LAN-TAM Merger Approved Creating Aviation Giant LATAM

Brazil's antitrust authorities approved the merger of Chili's LAN Airlines and Brazil's TAM Airlines Wednesday, paving the way for the birth of Latin America's largest airline.

Santiago-based LAN agreed to buy TAM in an all-stock transaction announced in August 2010. The merger will create a single airline called LATAM, a Latin American giant valued at $14.5 billion. LATAM would represent a whopping six percent of global air transport.

The combination follows similar associations among U.S. and European carriers attempting to reduce operating costs and increase revenue by offering a wider global market to passengers.

Last year, LAN and TAM flew over 45 million passengers and 754,777 tons of cargo. Combined, the airline would fly to 115 destinations in 23 countries, employ over 40,000 workers, and become the third-largest airline in the world.

Chile's antitrust authorities already approved the merger in September, but set 11 conditions including fewer flights to Lima, Peru.

Though Brazil's Administrative Council for Economic Defense (CADE) said the decision to approve the deal was unanimous, they too set several conditions for the merger.

The first condition set by the council was a reduction in the number of flights between Sao Paulo and Santiago. Collectively, the two airlines now control 80 percent of the flights between the two cities.

Furthermore, the antitrust regulator said in a Wednesday statement that the two companies must belong to only one international alliance. LAN is currently a member of Oneworld, which includes American, Iberia, British Airways, Qantas, and JAL, while TAM is a member of Star Alliance, which includes BMI, Lufthansa, United, and Air China.

The airlines have not yet said which alliance they will join.

The transaction will allow the combined airline to reach new destinations, create more opportunities for employees of both companies and more value creation for shareholders, and would foster economic development and job growth in the home counties of the group airlines and the countries they serve, according to the Web site for the merger.

The two airlines said in October that they hoped to finalize the creation of LATAM at the end of the first quarter of 2012.