Lan Tam Airplanes

When Cueto Met Amaro: In the works for 7 years, the Latam merger will shake up the regional landscape.

When Chile’s LAN and Brazil’s TAM, two of Latin America’s most efficient and profitable carriers, announced plans to combine operations, the headlines trumpeted the superlatives: the region’s largest fleet, 115 destinations in 23 countries, $8.5 billion valuation, $400 million in annual cost savings, and the list goes on. But the combined operations and creation of Latam Airlines Group (LAG) trumpeted in the global financial press has been downplayed here in Argentina, and Carlos Manzoni of La Nación tells us why. “The merger will be a blow to Aerolíneas Argentinas (AR), because Aerolíneas will have to compete with (Latam) in the two most important routes they have: Chile and Brazil. They are going to lose market share when they should be gaining ground.” If Argentina decides to makes life more difficult for Latam, Manzoni says, the new carrier can retaliate in a few different ways. TAM could stifle the flow of Brazilian tourists to Bariloche during ski season by routing flights to Valle Nevado in Chile instead. Likewise, LAN could opt to shut down trans-Atlantic service from Ezeiza to Europe, and channel those flights in and out of São Paulo instead. Either way, it will be a new airline landscape where Latam dominates as the big continental carrier, while small regional airlines like Gol and Pluna continue to gain market share exploiting the low-cost niche.

In closing, Manzoni says the courtship between the Cueto (LAN) and Amaro (TAM) families has been ongoing since 2003. Now that the nuptials are pending, let’s see if old regional flames try to spoil the honeymoon. (Full article in Spanish)

Tagged with:
 
I Love Uruguay

So far, 2010 has been a media lovefest for Uruguay. (Pictured: Oceanfront developments in Punta del Este)

If we could dole out awards for the best and worst PR campaigns in the Americas for 2010, the loser by an oily nautical mile would be BP. On the other hand (and hemisphere), the winner would be the Republic of Uruguay. When InvestBA originally launched, we coined the phrase The Tango Coast to encompass opportunities on both sides of the Río de la Plata. For every four stories about Argentina, we would unearth a gem about our Mercosur neighbor; however, pro-Uruguay, pro-investment content has been so fast and frequent this year, we had to finally create our own Uruguay channel. 2010 got off to a good start with a Top 20 ranking in the International Living Quality of Life Index, then Spear’s Wealth Management Survey sized up the tax advantages and dubbed Uruguay, A good place to visit your money. The I♥UY parade continued this spring with two new airline deals (Buquebus and Jazz/Pluna) further linking Uruguay with the world, while The New York Times touted the country as an attractive retirement destination for Americans and other foreign buyers. Then the World Cup kicked into high gear where Diego Forlán & Co. put together an odds-defying performance and silenced the skeptics, including a Miami Herald reporter. Now it seems we’ve come full circle with another glowing International Living piece naming Uruguay, The New Tourism Leader in Latin America.” Bottom line: If the last six months of 2010 are anything like the first six, Uruguay can look forward to more positive press and an influx of foreign buyers.

For more information about Uruguay investment opportunities and premier luxury properties, download the July edition of InvestBA Privada.

Brasil Ahora Promotion

Argentina sent 1.2 million tourists to Brazil in 2009, while the United States sent over 600,000.

