The eastern front: Chile's LAN is a top airline in the region, but what it really wants is to fly from neighboring Argentina.

Author:Joelson, Daniel A.

Stand in Concourse A of Miami International Airport any given weeknight, and Chilean airline LAN's supremacy is clear: The counters for a half-dozen airlines around the region are quiet while a huge line waits alongside the oversized LAN counter. That's because flights for company subsidiaries LanPeru, LanEcuador and LanDominica as well as LAN in Chile all leave from the same spot.

But LAN doesn't live on passengers alone, like many of its competitors. Cargo revenues regularly challenge passenger revenues for the airline. In fact, cargo revenues have grown at a quicker clip and the carrier wants to expand that business across the region. In 2003, cargo revenues hit US$602 million, a 16% rise from 2002. Passenger revenue rose 14% to $918 million during that period, but the carrier expects cargo revenues to carry even more weight in the future.

"LAN Chile isn't a traditional airline," says Alejandro de la Fuente, LAN's chief operating officer. "LAN combines two businesses: passenger and cargo, which are equally important. They complement one another, and the combination allows us to increase earnings while lowering operating costs."

LAN, however, faces a challenge in its neighboring skies. Earlier in 2004, Peruvian authorities clipped the carrier's wings there amid a battle for market share with Nuevo Continente. Both carriers are flying high in Peru today, yet LAN still can not fly within the one country with which Chile shares a significant border and which offers a big, fast growing air market--Argentina.

LAN has faced particularly rough times in Argentina. In June, LAN said it was considering buying American Falcon, an Argentine carrier; in the end, it chose not to. LAN has been stymied by strict regulations in Argentina--including a maximum foreign ownership cap of 49%--which the airline has said insulates Aerolineas Argentinas from competition. Aerolineas Argentinas, a unit of the Spanish holding company Marsans, already flies from Buenos Aires to Santiago.

Nevertheless, Chile's Aerolineas del Sur, also a Marsans investment, expects to battle LAN by flying domestic routes within Chile. Gustavo Manns, CEO of Aerolineas del Sur, doesn't see his airline as a bad thing for LAN or Sky, Chile's other domestic carrier. "The idea isn't that another airline dies," he says. "We believe that our arrival will help the airline market grow." Aerolineas del Sur seeks a 20% share in Chile by the beginning of 2006.

Sky Airlines wants to boost...

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