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LAN Airlines

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  • 1. University of Nebraska - Omaha Airline Operations – AVN 2020 Presented by: Ethan Schaecher April 2012 “El espíritu de América del Sur” LAN Airlines
  • 2. University of Nebraska - Omaha Airline Operations – AVN 2020 OUTLINE 2 Brief History Operations S.W.O.T. Analysis 2012 & Future  General, Fleet, Codeshare Agreements, Destinations, Business Tri-Model  Strengths, Weaknesses, Opportunities, Threats
  • 3. University of Nebraska - Omaha Airline Operations – AVN 2020 HISTORY 3 o 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) - 1932
  • 4. University of Nebraska - Omaha Airline Operations – AVN 2020 HISTORY 4 o 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 1995
  • 5. University of Nebraska - Omaha Airline Operations – AVN 2020 HISTORY 5 o 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 aircraft
  • 6. University of Nebraska - Omaha Airline Operations – AVN 2020 HISTORY 6 o 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.
  • 7. University of Nebraska - Omaha Airline Operations – AVN 2020 OPERATIONS 7 GENERAL o LAN Airlines  HUB: Santiago, Chilé (Comodoro Arturo Merino Benítez International Airport)
  • 8. University of Nebraska - Omaha Airline Operations – AVN 2020 8OPERATIONS o LAN Airlines Subsidiaries  Cargo (13 Freighters) • LAN Cargo • ABSA – Aerolinhas Brasileiras • Florida West International Airways • MasAir • LANCO  Passenger (118 Aircraft) • LAN Express (Formerly Ladeco) • LAN Peru • LAN Ecuador • LAN Argentina • LAN Colombia GENERAL
  • 9. University of Nebraska - Omaha Airline Operations – AVN 2020 9OPERATIONS o 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. GENERAL
  • 10. University of Nebraska - Omaha Airline Operations – AVN 2020 10OPERATIONS o LAN Airlines  Other Members of OneWorld™ Alliance: • American Airlines • British Airways • Canadian Airlines • Cathay Pacific • Quantas • Japan Airlines • Royal Jordanian • Malév GENERAL
  • 11. University of Nebraska - Omaha Airline Operations – AVN 2020 11OPERATIONS o LAN Airlines Current Fleet  Airbus 340 Tour • 360 View  Boeing 767 Tour • 360 View Fleet Notable Aircraft Routes Bombardier 8Q-100,200,400 Domestic (for LAN Colombia) Airbus 340-300 Europe, Oceania (To be replaced by Dreamliner) Boeing 767-300 Europe, N.A., Caribbean (To be replaced by Dreamliner) Airbus 320-200 Dom., Reg., S.A. Airbus 319-100 Domestic, Regional Airbus 318-100 Domestic, Regional Boeing 787-8&9 Dreamliner Europe, Oceania, N.A., S.A. (Ordered)
  • 12. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Codeshare Agreements o LAN Airlines Codeshare Agreements  AeroMéxico  Alaska Airlines  American Airlines  British Airways  Cathay Pacific  Iberia  Jet Blue – March 2011  Japan Airlines  Quanta  Finnair
  • 13. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Destinations o LAN Destinations  South America • S.A. Route Map  North America • N.A. Route Map  Europe, Oceania • Europe & Oceania Route Map
  • 14. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Business o LAN Airline’s Business Model  Has succeeded where rivals have failed  Has a unique cargo/passenger integration  Cargo made up 31% of LAN revenue in 2011 (less than 5% in American, Delta, United) Full-Service International Passenger Air Cargo No-Frills Domestic- Passenger
  • 15. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Business o LAN Airline’s Business Model  Air Cargo is far lower in domestic markets  Fairs lowered on domestic flights made possible by basic service  Demand has dramaticaly increased. Full-Service International Passenger Air Cargo No-Frills Domestic- Passenger
  • 16. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Business o No Frills Domestic – Air Cargo – Full Service International  Domestic Demand Increase • LAN Chilé – 83% • LAN Peru – 123% • LAN Argentina – 200%
  • 17. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Business o 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.
  • 18. University of Nebraska - Omaha Airline Operations – AVN 2020 12OPERATIONS Business o 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%
  • 19. University of Nebraska - Omaha Airline Operations – AVN 2020 S.W.O.T. Analysis - LAN 13 INTERNALEXAM EXTERNALEXAM SWOT W O T S POSITIVE INFLUENCES NEGATIVE INFLUENCES Strengths Weaknesses Opportunities Threats
  • 20. University of Nebraska - Omaha Airline Operations – AVN 2020 S.W.O.T. Analysis - LAN 14 Market Leadership Strong Financial Performance Diversified Operations Higher Turnover Ratios Strengths:
  • 21. University of Nebraska - Omaha Airline Operations – AVN 2020 S.W.O.T. Analysis - LAN 15 Lack of Scale Compared to Peers Weak Presence in Asia Weaknesses:
  • 22. University of Nebraska - Omaha Airline Operations – AVN 2020 S.W.O.T. Analysis - LAN 16 Growth in International Tourist Arrivals Increasing International Cargo Traffic Global Airline Market Opportunities:
  • 23. University of Nebraska - Omaha Airline Operations – AVN 2020 S.W.O.T. Analysis 17 Rising Aviation Fuel Prices Intense Competition & Price Discounting Cargo Price-Fixing Investigation High Interest Rates Threats:
  • 24. University of Nebraska - Omaha Airline Operations – AVN 2020 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 lessors
  • 25. University of Nebraska - Omaha Airline Operations – AVN 2020 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.
  • 26. University of Nebraska - Omaha Airline Operations – AVN 2020 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.
  • 27. University of Nebraska - Omaha Airline Operations – AVN 2020 RECAP 21 Brief History Operations S.W.O.T. Analysis 2012 & Future  General, Fleet, Codeshare Agreements, Destinations, Business Tri-Model Harvard Business Review  Strengths, Weaknesses, Opportunities, Threats
  • 28. University of Nebraska - Omaha Airline Operations – AVN 2020 RECAP 21
  • 29. University of Nebraska - Omaha Airline Operations – AVN 2020 Presented by: Ethan Schaecher April 2012 “El espíritu de América del Sur” LAN Airlines