Opens Another South American Passenger Market To The Chile-Based Airline

LAN Airlines S.A. said Friday it had signed a definitive purchase agreement for the acquisition of 98.942% of the outstanding shares of Colombian airline Aires. Having completed the due diligence process, LAN will acquire Aires for $12 million in cash, in addition to assuming net liabilities of approximately $100 million, which include $18 million of bank debt.

The airline says the transaction will provide the opportunity for an affiliate of LAN to participate in the Colombian passenger market, one of the largest markets in South America, thus allowing for LAN and its affiliates to continue strengthening their regional presence and providing seamless service to its passengers. Ignacio Cueto, LAN’s President and Chief Operating Officer, stated “We are very proud to announce this transaction. AIRES has made an important contribution by allowing many people in Colombia access to air travel as a means of transportation. LAN will now consolidate this growth by elevating even further the airline’s safety, quality, and service standards. We will dedicate our maximum efforts to advance this process as swiftly as possible, applying the experience and recognized capabilities of LAN, so that passengers may benefit from the changes that will gradually be incorporated to the AIRES operations.”

Aires will satisfy the foreign ownership and control requirements of each country where it operates. The company will replicate LAN’s “low cost” model already operating in the domestic markets of Argentina, Chile, Ecuador and Peru, stimulating demand on domestic flights by providing more Colombian citizens the opportunity to use air transportation. In the medium term, AIRES will evaluate the expansion of international passenger operations and the advantages of any synergies it may obtain from LAN Cargo’s affiliate in Colombia, LANCO, launched in March 2009.

LAN says the integration process may involve certain operational changes such as itinerary modifications and efficiency improvements. This process will not interfere with the continuity of current operations of AIRES, and is expected to be completed within the next months.

Aires is the second largest operator in the Colombian domestic market with a 22% market share. As of September 2010, Aires had operating revenues of $190.9 million. The airline's fleet consists of nine B737-700s, 11 Q200 and four Q400, all of which are operating under leases.

LAN continues to provide Colombian airline AEROASIS SA with technical support and service consultancy in the process of obtaining its operating permit issued by the Colombian Civil Aviation Authority (Unidad Administrativa Especial de Aeronáutica Civil).

FMI: www.lan.com