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  • 1. LAN Airlines “El espíritu de América del Sur”April 2012Presented by: Ethan SchaecherUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 2. OUTLINE 2 Brief History Operations  General, Fleet, Codeshare Agreements, Destinations, Business Tri-Model S.W.O.T.  Strengths, Weaknesses, Opportunities, Threats Analysis 2012 & FutureUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 3. HISTORY 3o LAN Airlines  Founded by Commodore, Arturo Merino Benítez in 1929 – Línea Aeropostal Santiago-Arica  Began as a state-owned corporation & provided services to passengers, cargo, & mail.  Took name Línea Aérea Nacional de Chile (LAN Chilé) - 1932University of Nebraska - Omaha Airline Operations – AVN 2020
  • 4. HISTORY 4o LAN Airlines  60 years later (1989) Chilean government sold 51% of its shares to national investors & the Scandinavian Airline System – privatization.  The privatization process ended in 1994  Current partners, company controllers, & other main shareholders acquired 98.7% of company’s assets.  LAN Chilé then began a process of expansion & internalization  Acquired Chile’s second airline, Ladeco, in 1995University of Nebraska - Omaha Airline Operations – AVN 2020
  • 5. HISTORY 5o LAN Airlines  In 2000, LAN Chilé became member of OneWorld™.  More global reach  Also in 2000, LAN Chilé began its Airbus passenger fleet renovation program – 27 new aircraftUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 6. HISTORY 6o LAN Airlines  In 2004, LAN Chilé and its subsidiaries (LAN Peru, Ecuador, etc., became unified under single LAN Brand. (LAN Airlines)  Opened its most recent subsidiary, LAN Argentina, in 2005  In 2010, LAN Airlines acquired the Colombian airline, AIRES.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 7. OPERATIONS 7 GENERALo LAN Airlines  HUB: Santiago, Chilé (Comodoro Arturo Merino Benítez International Airport)University of Nebraska - Omaha Airline Operations – AVN 2020
  • 8. OPERATIONS 8 GENERALo LAN Airlines Subsidiaries  Cargo (13 Freighters)  Passenger (118 Aircraft) • LAN Cargo • LAN Express • ABSA – Aerolinhas (Formerly Ladeco) Brasileiras • LAN Peru • Florida West • LAN Ecuador International Airways • LAN Argentina • MasAir • LAN Colombia • LANCOUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 9. OPERATIONS 9 GENERALo LAN Airlines  Member of OneWorld™ Alliance • Generate more value for members’ customers, shareholders, and employees than any airline can achieve by itself • Smooth transfer for passengers traveling across member airlines • Greater range • Of the 3 global airline alliances, OneWorld is rated #1 by Skytrax & Global Traveler.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 10. OPERATIONS 10 GENERALo LAN Airlines  Other Members of OneWorld™ Alliance: • American Airlines • British Airways • Canadian Airlines • Cathay Pacific • Quantas • Japan Airlines • Royal Jordanian • MalévUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 11. OPERATIONS 11 Fleeto LAN Airlines Current Fleet Notable Aircraft Routes Bombardier Domestic (for LAN  Airbus 340 Tour 8Q-100,200,400 Colombia) • 360 View Europe, Oceania  Boeing 767 Tour (To be replaced by • 360 View Airbus 340-300 Dreamliner) Europe, N.A., Caribbean (To be Boeing 767-300 replaced by Dreamliner) Airbus 320-200 Dom., Reg., S.A. Domestic, Airbus 319-100 Regional Domestic, Airbus 318-100 Regional Europe, Oceania, Boeing 787-8&9 N.A., S.A.University of Nebraska - Omaha Dreamliner Airline Operations – AVN 2020 (Ordered)
  • 12. OPERATIONS 12 Codeshare Agreementso LAN Airlines Codeshare Agreements  AeroMéxico  Alaska Airlines  American Airlines  British Airways  Cathay Pacific  Iberia  Jet Blue – March 2011  Japan Airlines  Quanta  FinnairUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 13. OPERATIONS 12 Destinationso LAN Destinations  South America • S.A. Route Map  North America • N.A. Route Map  Europe, Oceania • Europe & Oceania Route MapUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 14. OPERATIONS 12 Business No-Frills o LAN Airline’s Business Model Domestic- Passenger  Has succeeded where rivals have failed  Has a unique cargo/passenger Air integration Cargo  Cargo made up 31% of LAN Full-Service revenue in 2011 (less than 5% International Passenger in American, Delta, United)University of Nebraska - Omaha Airline Operations – AVN 2020
