LATAM Set To Alter Joint Venture With American Airlines

LATAM and American Airlines have announced they will no longer be flying to Chile under their joint venture, which was first announced back in January 2016. The decision comes after the Chilean Supreme Court barred the joint venture from operating flights to Chile due to antitrust concerns.

LATAM is South America’s biggest airline. Photo: Carlos Daniel Dobelli via Flickr

Flight Global reported yesterday that American Airlines and LATAM have removed Chile from their list of South American destinations to be served under a new joint venture. North and South America’s largest respective airlines have been working on legal approvals throughout South America since the joint venture was first announced back in January 2016.

After receiving approval from Chile’s antitrust tribunal, as well as legislators in Brazil, Colombia and Uruguay, the joint venture plans were complicated by the Chilean Supreme Court. The court ruled in May that the partnership between the two airlines would be anti-competitive, making them “difficult to challenge”.

As a result of the Chilean Supreme Court’s decision, the LATAM-American Airlines joint venture will no longer be able to operate in Chile. This includes important connecting flights out of Santiago de Chile. Consequently, flights will have to be moved to LATAM’s other regional hubs. American Airlines’ Vice President of Alliances and Partnerships, Joe Mohan, said,

“We will have to make some amendments to the applications, which we will do in the coming week”.

LATAM as a regional partner

As the largest airline in South America by quite some distance, LATAM is a powerful strategic partner for airlines looking to get a foothold on the continent. American Airlines isn’t the only carrier which has been looking to secure a joint venture with LATAM.

An American Airlines Boeing 767
A joint venture with LATAM could be lucrative for American Airlines. Photo: Nathan Coats via Flickr

At the same time as the American Airlines deal, LATAM also agreed to a similar joint venture with IAG. Speaking to investors back in November 2015, IAG’s Chief Executive, Willie Walsh, said that a partnership with LATAM could help IAG’s brands counteract their current reliance on northern hemisphere flights.

Unfortunately for IAG, the joint venture was also blocked by the Chilean Supreme Court.

Alongside the American Airlines and IAG joint ventures, LATAM recently signed a codeshare deal with Emirates. This means that both airlines can sell seats on each other’s flights using their own brand.

LATAM also recently announced it will be flying direct to Melbourne from Santiago de Chile in October. Far from being a South America-only carrier, LATAM is really utilizing its position as South America’s largest airline.

The complications of joint ventures

Joint ventures can go either way, and this isn’t the first time one hasn’t gone quite as expected.

Earlier in the month, Delta Air Lines’ Air Line Pilots Association sent a letter to the US Department of Transport complaining about the airline’s joint venture with Virgin and Air France-KLM.

A Delta Airbus A330
Delta operated a joint venture on transatlantic flights with Virgin and Air France-KLM. Photo: Benjamin van Waart via Flickr

The Delta pilots claim they have been missing out on work opportunities because the majority of new flights on the shared transatlantic route have been awarded to Virgin.

But joint ventures can also go well, a prime example being the Cathay Pacific-Air New Zealand partnership. Following a successful program since 2013, the airlines announced last week that they would be extending their joint venture until the end of October 2024.

Despite the complications that the LATAM-American Airlines joint venture has faced, it has received approval from a number of key South American countries. The Chilean Supreme Court also ruled that the partnership could still go ahead with cargo flights to and from Chile.

LATAM was not available to respond to Simple Flying’s request for comment.