Latin American Air Carriers Fly Up and Away
At the speed of light and with no turbulence, Latin American airlines are doing better than ever. Bankruptcy announcements, cost cuttings, layoffs and less routes are long gone.

The glory days are back, at least for some of Latin America´s major carriers that are seemingly back on track and putting up a formidable competitive stance in the region and elsewhere.

LAN Airlines is a good case in point. In only four years, this Chilean carrier has reached out to every nook and cranny of the globe and is now running three affiliates in Latin America: Peru, Ecuador and the Dominican Republic. LAN is also zeroing in on the Argentine market, announcing the beginning of LAN Argentina in the near future.

Spanish Group Marsans is not lagging behind and has tried to cope with LAN´s internationalization process. After helping Aerolineas Argentinas come out of the financial cold last year, the group opened an affiliate in Chile quite recently. The Spain-based company also has plans in the works to get a hold on the Peruvian market through one of the South American nation´s carriers, a project that´s still being worked out by local authorities.

Even though LAN and Aerolineas Argentinas are fighting with teeth and nails to get a grip of the South American market, Brazil´s Gol is increasingly becoming a tough competitor in the region.

Following its foundation in 2001, the Brazilian low-cost company has cracked the nation´s top-three list and is now holding nearly a quarter share of the domestic market. Its international expansion has begun with an outreach toward Buenos Aires and the go-ahead to start operations in Bolivia.

LAN Chile swapped a passenger variant 767-300ER for a freighter variant this last quarter, as LAN Chile saw cargo profits soar to 30% of its revenues. In an attempt to restore profitability and contain losses, LAN Chile is employing efforts similar to carriers across the region which also see themselves suffering from slowing domestic growth--and they are actively forming alliances.

It is this last point, forming alliances, which has become the staple of Latin American operators´ strategic planning. As a snapshot, here is a breakdown of the current regional alliances.

The TACA Group includes controlling-equity stakes in Aviateca, Nica, and LACSA, as well as a non-management, non-equity stake alliance with COPA of Panama. TACA also operates several regional airline subsidiaries within Central America and, more recently, Cuba. The TACA Group also purchased a twenty percent stake in Isleña Airlines of Honduras, operating a mixed fleet of ATR´s, Short´s and LET´s.

CINTRA, the Mexican holding company, has controlling-equity in Aeromexico, Mexicana and AeroPeru, as well as in several regional Mexican airlines. VASP Air System, of Brazil, has controlling-equity of Ecuatoriana, Lloyd Aereo Boliviano, and TAN in Argentina. VARIG has controlling interest in PLUNA of Uruguay and domestic Brazilian carrier Rio Sul.

ASERCA, the Venezuelan carrier, is in the process of acquiring a 70% stake in Air Aruba and recently signed a marketing alliance, together with Air Aruba, with Continental. LatinPass, the multi-carrier frequent flyer program, is owned by 10 Latin American airlines (Mexicana, Grupo TACA, COPA, Avianca, Saeta, and Aerospotal Alas de Venezuela) and has non-equity ties with US Airways, KLM and TWA.

Argentina, Peru and Venezuela have all passed legislation that allows foreign carriers, or individuals, to own as much as 70% or more of a national flag carrier. The law states that so long as a nationally incorporated corporation owns the airline, it does not matter if a foreign entity or person owns the corporation. A very forward-thinking move and something Richard Branson has been talking up in the United States.

All five Central American nations have signed with the U.S. Much of the Caribbean is `de facto´ Open Skies and Peru has recently signed up. Chile has signed subject to the DOT approving the LAN Chile/American Airlines Alliance, and Argentina will meet next month in Washington, D.C. to discuss Open Skies while Colombia is making similar noises. By the end of the century, most every country in the region will have some form of an Open Skies agreement.