LAN Airlines will not issue interim dividends in 2012 for the first time since 2003, according to a report by Diario Financiero, as the carrier purses a more conservative financial strategy following the loss of its investment grade credit rating after the merger with TAM. The conservative strategy will also reportedly help absorb TAM's debt into the combined LATAM Airlines Group and help fund expansion plans.
LAN will not issue 2012 interim dividends
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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.
LATAM Airlines Group is the latest in the region to build an arsenal to combat the LCC threat
LATAM Airlines Group is taking a major step to sustain its leadership in Latin America through the introduction of a new fare structure on domestic routes in its South American domestic markets. This move is to ensure that it remains competitive as existing and potential new low cost airlines aim to establish a foothold in the region.
The company’s plans emerged just as Copa Airlines decided to transition its Colombian operations to a low cost model – Wingo – and the Viva Group set its sights on launching its third Latin American low cost airline in Peru during early 2017. Airlines within LATAM have leading positions within those countries. Over the long term LATAM expects rapid leisure passenger growth in Latin America, and is establishing a framework to compete for those customers.
Key to LATAM’s execution of its new fare structure is cost efficiency, and the airline has cited several ways to achieve lower costs – including the expansion of direct sales, improved productivity and a marked increase in aircraft utilisation – in order to attain unit costs to compete with new low cost competitors.