The merger between Chile’s LAN airlines and Brazil’s TAM airlines (to be called LATAM) is on hold while regulator examine what, to them, appears to be the formation of a continental monopoly.  Oddly enough, the objections come from Chile’s regulators right now with Brazil’s remaining reasonably quiet so far. 

The western half of South America doesn’t have much competition going on and success by LAN has been the result of operating an airline like a grown up rather than as a shiny bauble for governments to admire.  However, at the end of the day, it was still Chile’s airline and by extension, it was still western South America’s airline too. 

Brazil is the one marketplace that does have a tremendous amount of competition in the airline industry and it has done nothing but help fuel the economic growth that country has experienced.  To the outside observer, LAN was the strong airline in this union.  However, to those in South America, LAN almost appears to leaping off a cliff and becoming swallowed up by TAM (and by extension, Brazil.) 

There is, in many senses, an inferiority complex when it comes to how other nations in South America view Brazil.  It is viewed with jealousy and suspicion.  Jealousy because of their economic growth and success over the past 2 decades and suspicion because Brazil never had the same history as the rest of that continent including not sharing a common language (Spanish).  As such, this merger is viewed there as a potential loss of LAN and that worries many, particularly in LAN strongholds like Chile, Ecuador, Peru and now Colombia and Argentina.  Not one of those countries lacks jealousy and fear of Brazil and its power.

Is the merger needed?  No, not necessarily.  But allowing a SuperLegacy in South America to develop would be good for the whole continent, not just Brazil.  In fact, I would offer that Brazil wouldn’t see much impact but the remaining countries would only benefit.  It would put LATAM on par with other major world airlines and offer them negotiating power and financial strength to expand their route system in a way that wouldn’t necessarily require alliances.

Will it get approved?  Ultimately, I think so.  Politically, I think this has some hurdles before it happens.  Brazil will have some objections as well, I think, and I would expect this to take as much as 2 years to accomplish and several more before a harmonious brand is decided upon.

Filed under: Airline News by ajax