LAN Airlines CFO Alejandro de la Fuente stated the airline is protected from a soaring Chilean peso, which is is trading at a three-year high against the greenback, by a natural hedge (MarketWatch, 29-Apr-2011). The CFO said that the stronger local currency means local costs rise but passenger traffic tends to increase as consumers' purchasing power expands and demand for goods from offshore increases, which benefits the airline’s strong cargo arm, LAN Cargo. The peso’s appreciation has hurt local exporters, however, which may neutralise any inbound cargo benefits. Mr de la Fuente reiterated LAN's forecast for 16% to 18% growth in passenger traffic this year, a downward revision from an earlier forecast 20% to 22% growth as high crude oil prices have forced the airline's to suspend certain routes.
LAN not hurt by surging peso: CFO
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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.