I say ……
The intricate alliances and code-share arrangements that exist between airilnes will require a number of potentially messy
divorces before TAM-LAN marriage can take place.
After the many mergers and alliances of airlines in Europe and North America,
it should come as no surprise that the airlines of emerging markets should want to challenge the worldwide supremacy of the northern
hemisphere’s long established leading brands.
Unlike two totally independent businesses that decide to join their destiny, airlines
cannot merge without causing considerable “collateral damage”. This is because the airline industry is quite incestuous and almost
every airline has code-share arrangements with some of its competitors, shared facilities in airports, and is in many cases a member
of a global alliance. Realising the marriage of LAN and TAM will require a number of divorces until the two parties are allowed to
unite. In this particular instance, the combined LAN-TAM company will need to decide whether it will be a member of the One World
or the Star Alliance network, and this will have a decisive impact on these respective networks’ presence and access on the South
American continent and, consequently, on those networks’ competitive position for intercontinental traffic between Asia or Europe
and the Americas.
What is at stake is huge, and one cannot exclude that the very northern-hemisphere anchored Air France-KLM
“SkyTeam” alliance may seize the opportunity to push Star Alliance and One World aside and set foot in a big way in South America.
After all, Aeromexico is already a member of SkyTeam, so pushing a little further south could make eminent sense…
So how does
all of this influence LAN and TAM’s ability to merge and integrate successfully to become a leading global player? Best practice shows
us that pre-integration preparation is crucial if two companies are to blend into one and turn the initial business case of the merger
into a reality. This requires an inordinate amount of focus and careful planning, strong leadership and clear communication aimed
at reassuring management and staff, shareholders, customers and other stakeholders. One would assume that LAN and TAM have thought
through the strategic challenge that will be posed by their choice of global alliance and the rearrangement of their numerous code-sharing
agreements. But even if they have clarity of intent, the coming weeks and months will see intense and prolonged negotiations and many
offers from all sides trying to seduce the LAN-TAM tandem towards joining either of the existing global alliances.
Typically,
companies that merge need to ensure they present “one face to the customer” as soon as feasible. Presenting “one face to the outside
world” is the next step, which comprises all external interfaces including importantly procurement. But what if this huge integration
effort is distracted and hijacked by negotiations with One World, Star Alliance and possibly SkyTeam, all trying to seduce the new
big kid on the block and establish dominance on the South American continent?
We must hope for the sake of LAN and TAM that they
have found an excellent Integration Director to successfully blend those two businesses, and that the companies’ senior executives
will have the wisdom of clearly segregating and protecting the daily running of the business from the integration process and the
negotiation of their future alliances. The LAN – TAM merger was announced on Friday 13th August – but markets and consumers are not
superstitious - they will base their verdict on hard facts: consistency of service levels, convenience of schedules, value for money,
and seamless routing through code-sharing or other alliance agreements.
Let LAN and TAM not fall victim of the mistakes which
brought other airlines to their demise. Integrating airlines is complex, because the customer’s perception is based on consistency
of service, which is harder to implement than harmonising the specifications of a hardware product. Many airlines got it wrong in
the past: Swissair thought 10 years ago they could acquire Sabena, Air Portugal, Air Liberté and others and rapidly improve their
standards to match their own much envied reputation. This ended up in a big crash: no aircraft destroyed, nobody was injured or killed,
but the whole Swissair Group went bust because the integration of the acquired companies and the way they would present “one face
to the customer” had not been thought through.
LAN and TAM deserve far better, if only because of their crucial importance in
Latin America. Maybe they chose that Friday 13th on purpose after all …
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They say …..
(source: The Independent 17-Aug-2010)
Travel boost for South America as airlines agree to merge
Brazilian airline TAM is
to merge with Chilean rival LAN, the companies announced last week, creating a Latin American "super-carrier" that could be good news
for travellers.
If approved, the deal will create an airline that will strengthen transport links between Latin America and the rest
of the world, flying to over 115 destinations in 23 countries.
In their joint announcement, the airlines said that their primary growth
areas included routes between Brazil and Europe/Africa, as well as routes between Lima and North and Central America, pointing out
that jointly the carriers will be able to offer destinations neither could have managed alone.
The deal is set to make the joint airline
the second biggest carrier between North America and South America, creating considerable price competition with American Airlines,
which currently holds top spot.
In between South America and Europe, the combined airline would be the fourth largest, behind British
Airways/Iberia, Air France/KLM and Portuguese carrier TAP.
But it's not all good news - as the airlines are currently members of competing
airline alliances (LAN is a member of OneWorld, while TAM is part of Star Alliance), the likelihood seems to be that one of the alliances
will be dropped, potentially damaging links into the region for the passengers of other member airlines of that alliance.
Airline analyst
the Centre for Asia Pacific Aviation said that the previous consolidation seen from airlines such as Air France/KLM, Lufthansa and
British Airways/Iberia will "pale in comparison to the effect that this group will have on its home turf."
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