FOCUS: Is LATAM a Game-Changer?

Like a computer on dial-up, the merger between LAN Group and TAM airlines had been ticking over for almost two years by the time it finally became reality on the 22nd June. The carriers, of Chile and Brazil respectively, are now called LATAM and it is estimated that their combined revenues amount to either $13bn or $14bn, depending on who you ask. In 2011 it had a combined fleet of 310 aircraft, which would put it well inside the top twenty in the world, as would their scheduled passenger numbers: last year they carried sixty-million.


But the big question now being asked is this: will this pave the way for other international mergers? Sure, we have KLM-Air France and BA-Iberia, but these carriers still have their separate identities and are controlled by holding groups, set up simply to avoid the archaic ownership and control rules established during the teething years of commercial aviation. 
But now LATAM plans to eventually become essentially one airline. The civil aviation industry is one of few that still abide by restrictive old laws like these; they were created to protect the sovereign rights of nations who felt the threat of airborne attacks were very tangible.


Theoretically, there is no longer any problem with Yippee Airlines from Argentina being owned by Belgians or Patriotic Airways from China being owned by Kazakhs. After all, it happens in the car manufacture industry, the shipping industry, the banking industry...the only barrier now is the law itself. 
Of course, anti-trust laws must be observed to ensure competition is fostered, but this has been honoured in the South American merger - the agreement, for example, includes rules on which alliance the new behemoth of a carrier can join - so there's no reason it couldn't in other mergers.


Which leads me onto the final thought of this post. Where will LATAM lay its allegiance? TAM was a member of Star Alliance but the agreement stipulated that it couldn't be in the same one as the other South American super-carrier, AviancaTaca, also a Star member.
LAN, on the other hand, has been in Oneworld since 2000. Of course, there are the options of Skyteam, or simply staying unaligned (although with all the benefits of alliances this doesn't look likely), but as Ghim-Lay Yeo of Flightglobal points out, there is much less incentive to change after twelve years. Besides, Oneworld provides the North American and European connections its chief executive, Enrique Cueto, wants in the form of American Airlines and IAG (BA-Iberia). 


A decision is expected imminently, and no doubt the potential alliances will be vying for LATAM's attention. Whichever way they go, it could prove to shake up the industry considerably.