Wednesday June 27, 2012
by Jack Adamo, editor Insiders PlusLAN Airlines S.A. (
LFL) and Brazilian airline Tam SA have passed all regulatory hurdles and will now merge. The new company will be called, Latam Airlines Group SA.
Latam will control 40% of the passenger traffic within South America and be the second-largest airline on routes to the U.S. and third-largest to Europe.
From a market value perspective, it will be the most valuable airline in the world, according to S&P. It may also be the most profitable airline in the world from what I see.
The fit is a good one. Only 3% of their flights overlap. The company expects between $600 million and $700 million per year in cost savings and additional revenue by the merger's fourth year.
Enrique Cueto, Latam's chief executive, said the combined capacity puts the airline in a better position to negotiate network agreements with U.S. and European airlines. "Every airline is trying to fly to Brazil or Latin America," and will need Latam flights to connect to cities across South America.
I’m hoping we get to buy some more stock at lower prices this summer. Meanwhile, LAN Airlines S.A. is a buy up to $31 per share.
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