Saturday, August 21, 2010

Big Sky Continent: LAN and TAM Merge

A few weeks ago, my Moon Handbooks colleague and Brazil author Michael Sommers wrote an encomium to the airlines of his adopted country, where flying can still be the pleasure it was decades ago in the United States. Michael praised Brazilian airlines’ courtesy, flexibility, and - especially - the lack of silly “security” measures and luggage fees. Here, nobody humiliates you with the demand that you take your shoes off.

In a country of Brazil’s size - it’s the world’s fifth-largest country, smaller than China but larger than Australia - flying can be imperative, and it’s a pleasure to look forward to a flight with anticipation rather than dread. That should be even truer in the near future as, last week, Chile’s LAN - widely acknowledged as Latin American’s top airline - has acquired Brazil’s TAM Linhas Aéreas to form the region’s largest airline, to be known as LATAM Airlines Group SA. According to Bloomberg News, LAN, which also operates affiliates in Argentina, Perú and Ecuador, paid US$3.7 billion in stock for TAM.

Both airlines will continue to operate autonomously, under their own names, but the merger will create the world’s 11th-largest network, with 116 destinations in 23 countries. According to Bloomberg, LAN’s market value of US$9.4 billion makes it the world’s fifth-largest airline and, by adding TAM’s US$3.3 billion worth, LATAM may become the third largest, behind Air China and Singapore Airlines, and ahead of Cathay Pacific and China Eastern. Quite an achievement for what was, a couple decades ago, a modest regional flag carrier in a country that ranks 38th in size, just below Turkey and just above Zambia (in fairness, Chile’s stringbean geography has made air travel critical to its development).

What this will mean for fliers is another question entirely. As Michael points out, flying has become more commonplace and fares have fallen in Brazil as the middle class has grown but, in Chile, getting the best fares now requires advance purchase and/or the willingness to travel at inconvenient hours (some LAN flights, for instance, leave Santiago after midnight and arrive in the Patagonian city of Punta Arenas around 4 a.m.). Still, there’s no question the service and the flying experience are, and will continue to be, better than on most of their North American or European counterparts.

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