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Latin American airlines to combine

Latin American airlines to combine

   Chile's LAN Airlines and Brazilian carrier TAM announced their intention Friday to merge operations under a single holding company, LATAM Airlines Group.

   Each of the airlines in the group, including LAN Cargo, would continue to fly under their own brands and operating certificates.

   LAN also has affiliates in Ecuador, Peru and Argentina.

   The companies said the joint group would provide a more extensive network of passenger flights and cargo services throughout South America, thereby enabling the company to grow faster.

   Under the tentative deal, TAM shareholders will be offered 0.9 shares of LATAM stock for each TAM share.

   Mauricio Rolim Amaro, board vice chairman at TAM S.A., will serve as chairman of LATAM. Enrique Cueto, chief executive officer of LAN, will serve as LATAM CEO.

   “This is the completion of the vision of our founder, Capt. Rolim, who believed that in an open skies market, a large Latin American airline group would provide much more competitive services to our passengers and cargo customers” TAM CEO Marco Bologna, said in a statement. “Combining our strengths and complementary networks will bring great benefits to our customers, employees, shareholders and Latin America. Together, LAN and TAM will be able to offer new destinations that neither company could have supported on its own. This will position us to compete with the foreign carriers that continue to increase service to our region while creating new jobs in our home countries.”

   The combined airline group would provide passenger services to more than 115 destinations in 23 countries while providing cargo services throughout Latin America and across much of the globe. The group's airlines would operate a fleet of more than 220 aircraft, and have more than 40,000 employees. In 2009 these carriers had combined revenues of $8.5 billion, carried more than 45 million passengers and carried combined cargo of 832,000 tons.

   The companies said they expect to save $400 million per year by aligning their passenger and cargo networks, and eliminating duplicate costs.

   The two airlines said they would engage in exclusive negotiations towards a binding definitive agreement. No assurances can be given that an agreement will be entered into or that the combination will be completed, they said.