(2010-08-20) Chile’s Lan Airlines Completes Agreement for the Purchase of Brazilian Airline Compan
The Brazilian airlines market has been impressive recently, as rising incomes increas
(Brazil 20-aug-2010) In a deal pegged at $3.7 billion, Chilean airline company, Lan Airlines SA, said it had completed an agreement that will see it takeover the Brazilian airlines firm, Tam SA. Lan Airlines SA is Latin America’s largest carrier in terms of market value and the Brazilian investment is expected to enable the firm further expand its foothold in the region. The Brazilian airlines market has been impressive recently, as rising incomes increase demand for leisure travel.
The Chilean company reiterated that it was keen on accessing the burgeoning market in Latin America’s biggest economy, Brazil. Based in Santiago, Chile, Lan’s shareholders will control 70% of the merged entity whereas Tam’s investors will control the remaining stake under the terms of a non binding agreement, said Alejandro de la Fuente, Lan’s chief financial officer.
However, the deal is not the only one of its kind witnessed recently. Other tie ups have been undertaken between American and European carriers keen on reducing costs and driving up revenues through the provision of a wider range of global market to passengers. The move is majorly aimed at fighting off the effects of the global financial meltdown that hit the Airlines Industry hard.
According to Libano Barroso, chief executive officer of Tam Linhas Aereas, in the future the world may have not more than 10 major airlines. Lan’s Tam acquisition effectively gives it access to an airline firm with huge revenues and a firm grip on the Brazilian airlines market. In 2009, Tam had revenues of $4.9 billion, when reflected against Lan’s $3.7 billion, said the chief executive, Tam.Additionally, whereas Tam has 63 destinations in 14 countries, Lan has 70 destinations in 17 countries.
The new merged entity will be called LATAM Airlines Group and will be headed by Lan’s Enrique Cueto as its chief executive. However, the Chilean airlines company said it will be expanding its international commercial routes and its freight business in order to capitalize on the Tam SA purchase. The investment is expected to result in the world’s 11th largest carrier in terms of passenger numbers.
Fuente said the company was planning venturing into fresh markets for additional opportunities. As such, Lan expects to gain about 43% of the Latin America domestic airline market and about $4.9 billion in yearly sales. Tam’s position as the largest airline in the Brazilian market already bolsters Lan’s position and Lan said its cargo business will be advanced from Brazil.
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