Brazil’s antitrust regulator, CADE, has approved LAN Airlines' USD3.2 billion acquisition of TAM in a unanimous vote with the approval contingent on limiting services between Santiago and Sao Paulo. Chile’s antirust regulator previously approved the acquisition on 21-Sep-2011 after imposing similar conditions of fare capping on the Santiago-Sao Paulo route until the carriers exchange four daily slots with competitor carriers. Cade’s conditions required only two slots to be exchanged. LAN is currently appealing Chile’s antitrust conditions with the agreement expected to close 1Q2012. [more - original PR]
Brazil’s antitrust authority approves merger between LAN and TAM in a unanimous vote
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Qatar Airways buys 10% of oneworld's LATAM, to add to its 15% in IAG
Enter Qatar Airways. As Etihad Airways looks to bed down its investments in other airlines, Qatar is gradually expanding its airline investment portfolio. Qatar's 15% stake in IAG is now being followed with a 10% stake in LATAM for USD613 million – nearly 1.5 times Qatar's net profit of USD446 million, disclosed (for the first time) on the day prior to the LATAM equity announcement. It is a safe investment; LATAM group has a strong market position and its share price has remained strong even in the face of a brutal downturn in Latin American economies.
Qatar gives LATAM needed cash and a distant shareholder. Latin America is the smallest market by far for Gulf airlines, but while currently in the economic doldrums, has a longer term potential for growth. It is also a key future market for US airlines, albeit very small on the Gulf airlines' networks. Qatar is spending nearly EUR2.5 billion on equity investments, still smaller than Etihad's but illustrating a willingness to acquire airline assets, for investment and strategic reasons. In this case the immediate strategic purpose for Qatar is less apparent.
Star Alliance's privately owned Avianca is also considering a strategic shareholder; that would mean five of Latin America's eight largest airline groups could have an airline investor from outside the region.
Chile's domestic airline market stable as Sky Airline tests the LCC model - and Paravai plans entry
Chile recorded a solid 9.7% increase in passenger growth for the first seven months of 2016, with domestic passengers growing 9% and international passenger growth reaching nearly 11%. Although Chile has not been immune to the economic degradation in Latin America, its economy is more stable than in other countries in the region.
Some changes have taken place in Chile’s domestic market during the last year – most notably the transition of the country’s second largest domestic airline Sky into a low cost carrier. As it has undertaken a change in its business model Sky’s international passenger numbers fell for the Jan-2016 to Jul-2016 time period, but the airline is adding some international markets in 2016 and 2017, upping competition with its familiar rival, LATAM Airlines Group.
Another airline aims to start operations in Chile during early 2017 with aspirations to compete with LATAM and Sky on domestic routes. Paravai Líneas Aéreas may not pose a huge threat, but its ambitions reflect a belief that perhaps Chile’s duopoly needs to be shaken up.