LATAM Airlines: Rewriting Alliance
Strategies — December 2019

“It was an offer we couldn’t refuse.” So said LATAM’s outgoing CEO Enrique Cueto when remarking on the approach by Delta to take a 20% stake, remove some embarassingly unwanted A350s and persuade South America’s largest airline to switch alliance from oneworld to SkyTeam.

The previous strategy had been stymied by the courts in Chile: LATAM had passed all the other hurdles to enable it to set up an immunised JV operation with American Airlines to the US and with Iberia and British Airways on the South Atlantic. But the Chilean Supreme Court, on appeals from Chilean tourism groups and consumer associations against regulatory approval from the competition authority, was not convinced by the arguments of double marginalisation which underpin the US DoT approval of joint ventures. It stated that the proposed joint ventures would result in the airlines acquiring a market position that would be “difficult to challenge” in an industry that already has high barriers to entry. This led to a major rethink of strategy.