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Airline JVs crucial for Latin America to compete: CEOs

Latin American airlines believe that joint ventures are the way of the future, although they say regulators have not come around to the benefits of such partnerships.

“Either we get into this model or we will be acquired,” said LATAM Airlines Group chief executive Enrique Cueto on a panel of airline chiefs at the ALTA Leaders Forum in Mexico City.

Cueto says joint ventures allow airlines to co-operate more effectively than the traditional airline alliances. LATAM is a member of Oneworld, and is seeking regulatory approval for JVs with Oneworld members American Airlines and IAG.

“Alliances are one thing,” says Cueto. “But even if you are in the same alliance, American will want their passengers and I will want my passengers. When you start a JV, you come to a neutral point where you benefit from what your partner does.”

LATAM is not the only Latin American airline seeking a JV with a foreign partner. Aeromexico and Delta Air Lines recently received US tentative approval for their partnership, but Aeromexico has said the airlines are fighting conditions that US regulators have tagged on to the decision.

Airline interest in JVs was “non-existent” in Latin America not long ago, compared with highly developed JVs across the North Atlantic, points out Aeromexico chief executive Andres Conesa.

“A JV makes sense for consumers,” he says.

With the growth or airline JVs in Latin America, carriers that do not take part in such an arrangement could come under pressure, says Copa Airlines chief executive Pedro Heilbron.

While Copa is not part of a JV, it once had Continental Airlines as a 49% shareholder – an experience that was positive for Copa, says Heilbron. The relationship with Continental allowed the airline to build up its interline and codeshare partnerships.

“There will be pressure for Copa, Avianca and other airlines [that do not have JVs],” says Heilbron.

Avianca is in the process of searching for a strategic partner, but it is not clear what form a partnership will take.

The growing interest in airline JVs does not come without challenges. LATAM’s Cueto believes that regulators do not fully understand the benefits of such partnerships, and are too wary of them.

LATAM’s proposed JV with IAG has prompted concerns from Brazil’s competition regulator, which has yet to approve the deal.

“This is something that is difficult,” says Cueto. “Many JVs in the US are accompanied by open skies. But over here, governments say, ‘Oh open skies, no I don’t want that.’”

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