LAN Airlines and TAM share prices gained on speculation Chile’s antitrust tribunal will approve the Santiago-based company’s USD4.1 billion takeover of its Brazilian rival (Bloomberg, 05-Jul-2011). LAN advanced 2.2% in Santiago trading to 13,904 pesos, the highest price since 28-Jan-2011. TAM increased 4.6% to 36.46 reais in Sao Paulo, the largest increase since 12-Jan-2011. The tribunal, known as TDLC, is studying the merger proposal at the request of a consumer defense association.
LAN and TAM share prices increase over USD4.1bn acquisition speculation
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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.
Qatar Airways buys 10% of oneworld's LATAM, to add to its 15% in IAG
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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.