  • 15. OPERATIONS 12 Business No-Frills o LAN Airline’s Business Model Domestic- Passenger  Air Cargo is far lower in domestic markets  Fairs lowered on domestic Air flights made possible by basic Cargo service Full-Service  Demand has dramaticaly International Passenger increased.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 16. OPERATIONS 12 Businesso No Frills Domestic – Air Cargo – Full Service International  Domestic Demand Increase • LAN Chilé – 83% • LAN Peru – 123% • LAN Argentina – 200%University of Nebraska - Omaha Airline Operations – AVN 2020
  • 17. OPERATIONS 12 Businesso No Frills Domestic – Air Cargo – Full Service International  Maximal Use of Physical Assets – Example • Miami-Santiago, Chilé – PAX/Cargo • Continues to another S.A. city (Buenos Aires) • Delivers more U.S. cargo there • Returns to Santiago with more customers & new cargo for U.S. • Santiago-Miami or NYC (night flights & new cargo)  Meanwhile, competitors with no cargo operation are forced to park their aircraft at Santiago’s airport most of the day.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 18. OPERATIONS 12 Businesso No Frills Domestic – Air Cargo – Full Service International  Numbers & Comparisons • Complementary, not separately • 1993-2010: 17% compound revenue growth (318 Million to 4.2 Billion) • Market Capitalization $8.9 Billion (3/11) • Now exceeds most global rivals: • American – 2.2 Billion • U.S. Airways – 1.5 Billion • British Airways – 6.9 Billion • United/Cont. – 8.1 Billion From 1998 – 2010, LAN’s share price has grown by more than 1,500%University of Nebraska - Omaha Airline Operations – AVN 2020
  • 19. S.W.O.T. Analysis - LAN 13 POSITIVE INFLUENCES Strengths Opportunities S OINTERNAL EXAM EXTERNAL EXAM SWOT W T Weaknesses Threats NEGATIVE INFLUENCES University of Nebraska - Omaha Airline Operations – AVN 2020
  • 20. S.W.O.T. Analysis - LAN 14Strengths: Market Leadership Strong Financial Performance Diversified Operations Higher Turnover RatiosUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 21. S.W.O.T. Analysis - LAN 15 Weaknesses: Lack of Scale Compared to Peers Weak Presence in AsiaUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 22. S.W.O.T. Analysis - LAN 16 Opportunities: Growth in International Tourist Arrivals Increasing International Cargo Traffic Global Airline MarketUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 23. S.W.O.T. Analysis 17 Threats: Rising Aviation Fuel Prices Intense Competition & Price Discounting Cargo Price-Fixing Investigation High Interest RatesUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 24. 2012 & FUTURE 18 o LAN doubling its aircraft expenditure in 2012  1.76 Billion for 23 aircraft • 12 Airbus A320 – Dom.& Reg. Routes • 9 Boeing 767-300s • 2 Boeing 787-8 Dreamliners – Long Hauls o LAN selling 5 Airbus 318s, returning 2 Boeing 767-300s & 3 737-700s to lessorsUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 25. 2012 & FUTURE 19 o According to IATA, In 2011, Latin America was the only world region in which demand growth outstripped capacity growth – 10.2% rise in air passenger traffic.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 26. 2012 & FUTURE 20 o Approved in Dec. 2011, LAN & TAM approved a merger agreement. o LATAM Airlines o Synergy estimates predict 600-700 Million/YR o Mega-airline will control 40% of Latin America’s air passenger market.University of Nebraska - Omaha Airline Operations – AVN 2020
  • 27. RECAP 21 Brief History Operations  General, Fleet, Codeshare Agreements, Destinations, Business Tri-Model Harvard Business Review S.W.O.T.  Strengths, Weaknesses, Opportunities, Threats Analysis 2012 & FutureUniversity of Nebraska - Omaha Airline Operations – AVN 2020
  • 28. RECAP 21University of Nebraska - Omaha Airline Operations – AVN 2020
  • 29. LAN Airlines “El espíritu de América del Sur”April 2012Presented by: Ethan SchaecherUniversity of Nebraska - Omaha Airline Operations – AVN 2020