A future airline giant in Latin America?

On one side, LATAM, South America's leading carrier resulting from the merger of the former Lan Chile and its subsidiaries (Colombia, Ecuador, Peru) with Brazil's TAM. On the other hand the Azul carriertoday Brazil's second largest airline and the fourth largest airline in South America. In 2019, LATAM carried 74 million passengersAzul 27.5 million. Azul only flies to the United States and Lisbon internationally. LATAM serves all continents, including the United States. Paris.

LATAM has been restructuring since June 2020The company has filed for Chapter 11 bankruptcy in the United States. However, it is due to present its bankruptcy exit plan this November.

There is already a relationship between the two carriers. It is manifested by a code-sharing agreement between Azul and LATAM Brazil. The agreement strengthens the connectivity of the two airlines and recognises the mutual loyalty programmes of each partner.

But LATAM's financial woes are attracting a lot of interest. In an interview with the Chilean daily Diario Financiero, John Rodgerson, CEO of Azul, said that he had drawn up a "strategy for the future". proposal to acquire the entire South American giant.

Initially, he had wanted to acquire only the company's Brazilian operations. This change of heart is explained by Azul's CEO, who believes that it is in LATAM's economic and marketing interests to preserve it in its entirety.

Absolute giant potential in South America

The combination of Azul and Latam would bring little change to the sub-continent's airline rankings in terms of passenger numbers. But it would give an almost absolute monopoly on domination of the South American skies.. Such a merger would create a a giant controlling half of all South American capacity - and almost 58 % from the Brazilian market - according to 2019 figures. The carrier would have operational units in five countries. The international network would stretch from Australia to Europe, the United States and South Africa, operated by a fleet of 464 aircraft.

On the other hand, such a merger would upset the alliances forged with partners outside the region. Azul acquires a stake in United Airlines (8% shareholding). It also has a joint venture with TAP Air Portugal to operate Brazil/Portugal routes. On his side, LATAM's share capital includes Delta Air Lines and Qatar Airwayswhich respectively held 20 % and 10 % of the shares in the Chilean group before its bankruptcy. It is unlikely that all these partners will coexist if a merger is approved.

However, nothing seems certain. LATAM refuses to comment on Azul's plan, which is considered to be a hostile takeover bid. In fact, the company's directors have previously spoken out against any merger with the Brazilian company.. This is a matter to watch, however, as such a merger would probably receive the green light from the Brazilian regulatory authorities...