The Wall Street Journal published an interview with British Airways CEO Willie Walsh in which he predicted that the merger between Chile’s LAN airlines and Brazil’s TAM wouldn’t affect the oneworld alliance. LAN is a long time member of oneworld while TAM recently joined the competing Star Alliance in March of this year.
“I don’t think it’s a battle” over LAN, Mr. Walsh said. “LAN know what the value of oneworld is to them. Maybe Star will have more of a challenge convincing TAM of the benefits.”
The whole South American airline market resembles a telenovela, complete with complex plots and subplots. For a long time, Varig was the de-facto national carrier of Brazil and enjoyed both protection and a position much like Pan Am did in the United States. Then upstart TAM came along end eventually led to Varig’s demise. Varig’s bankruptcy led to a “new Varig” which in turn became part of GOL, and now GOL is challenging TAM for market dominance.
The airline drama in Brazil has had implications outside of that country as well, as Varig was a founding member of the Star Alliance and the airline’s demise opened the way to oneworld’s leadership in the South American market. So, while oneworld has long enjoyed this advantage, and the combination memberships of American Airlines, LAN and Spain’s Iberia. Star, led by United and Lufthansa, has been without a South American partner and TAM joining in March marked the alliance’s return to competition.
Meanwhile, Columbia’s Avianca and their central American partner, TACA, have supposedly also been in talks with Star, but if TAM leaves the alliance, then the partnership might not be as attractive to either of them. Then there’s Sky Team, long without a real presence in South America, and they’ve been quoted as hoping to “increase the scope and reach” of their network especially “in Latin America”.
The LAN/TAM merger has been the subject of much speculation and here’s an excellent analysis of the balance of power and possible outcomes.
Interestingly, American recently announced a codeshare agreement with Brazil’s GOL airlines allowing them to connect their flights and schedules in Sao Paulo. GOL has almost 42% of the domestic Brazilian market. Maybe American decided it would pursue a relationship with GOL as insurance in the event that LAN/TAM decides to leave oneworld and join Star or Sky Team.
The new name of the merged airlines will be the highly creative LANTAM (I imagine some branding consultants got paid handsomely for that).