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American Airlines Group Inc. and British Airways parent IAG SA signed joint venture agreements with Chile’s Latam Airlines Group SA as they seek the closest level of cooperation available with the No. 1 South American carrier short of a merger.
The companies will need antitrust approvals allowing them to coordinate schedules and pricing and share revenue on flights between their respective countries, a process that may take 18 months. The IAG venture would also involve its Spanish unit Iberia, the carriers said in statements Thursday.
For IAG, the deal advances Chief Executive Willie Walsh’s stated aim of working more closely with Latam, and would unite all three companies in what he said would be a “sensible next step” in their trans-Atlantic strategies. American and London-based IAG already have an antitrust-immune partnership, and they and Latam are partners in the Oneworld alliance.
Damian Brewer, a Royal Bank of Canada analyst in London, said in a note that the frequency of service from joint ventures can deliver “disproportionate market share gains,” especially for time-sensitive, high-yielding traffic. The plan is therefore positive for IAG and “likely relatively adverse” for its European rivals Air France-KLM Group and Deutsche Lufthansa AG, he said.
Most existing airline joint ventures extend across the Pacific or North Atlantic. Such pacts allow carriers to closely coordinate operations and share cost and income, and have emerged as the preferred option for cooperation at a time when intercontinental mergers are blocked by curbs on foreign ownership.
The so-called BA-AA alliance took more than a decade to secure, and is regarded as the industry’s most profitable partnership, tapping into the biggest market for business travel.
Under the proposed venture, BA, Iberia and Latam would jointly serve 100 destinations in South America and 87 in Europe. The American agreement would involve flights between the U.S., Canada and six South American countries.
This article was written by Mary Schlangenstein and Kari Lundgren from Bloomberg and was legally licensed through the NewsCred publisher network.