Strong passenger and cargo traffic are pushing up revenues at Chilean airline LAN Airlines (LFL)
, although high fuel prices and start-up costs at the carrier's new Colombian operations cut into the airline's net profits recently. Company officials, meanwhile, are looking ahead to 2012, when a merger with Brazilian carrier TAM Airlines (TAM)
Revenue at LAN during the third quarter of 2011 rose 29 percent to $1.49 billion due to a 33 percent increase in passenger revenues and a 23 percent increase in cargo revenues. Net income hit $94.5 million in the quarter, a decrease of 11 percent compared to the third quarter in 2010 due to pricey fuel and expanding in Colombia.
In 2010, LAN Airlines said it was merging with Brazilian carrier TAM Airlines (TAM). The new carrier, LATAM Airlines Group, is winning praise from analysts.
While LAN Airlines isn't rated, TAM is, and Standard & Poor's is putting the Brazilian airline's ratings in line for an upgrade because of the deal.
"We expect the merger between TAM and LAN to benefit TAM's financial profile. We are keeping the ratings on TAM on CreditWatch with positive implications. We expect to resolve the CreditWatch after the transaction is final," Standard & Poor's analysts write in a note on TAM.
Antitrust officials must still approve the deal, scheduled by the airlines to wrap up in early 2012, so keep an eye out for delays. Executives at both LAN and TAM, meanwhile, are already at work on forging a new management structure.
When the deal is complete, LAN Airlines CEO Enrique Cueto will become CEO of the new LATAM while Mauricio Rolim Amaro, current vice-chairman of TAM’s board of directors, will become chairman of LATAM’s board of directors.
"We are very pleased with the integration process between both companies and we expect to complete the process of creating LATAM Airlines Group by the end of first quarter 2012, after obtaining all necessary approvals," says Cueto.
LAN Airlines will release fourth-quarter results on Jan. 25.
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