Even as the newly merged LATAM Airlines deliberates over its choice of airline alliance, the path seems to lead to the region's two major airline groups competing head-to-head in Oneworld and Star Alliance.

LATAM, whose merger was finalised in June after almost two years in the making, will make a long-awaited decision on its alliance membership by the end of 2012, says LATAM chief executive Enrique Cueto.

Chile-based LAN was one of the early members of Oneworld, while Brazil's TAM is in the Star Alliance. Under Chilean anti-trust stipulations issued as part of the approval of the merger, LATAM cannot be in the same alliance as the other major Latin American carrier, AviancaTaca.

AviancaTaca became a Star Alliance member in June, which effectively means that TAM would have to give up its Star membership. Cueto points out that LATAM is also studying other options, such as keeping either LAN or TAM independent of any airline alliance. But the two airlines cannot remain in two different alliances, says Cueto.

While abstaining from alliance membership is provided for under Chilean anti-trust stipulations, it seems unlikely that LATAM will follow this path. Cueto emphasises that the carrier is seeking a grouping that will give it the best partnerships in the USA and Europe, a benefit that a global airline alliance will be able to provide.

While Cueto says joining SkyTeam is an option that is not entirely off the table, there would be little impetus for LAN to leave Oneworld, of which it has been a member since 2000. Oneworld, with the IAG group and American Airlines, would give LATAM the European and US partnerships it wants. The jockeying for a position in one of the fastest growing airline markets in the world came into clearer focus when AviancaTaca and Panama's Copa Airlines officially joined Star.

AviancaTaca, which already codeshares with Star's United Airlines, US Airways and Air Canada, gained access to more than 1,300 destinations served by its Star partners.

Observers have suggested it could be awkward for Copa and AviancaTaca to remain in the same alliance because both companies have been traditional rivals, with competing hubs next door to each other.

However, the airlines' leaders have dismissed this idea, saying that being in the same alliance does not mean that they will stop competing against each other.

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Source: Airline Business