LAN Airlines has signed a definitive purchase agreement to acquire 98.942 per cent of the shares of Colombian airline Aires.
Chile-based LAN Airlines is acquiring Aires for US$12 million in cash and is assuming Aires’ net liabilities of approximately $100 million, which include $18 million of bank debt.
LAN says the deal will give it the opportunity for an affiliate to compete in the Colombian passenger market, one of the largest markets in South America. In turn, says the Chilean carrier, this will allow LAN and its affiliates to continue strengthening their regional presence and provide seamless service throughout Latin America to their passengers.
“Aires has made an important contribution by allowing many people in Colombia access to air travel as a means of transportation. LAN will now consolidate this growth by elevating even further the airline’s safety, quality, and service standards,” says Ignacio Cueto, LAN’s president and chief operating officer.
“We will dedicate our maximum efforts to advance this process as swiftly as possible, applying the experience and recognized capabilities of LAN, so that passengers may benefit from the changes that will gradually be incorporated to the Aires operations,” adds Cueto.
The Colombian carrier will satisfy the foreign ownership and control requirements of each country where it operates, according to LAN. Aires’ Chilean buyer says its new acquisition will replicate the low-cost model that LAN group carriers already use successfully in the domestic markets of Argentina, Chile, Ecuador and Peru.
LAN says this will stimulate demand on Colombian domestic flights by giving more Colombian citizens the opportunity to fly. In the medium term, adds LAN, Aires will evaluate expanding its international passenger services, as well as the advantages of any synergies it may obtain from LAN Cargo’s affiliate in Colombia, LANCO, launched in March 2009.
The process of integrating Aires into the LAN network and making sure its standards of safety, punctuality and efficiency are consistent with LAN’s own may involve modifying Aires’ schedule and introducing efficiency improvements, according to LAN. The Chilean airline says the process will not interfere with the continuity of Aires’ operations and expects to complete the process within the next few months.
Aires is the second-largest carrier in the Colombian domestic market with a 22 per cent market share, according to LAN. As of September 2010, Aires had operating revenues of $190.9 million for the first nine months of the year. Aires’ fleet consists of nine Boeing 737-700s along with 11 Bombardier Q200 and four Q400 turboprops. The airline has taken all of its aircraft on operating leases.
LAN is continuing to provide Colombian new-entrant AerOasis with technical support and consulting services to help it obtain an operating permit from the Colombian Civil Aviation Authority (Unidad Administrativa Especial de Aeronáutica Civil).
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