Approval of the LAN-TAM merger by Chile's antitrust agency is accelerating efforts by Latin America's six largest airlines to boost their route networks.
LAN and TAM are seeking to solidify their presence throughout Latin America, and their rivals are anxious to keep pace.
LAN and TAM still need competition approvals from Brazil, Argentina and Spain, but observers foresee quick clearance in contrast to the prolonged proceedings in Chile that finally brought approval but with 14 conditions. Once the merger starts taking shape, there is little doubt about its impact. With a third of the region's traffic, Brian Havel, director of DePaul University's International Aviation Law Institute in Chicago, says: "LAN and TAM will hold a dominant position in the Latin American market. Depending on how the alliance system works out, they could become a worldwide force for flights to and from Latin America."
GOL, Latin America's next largest carrier, has taken steps to insulate itself from this mega-merger. GOL's low-cost focus appeals to a different market segment. Acquisition of rival Webjet, recently approved by Brazil's aviation agency, will boost GOL's domestic market share to 41%, close behind TAM's 44%. Following GOL's decision in May to dispose of the last Boeing 767s that it inherited from Varig, the carrier is concentrating on domestic and short-haul international routes that work best with its all-Boeing 737 fleet. The big unknown is what LAN-TAM will do to challenge these markets.
AviancaTaca is probably tested more than any other Latin American airline by a LAN-TAM merger. Its network overlaps the most with LAN-TAM's. Traditionally, AviancaTaca's strength has been in Central America, while LAN-TAM dominates South America. But the latter has served notice that this will change. LAN is relaunching Colombia's Aires as LAN Colombia, and TAM is opening its first route to Mexico City. So far, AviancaTaca has not responded. It will maintain its Lima hub, but all of AviancaTaca's recent new routes - Cuba, Dominican Republic and Orlando - have been closer to home. This could change.
Aeromexico, Latin America's fifth largest carrier, has made one recent foray into LAN-TAM territory. In the middle of September, it added two weekly flights from Mexico City to Santiago, Chile, bringing its weekly total to six. LAN carries three-quarters of all passengers on this route, so Aeromexico is only trying to keep from falling further behind.
This is a familiar theme for Aeromexico, which is striving to recapture Mexico's international traffic lost when Mexicana stopped flying in August 2010. Mexicana's grounding could not have come at a worse time for Aeromexico because the US Federal Aviation Administration had downgraded Mexico to category 2 under the US air safety system, which meant no Mexican airline could add US flights. Mexico has since regained its category 1 status, but foreign carriers now transport 84% of all passengers to or from Mexico.
Aeromexico, Volaris and VivaAerobus are doing what they can to reverse this. Aeromexico has launched five new US routes in the past three months and entered a far-reaching trans-border pact with SkyTeam partner Delta Airlines. Since last December, Volaris has added routes to Chicago Midway, Las Vegas, Fresno and San Diego. VivaAerobus is expanding this year to Chicago, Miami, San Antonio and Orlando.
Unions have managed to forestall Mexicana's liquidation, so it is still possible for an investor group to relaunch the grounded airline out of its court-supervised reorganisation. The reality, however, is that Mexico's other carriers are leaving little room for its return.
Copa Airlines, the smallest of Latin America's big six, is only half the size of AviancaTaca. Yet, despite its small domestic base, Copa continues to exploit Panama's strategic location as a sixth freedom hub. Its success is evident by the routes it keeps adding. Toronto, Chicago, Brasilia, Porto Alegre and Nassau have all come online this year. Copa will close 2011 with new routes to Monterrey, Mexico and Montego Bay, Jamaica.
LAN-TAM's merger signals a big step toward consolidation and ensures that Latin America's largest airlines will continue this trend.
Flink: Read more about AviancaTaca's post merger plans with our interview with TACA chief Roberto Kriete
flightglobal.com/Kriete
Source: Flight Daily News