At the height of the summer travel season, we posed the question, Where do Brazilians go when they need a little D&R (Descanso e Relaxmento)? Judging by the Portuguese-speaking throngs on the slopes of Bariloche or in the trendiest parrillas in Puerto Madero, we surmised, Argentina was a safe bet. Now the flip-side of that tourism coin: A record number of Argentines visited Brazil last year, and a major public/private sector marketing campaign is priming the tourism pump for more in 2010. Over 1.2 million Argentines visited Brazil in 2009, a 19% increase over 2008, in a year when total visitors to Brazil actually declined slightly by 5%. Argentines account for 1 out of every 4 visitors to the Mercosur neighbor followed by the United States which sent over 600,000 travelers to Brazil, roughly 12% of the 4.8 million total visitors. In an exclamatory effort to keep a good thing going, the Brazilian Ministry of Tourism, Embratur, recently launched an aggressive marketing campaign called ¡Brasil Ahora! (Brazil Now!). Full-page advertisements in Clarín and La Nación promote discounted vacation packages to beautiful Brazilian destinations like Florianópolis, Salvador, Búzios and Pipa. Fortunately for Argentines, there is no shortage of flights from Ezeiza and Aeroparque. Major airlines like GOL, TAM and Aerolíneas Argentinas are participating in the ¡Brasil Ahora! promotion, while short-haul carriers like Pluna and Buquebus offer attractive airfare options. Embratur says the goal of the campaign is to introduce foreign travelers to new Brazilian destinations in the years leading up to the 2014 World Cup. According to the government report, of the 1.2 million Argentine visitors, 77% entered Brazil for pleasure, the average stay was 11 days, and Florianópolis was the #1 destination.

Tagged with:
 
jazz-pluna

Canada's Jazz is "not a typical airline." Neither is Uruguay's Pluna, so this deal makes sense.

Canadian airline Jazz is spreading its investment wings to the Southern Hemisphere by acquiring a stake in Uruguay’s flagship carrier, Pluna. And while the union of Nova Scotia-based Jazz with Montevideo-based Pluna might seem an odd pairing at first glance, a closer inspection reveals two very unique, quality-focused, Bombardier-rich regional carriers meeting niche passenger demands. Jazz serves as a contract carrier for Air Canada linking smaller markets with major Canadian and U.S. cities, while Pluna is the regional carrier with the most modern fleet and some of the most competitive fares in the Southern Cone. (e.g., round-trip from Buenos Aires to São Paulo can be bought on Pluna for US$250 compared to $400 on Aerolineas and $800 on TAM) The Jazz Air Income Fund (TSX: JAZ.UN) will invest US$15 million in Pluna in exchange for a 33% voting interest in Latin American Regional Aviation Holding Co. Jazz CEO Joseph Randell cited geographic diversification and double-digit growth in Latin American passenger demand as two of the motivating factors for the purchase, “This is a great opportunity to participate in one of the world’s fastest growing air travel markets and it positions Jazz on the international stage.” Jazz sees good upside in the deal, especially considering Pluna’s modern fleet, a brand new Montevideo hub and a potential IPO in 2013. (Full story)

Tagged with:
 
Market Predictions, Anyone? We could all use some "Comfort y Musica para Volar" en 2010.

Market Predictions, Anyone? We could all use some "Comfort y Música para Volar" en 2010.

Latin America is a region of the globe where pessimism springs eternal when it comes time for annual economic forecasts. From a BA perspective, it’s a little like making a travel reservation with Aerolineas, the state-owned airline: You know you will eventually reach your destination, but you’re just not exactly sure how (My last flight from Montevideo to BA was cancelled, so I was transfered to Uruguay’s wonderfully-efficient, profitable and privately-owned Pluna to get me back home.) or when. (My last overnight flight from BA to Miami was delayed seven hours with neither apology nor explanation.) Similarly, economists and regional analysts know Latin American countries will make it to the end of the year, but bearish forecasts are the norm given the abundancia of unknown macro and political variables. The Wall Street Journal’s Nicholas Casey says 2009 was no exception, “Investors began 2009 bracing for more drops in Latin American stocks as global markets plummeted in the worst economic crisis in generations.” Now fast forward to December 31, 2009, and see how bracing and fence-sitting worked out for regional investors: Argentina’s Merval Index surged 115%, Brazil’s Bovespa rose 83% and Mexico’s IPC rallied a respectable 43%. With such “heady gains,” we should hit our knees praying for another round of dire predictions; yet, Casey warns us, “Forecasts are now for an optimistic 4% economic growth for Latin America given its performance in the past year.” For now, we’ll just have to sit back, relax and see if 2010 is ultimately defined more by unexpected turbulence or friendly skies.  Bienvenidos A Bordo.

Tagged with:
 
© 2010 InvestBA.com