LAN estimates Aires will lose roughly $25m in 2011

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South American airline group LAN estimates its Colombian subsidiary Aires will post losses of around $25 million this year.

LAN closed on its acquisition of Aires in late 2010 and is working through a new business plan for the carrier.

During a recent earnings call LAN CFO Alejandro de la Fuente stated Aires lost $11 million for the four months ending 31 March. LAN now believes Aires should achieve a break-even financial performance in 2012.

LAN's evaluation of Aires' new business plans includes scrutinising the Colombian carrier's fleet, which currently consists of nine Boeing 737-700s, 11 Bombardier Dash 8-200s and four 70-seat Q400 turboprops.

Aires is likely to transition to an A320 family fleet since LAN exclusively operates Airbus narrowbodies, and previously LAN management has said Aires could begin operating A320s later this year or early in 2012.

Elements of LAN's overhaul of Aires should start to emerge in the second half of this year, LAN officials state, noting the Colombian market is performing strongly and they expect "higher revenues to come in time".

Shortly after completing the transaction to acquire Aires, LAN quickly raised the carrier's fares, and cut nearly all of Aires' international flights.

LAN in 2010 also forged a deal with Colombian start-up Aeroasis, which included LAN having an option to purchase the carrier. LAN now intends to merge Aires and Aeroasis.

LAN during the first quarter took delivery of three Airbus A319s and six A320s. For the remainder of the year LAN plans to add 11 more A320 family narrowbodies and three Boeing 767-300s. The company also aims to sell five A318s.

By year end LAN plans to operate a combined passenger and cargo fleet of 149 aircraft.