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Latest update : 2010-08-14

Two of Latin America's leading airlines, Chile's LAN and TAM of Brazil, have announced plans for a merger that would create the continent's largest carrier, to be known as LATAM airlines.

AFP - Two of South America's biggest airlines, Chile's LAN and Brazil's TAM, on Friday announced they planned to merge to create Latin America's largest carrier.

The news sent shares in TAM soaring 30 percent on the Sao Paulo stock market. LAN shares leapt nearly eight percent in Santiago.

The new parent group would be called LATAM Airlines but the separate TAM and LAN logos would be maintained on aircraft in each country, the airlines said in a joint statement.

Regulatory authorities and shareholders would have to give their approval to the deal, which was outlined in a memorandum of understanding.

If the marriage goes ahead, the new airline would have combined revenues of more than eight billion dollars, and fly passengers to 115 destinations in 23 countries.

It would have a combined workforce of 40,000 employees and a total fleet of 241 aircraft.

The companies said they believed the merger could save the new LATAM airline 400 million dollars.

Sao Paulo-based TAM is Brazil's biggest airline, controlling 43 percent of the domestic market in Latin America's biggest economy.

LAN, which also has operations in Peru and Argentina, is one of the biggest airlines in Latin America, with a strong network of international routes which generate more revenue per passenger than domestic flights.

According to the trade review Air Transport World, TAM carried 29 million passengers last year, most of them inside Brazil, whose population of 190 million is Latin America's biggest. LAN Airlines carried 15 million passengers.

TAM's revenue passenger kilometers (RPK), an industry measure, was 42.4 million to LAN's 30 million.

LAN, however, had a 2009 operating profit of 435 million dollars on 3.7 billion dollars of revenue, compared with TAM's 98 million dollars on 4.9 billion dollars.

TAM is a member of the Star Alliance airline cooperation group while LAN is part of Oneworld.

Simone Luciano, a spokeswoman for Brazilian investment bank BTG Pactual, told AFP her bank participated in the merger negotiations.

Under the deal, TAM shareholders would get 0.90 LATAM shares per TAM share. TAM would be delisted from the Sao Paulo exchange, which would instead offer Brazilian Depositary Receipts for the new LATAM Airlines.

The New York stock exchange would offer American Depositary Receipts for the new company. Depositary receipts are the paper equivalent of shares for companies on foreign exchanges.

Last year, LAN had revenues of 3.7 billion dollars while TAM took in 4.9 billion dollars.

Date created : 2010-08-14

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