM falls

Ignacio Cueto, LAN's chief operating officer

Chile's LAN Airlines will seek another partner or explore other options to expand internationally if a local antitrust tribunal rules against a planned merger with Brazil's TAM, according to an interview published by leading daily El Mercurio.

The proposed merger would create Latin America's biggest carrier, and LAN promised the tribunal last week that it would guarantee lower fares and more competition on key routes shared with TAM to win approval for the plan.

Ignacio Cueto, LAN's chief operating officer, told El Mercurio that he believed the companies had presented substantive arguments to override a consumer group's challenge to the merger.

But if the antitrust body rules against it, ”We will look for a 'second best' (partner). We could start conversations with Gol, although that company may not be available and its international reach is not comparable to TAM's,” Cueto said, referring to Brazil's No. 2 airline Gol Linhas Aereas.

He added that LAN would also explore other options besides mergers.

A lawyer for TAM made a similar statement during last week’s antitrust hearing, saying the Brazilian airline could seek another partner if the merger were blocked.

The Chilean antitrust review has pushed back the effective date of any merger from the third quarter to early next year, but most analysts agree the tribunal is likely to approve the deal with some competitive guarantees before the end of July.

In Brazil TAM Airlines reported a net income of Real 128.8 million in the first quarter of the year and reverted the losses of Real 71 million recorded for the same period in 2010. The operational profit (EBIT) increased by 43.6% to R 110.2 million in comparison with the first quarter of 2010.

The gross operational income increased by 17.1% to R 3.2 billion in the same period. However, passenger invoicing on domestic and international flights increased 7.2% to R 2.4 billion. The total number of paying passengers was 9.3 million, an 11.9% increase. The company operated an average of 881 daily flights in the period.

“The good performance of TAM Airlines in the first quarter reflects the positive impact of the foundation built for this new period of Brazilian aviation growth. We now have 29,110 people committed to delivering a high quality service”, says TAM S.A. president, Marco Antonio Bologna, remembering that staff numbers are 3.3% higher than in December 2010.

“We should point out that our membership to the Star Alliance completed one year in May; the consolidation of Multiplus Fidelidade, which works with networks of customer loyalty programs, as a publicly-held company; the development of the TAM Vacations franchise model; and the increase in new customers at TAM MRO, our business unit that undertakes aircraft maintenance and review services.”