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Investors concerned LAN/TAM merger will not go ahead; Copa Airlines slips


North and South American airline stocks declined for Friday (17-Sep-2010) as the wider market faltered late in trading on news US consumer confidence plummeted to a one-year low for Sep-2010. The Dow (+0.1%) ended the session up only marginally, after stronger gains in the morning.

In Latin America, Chile’s IPSA (-0.2%) and Brazil’s Bovespa (-0.9%) were both down for the day, mirroring declines in the US due to the weak economic data. However, Latin American markets bounced back for the week, following declines the week prior.

Investors concerned LAN-TAM merger will not go ahead

LAN Airlines (-1.6%) and TAM Airlines (-1.4%) were both down after a report by Bloomberg, the carriers stocks show investors are not confident LAN can complete its takeover of the Brazilian airline, with TAM trading 18% below LAN’s 13-Aug-2010 offer price.

Global Equity Administradora de Recursos employee, Octavio Vaz, told Bloomberg investors are concerned the merger will be blocked or delayed by regulators, despite Brazilian Finance Minister, Guido Mantega, stating the agreement complied with the country’s foreign control limits for airlines. However, Mr Vaz stated investors did not take his comments seriously as it is not Mr Mantega who will make a final decision on whether the merger can go ahead.

LATAM execs study share swap with Iberia and British Airways

In other LAN and TAM news last week, it was reported that LAN and TAM executives were in London studying the possibility of an agreement with British Airways involving a potential 5-10% stake swap. Iberia spokesman, Santiago de Juan, stated British Airways and Iberia are focused on their impending merger and “can’t confirm anything” regarding reports of a planned share swap.

However, LAN denied the reports it is in negotiations with other companies in the industry, reaffirming it is concentrating all efforts on the creation of the LATAM Airlines Group.

TAM’s market share falls

TAM meanwhile reported a 6.1 ppt year-on-year improvement in domestic load factor, to 68.9%, and a 8.0 ppt improvement in international load factor, to 81.7% for Aug-2010. Domestically, the improvement was due to a 30.5% rise in domestic traffic (RPKs) on a 18.9% increase in capacity (ASKs), while internationally, traffic rose 20.8% on a 9.0% increase in capacity.

However, the carrier witnessed a decline in market share for the month, with domestic share down 1.2 ppts to 42.6% and international market share down 5.4 ppts, to 84.0%.

See related CAPA Profile: Market Share

Copa Airlines increasing frequencies

Copa Holdings Holdings (-0.7%) was also down for the day. Copa Airlines plans to increase Tocumen-Montevideo frequency to twice daily by the end of 2010. The carrier is the sole operator on the sector. The carrier also announced plans to increase Tocumen-Mexico City frequency to 19 times weekly. The carrier is also the sole operator on that sector.

See related CAPA Profile: Route Changes

Elsehwhere, GOL (+0.8%) was the only Latin American carrier to rise for the session, with Air Canada (+2.4%) and Allegiant (+0.6%) also ending the session higher. Delta Air Lines (-3.5%) and Alaska Air (-2.0%) were down. 

North & South America selected airlines daily share price movements (% change): 17-Sep-2010

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