Star prepares for battle to win LAN-TAM allegiance

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The Star Alliance is preparing for a competition against Oneworld to win the allegiance of the LATAM Airlines Group, the new holding company for Chile-based LAN and Brazil's TAM.

After initially unveiling their merger plans in August, Star member TAM and Oneworld member LAN initially indicated they will stay in their respective alliances until at least 2012, at which point they will start to consider potentially selecting a single alliance. But Oneworld managing director John McCulloch said late last month that Oneworld expects LATAM will make a decision significantly sooner and that a battle will ensue over the next couple of months between the global alliances to secure membership from the merged LAN-TAM.

McCulloch said the two carriers "seem well ahead of the timetable" in their integration and it is important for Oneworld to now begin making its case to LAN and TAM. Speaking at a Star Alliance press conference earlier this week in Miami, Star chief executive Jaan Albrecht said Star is also "looking forward to a fair competition" and submitting LAN and TAM its "best proposal".

"We are assured there will be many meetings in Sao Paulo and Santiago," Albrecht said.

Albrecht insisted that Star's approval this week of Latin American airline groups Avianca-TACA and Copa as new members in no way indicates Star is preparing for TAM's exit from the alliance. "What we are doing today is enhancing our presence in Latin America. TAM is the airline that gives us access to Brazil and to deep South America," Albrecht says.

But if LATAM selects Star over Oneworld it could lead to the awkward situation of having Colombia's three main carriers in one alliance. Avianca and Copa Colombia will formally join Star in 2012 along with their sister carriers while LAN last month announced its intention to acquire Aires.

Avianca is currently the largest domestic carrier in Colombia, followed by Aires and Copa Colombia, which was previously known as Aero Republica. Combined these three carriers now control 91% of Colombia's fast-growing domestic market, according to Colombian CAA data from the first eight months of 2010.

LAN already competes head to head with Avianca-TACA in the Ecuadorean and Peruvian markets, where they both have subsidiaries or affiliates. Asked after the press conference by ATI and Flightglobal if Avianca-TACA would welcome its archrival LAN into Star, Avianca-TACA CEO Fabio Villegas replied it is too early to even consider such a question. "I don't know what LAN is going to do. I don't know what will happen," Villegas says. "All we know is what we want to do - we wanted to join Star.

"We've run our numbers and we've run our models and we know that's the best alternative for us. We'll continue to do our best to accelerate the process of entering into the alliance."

Albrecht told reporters the recent spate of mergers and acquisitions are creating new challenges for Star and other global alliances. He says Star is now seeing mergers "in every part of the world" and in recent years several of its members have pursued mergers or acquisitions. But he acknowledges the LAN-TAM merger is unique and presents a different kind of challenge as it involves for the first time a merger between a Star carrier and a carrier from another global alliance.