LAN and TAM have unveiled plans to merge and create a new single parent company.
Chile-based LAN and Brazil-based TAM announced this evening they have forged "a non-binding memorandum of understanding that outlines their intentions to combine their holdings". The deal is subject to both companies completing a binding definitive merger agreement and securing approval from their shareholders and relevant regulatory authorities.
LAN and TAM are the two largest Latin American airline groups by revenue. In addition to its Chilean operations, LAN has passenger airline affiliates in Argentina, Chile, Ecuador and Peru as well as cargo airline affiliates in Brazil, Colombia, Mexico and the US. TAM has passenger airlines in Brazil and Paraguay as well as a Brazilian business aircraft operation that is one of the largest in Latin America.
The two groups, once combined, will be known as the LATAM Airlines Group. They say the new group "would offer seamless passenger and cargo service across the continent and around the world".
Combined, LAN and TAM would have annual revenues approaching $10 billion. While this would dwarf any other Latin American airline group by about $7 billion, it would still be significantly smaller than the largest airline groups in North America, Europe and Asia.
Brazil's Gol and the newly formed Avianca-TACA group, for example, have annual revenues of roughly $3 billion. Air France-KLM, Lufthansa and Delta all have annual revenues of roughly $30 billion.
LAN and TAM are both already traded in the New York stock exchange. The new parent company LATAM would continue to be listed in New York as well as in Chile - where LAN is also now traded - and in Brazil - where TAM is currently traded.
Both have similar narrowbody fleets consisting of Airbus A320 family aircraft, and also operate Boeing 767s and Airbus A340s in their widebody fleets. But from an alliance perspective the two are very different - LAN is a long-standing member of the Oneworld alliance while TAM joined Star earlier this year.