Latin America’s powerhouse carriers have completed what looks to be the final wave of consolidation for a while, even as rising low-cost airlines in the region prime themselves for more aggressive growth.
The mergers have changed the region’s landscape. LATAM, the carrier created by the merger of LAN with TAM is by far the largest group in the region, followed by Avianca and Gol. While growth has continued in the region, passenger traffic up nearly 10% among the region’s leading carriers in 2012, profits for many were impacted.
Merger costs compounded the devaluation of the Brazilian real against the US dollar at LATAM last year as net profits slipped 90% to $11 million and to a loss of $492 million on a pro-forma basis. Gol too faced another tough year as slower GDP growth and increased airport fees added to currency pain in 2012. It has responded by cutting capacity in a bid to turn round its financial performance.
Meanwhile the new mergers partners are embarking on their new lives together. In March LATAM picked Oneworld – where LAN has been a long-term member – as its alliance partner, taking Brazilian carrier TAM out of Star Alliance. The move lifts Oneworld’s presence significantly in Brazil, one of the fastest-growing air transport markets in the world.
LATAM’s merger comes after the combination of Avianca and TACA, marking the second such recent merger in the region that led to carriers from several nations being united into one family. The merged company launched a single brand – Avianca – across all its carriers in May, three years after the merger was finalised. The airline group joined Star Alliance in June 2012 with Panama’s Copa Airlines
, significantly expanding the alliance’s share of the Latin American region.
Meanwhile, LATAM says it is on track to achieve its synergies target of between $600 million and $700 million by June 2016, four years after its merger.
In Brazil, eyes were on Azul
and Trip as they engineered a merger to form the third-biggest airline in the country, in a deal approved by Brazilian anti-trust authorities in March. Together, the two airlines serve 103 destinations in Brazil and hold a 29% share of the Brazilian market in terms of departures. It took a further step in its expansion in May, when it filed for an IPO from which it hopes to raise about R1 billion ($444 million) .
Azul is not the only carrier striving for financial growth with an IPO. Mexican low-cost operator Volaris
followed suit in June, six years after it began operations. In recent years, Volaris has grown into Mexico’s second-largest carrier in the domestic market, behind Aeromexico
. It has particularly benefited from the demise of Mexicana
in 2010, taking over 15 routes previously operated by the carrier. Volaris has also carved out a presence in the transborder market, and will fly to 11 US destinations in the fourth quarter of 2013.
Fellow Mexican carrier Interjet
has also expressed hopes of launching its IPO in mid-2014, after dropping the proposed listing in 2011 because of market conditions.
While the airlines which consolidated bolstered their strength in the region, the wave of mergers also left behind victims – crumpled under financial difficulties and competition.
and Bolivia’s AeroSur
were among the casualties that grounded their operations in 2012, although the lost capacity was quickly absorbed by their competitors.