Advertising
  • News
  • Airlines
  • Business strategy
  • ANALYSIS: Latin America's airlines look globally for partners

ANALYSIS: Latin America's airlines look globally for partners

Latin America’s airlines are forming deeper partnerships with global major carriers as they seek greater connectivity and financial investment amid unstable macroeconomic conditions in their region.

The area’s airline industry has changed significantly in the last decade, when carriers were initially more fragmented and less keen to work with foreign airlines. However, in the past six years, two mega airline mergers and growing airline alliance membership have made Latin America’s carriers more attractive as global partners.

Colombia-based Avianca joined Star Alliance in 2012, fresh from a merger with Central American airline group TACA in 2010. LATAM, Latin America’s biggest carrier formed by a merger between Chile’s LAN and Brazil’s TAM that closed in 2012, gave Oneworld a stake in Brazil when TAM left Star to join LAN in Oneworld in 2014.

BOOSTING CONNECTIVITY

In recent times, LATAM has led the charge when it comes to forming partnerships with other airlines to broaden its reach.

Earlier this year, it announced plans to launch joint ventures with Oneworld members American Airlines and IAG. Both deals are still pending regulatory approval. Once cleared, they will enhance connectivity for LATAM’s passengers flying to North America and Europe, LATAM chief executive Enrique Cueto has said.

“This step is necessary to offer the best network of connections for everyone in Latin America, and increases the possibility of adding new routes and direct flights to new destinations, as well as flights already operated by LATAM and affiliates in the future,” he said in January.

LATAM will gain more than 200 destinations served by American in North America, and at least 87 points served by IAG carriers British Airways and Iberia.

The Latin American carrier’s ties with its Oneworld partners do not stop there. Six months after the joint ventures were announced, Qatar Airways proposed – to everyone’s surprise – a plan to acquire up to a 10% share in LATAM through a capital increase. “LATAM represents an excellent opportunity to invest and support the development of our long-term relationship,” said Qatar chief executive Akbar Al Baker in July.

Qatar’s investment is not only a financial boost for LATAM – the Latin American airline says it will also explore opportunities for greater connectivity with Asia and the Middle East, where it has little presence.

AWAITING APPROVAL

Elsewhere in Latin America, Aeromexico received tentative US regulatory approval in early November for its joint venture with SkyTeam partner Delta Air Lines, which the two carriers say will boost transborder traffic. A liberalised bilateral air services agreement between the USA and Mexico took effect in August, opening the door for several new routes that airlines previously could not operate.

The planned JV between Aeromexico and Delta has not gone unopposed. Airlines in both the USA and Mexico had called on US regulators to reject the deal, citing concerns over access to slots at Mexico City International airport, which is dominated by Aeromexico. Mexican regulators okayed the deal on the condition that Aeromexico and Delta divest eight daily slot pairs at the airport. The tentative US agreement calls for the pair to divest 24 slot pairs at Mexico City and six at New York JFK. The two airlines were yet to comment.

Delta is also in the process of acquiring up to a 49% share in its Mexican partner.

Under the leadership of a new chief executive, Avianca is on the hunt for a strategic partner for a deal that might resemble the joint venture that its Latin American peers are progressing on.

“We are looking for a strategic global partner... a carrier that complements and supplements what we do so that our clients can travel around the world in an easier way,” said Avianca chief executive Hernan Rincon in June, two months after he joined the airline.

Rincon added that Star carriers such as Lufthansa and United Airlines, both of which have substantial global networks, are natural partners to consider.

Since then, speculation has been rife that Avianca is in talks with different airlines in the hope of selling a stake. The carrier has so far denied all the rumours, only saying that its search for a strategic partner continues. In August, Rincon would only say that the airline was making progress in the process.

Avianca’s search for a partner comes as it faces weak conditions in some Latin American markets. The airline saw its second-quarter net loss widen to $23.2 million, despite boosting operating profit year-on-year for the period.

For our coverage of the ALTA Airline Leaders Forum taking place in Mexico City on 13-15 November, visit www.flightglobal.com/alta

Related Content
Advertising

Advertising
What's Happening Around "LATAM Airlines Group"