In order to keep with their plan of expanding their services into South America, British Airways signs a Joint Venture with Chile’s Latam Airlines. This was not signed only by BA, with the owner of said company, IAG, complying to this agreement as well.
This move will effectively link all transatlantic lines, with European services being provided by IAG’s BA and Iberia while the South American side will be overseen by Latam Airlines. This comes as the next step in BA’s plan of expanding across the world, with the basis of this goal being set over 5 years ago when British Airways signed a deal with American Airlines.
The number of available destinations after this joint venture is complete will gain a boost of 100 locations in South America and 87 in Europe. Besides this increase in destination numbers, the alliance will offer its customers the option of combining several airlines in order to reach their selected arrival point. New routes will also become available in order to facilitate travel between existing and new departure points.
Because this joint venture will basically mean that IAG will control 30% of the airline market between South America and Europe, the company’s shares encountered a rise of 0.3% over the course of a day.
The continued expansion of IAG will bring an increase in flight frequency for its customers while at the same time boosting the economy in the locations where it establishes its routes. For instance, after IAG purchased Aer Lingus of Ireland for 1.4 billion euros, Dublin was turned into an important hub for US arrivals and departures.
Although this joint venture has been signed, IAG will have to wait for about 18 months before every location is made available. This is entirely dependent on the decisions made by the European and US competitor regulators.
Furthermore, this partnership agreement is also somewhat halted by Brazil’s difficulty of settling the OpenSkies agreement, which was expected to be resolved in October 2015 after being signed over 5 years ago. The OpenSkies regulation is required to be at the base of any joint venture or merger between two airline service providers.
This alliance between IAG and Latam has been hinted for several months up to this point, with both of them being a part of the Oneworld Alliance alongside American Airlines. Because of this, Chile’s Latam is also expected to tie-up their relations with American Airlines in the near future, in accordance with their officially released statement made Thursday night.
Even if British Airways signs a Joint Venture with Chile’s Latam Airlines, the general public will have to wait around two years before every destination and flight route is made available. Hopefully for the two gigantic companies, everything will go according to plan.