TAM chief outlines LAN merger timeline

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Marco Antonio Bologna, president of the TAM holding company to which the TAM group of airlines belongs, has detailed the timeline for the merger process with Chile's LAN group.

Antonio has recently concluded a meeting with Brazil's Minister of the Presidency, Erenice Guerra.

Speaking to journalists after the meeting, Bologna says that the "round of presentations to the government has now concluded". It has been determined that the proposed merger will require the authorisation from Brazil's civil aviation authority ANAC, the country's competition watchdog (CADE) and the Stock Exchange supervisory commission.

Last week Brazil's Finance Minister Guido Mantega said privately that he did not object the planned merger of the two airlines. As Mantega has a seat in the CADE committee, this comments suggests that the process will not encounter major administrative barriers.

According to Bologna, this administrative authorisation process "will take six to nine months". After this period, the merger itself will "require two to three years" to become fully operational, setting a horizon of 2013-2014 for "activating the full potential of all synergies".

In the first half of 2011, once it becomes clear that there will be no regulatory obstacles, TAM and LAN will "start analysing the development of a joint network, the reassessment of contracts under the perspective of a joint operation and how both frequent flyer programmes can be brought together".

While TAM recently split off its loyalty programme converting it into a publicly traded company, LAN operates its frequent flyer scheme as an internal business unit.

Bologna also reassures employees that there will be "no merger-related dismissals" among TAM's 25,000 employees and that the "tendency is to grow into new markets which means new job opportunities".

He confirms that he also brought up the issue of foreign ownership limitations for airlines, currently limited to 20%, during the meeting with Minister Guerra. Last year, Brazil was close to passing a legislative bill raising the cap on foreign ownership of Brazilian airlines to 49%, but some internal political struggles within the ruling Workers Party delayed the final resolution of this project until early 2011, after the general elections to be held later this year.

While TAM has stated previously that the model of the Latam holding company under which TAM and LAN will operate independently has been designed to be fully compliant with the current legislation, Bologna confirms that the political will to raise the foreign ownership cap to 49% "continues active in the Congress". He adds that there is a good chance that the law will also include provisions that "foreign ownership may even reach 100%" under a reciprocity clause, meaning that investors from countries who also allow Brazilians to acquire 100% of their airlines might be allowed to do the same in Brazil.