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Air Alliances Confident After LAN-TAM Merger Move

By Doug Cameron Of DOW JONES NEWSWIRES Two of the alliance groups that dominate the global airline industry on Monday shrugged off speculation that they may lose their presence in Latin America if the region's two largest carriers consummate a merger plan. Chile's LAN Airlines (LFL, LAN.SN) is a key member of the Oneworld alliance while Brazil's TAM SA (TAM, TAMM4.BR) only joined the Star grouping in May. The two carriers said Friday that they had yet to formulate an alliance strategy. Earlier that day, they announced a framework deal to merge by mid-2011. Latin America is one of the fastest-growing regions for global airline traffic, and though LAN and TAM would continue to operate as standalone brands, similar mergers have seen airlines regroup around a single alliance. The proposed deal is expected to trigger another contest between the three global alliances, with SkyTeam keen to boost its relatively weak position in the region, where it lacks a partner. "The alliance issue is an important issue in the future but now we don't have an answer to that question," Enrique Cueto, LAN's chief executive, said on a conference call Friday. The Oneworld grouping led by AMR Corp.'s (AMR) American Airlines, British Airways PLC (BA.LN) and its Spanish merger partner Iberia may have the most to lose. Latin America was a region of relative strength for Oneworld through LAN's membership, but it has been weakened by the recent bankruptcy filing from the main unit of Mexicana. Mexico's largest airline joined the alliance late last year. "LAN and TAM have stressed that both airlines will continue to operate independently once they combine under a single holding company," said Oneworld in a statement. "So Oneworld and its other member airlines look forward to building further our successful working relationships with LAN into the future," Oneworld said. Star was more circumspect, but said it expected TAM to remain a member even if consolidation led to "future effects" on alliance membership. "Both TAM and the Star Alliance remain committed to delivering...benefits across the Latin American and global network," it said in a statement. Star is led by Deutsche Lufthansa AG (DLAKY, DLA.XE) and the United Airlines unit of UAL Corp. (UAUA). SkyTeam members declined comment on whether they would pursue a merged LAN-TAM as a member, though has said it wants to recruit in Latin America. The grouping is led by Delta Air Lines Inc. (DAL) and Air France-KLM SA. Delta is the second-largest U.S. airline on routes to and from South America, trailing only American Airlines. -By Doug Cameron, Dow Jones Newswires; 312-750-4135; doug.cameron@dowjones.com

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