LAN Sees 2006 Growth Driven By Argentina

Ally · 03-22-2006, 06:42 AM

22nd March 2006

Quote:

Chile's LAN Airlines expects 2006 revenue to grow 20 percent to USD$3 billion, boosted by dynamic growth in Argentina possibly helped by regulation reform in that country.

LAN Chief Executive Enrique Cueto also said that he expected the new Argentine operations to break even by 2007.

Cueto said LAN will add six aircraft in 2006 to LAN Argentina at a cost of US$35 million each and begin flying this year from Buenos Aires to Miami.

LAN and other airlines in Argentina are constrained by a price band on domestic fares, which Cueto hoped would be changed this year. Under the current system, LAN Argentina cannot break even.

"But I believe that the authorities are looking at this issue and there is going to be a change -- not only in fares that could go up, but also in fares that should go down because, in today's world, one wants to have a price band that's open at the lower end as well."

Cueto added he was sure the airline could come to an agreement with Argentine unions seeking wage increases.

LAN is the dominant airline in Chile and has affiliates in Argentina, Ecuador and Peru. The company has big cargo as well as passenger operations and flies throughout the Americas, to Europe, Australia and the South Pacific.

LAN owns 49 percent of LAN Argentina, which began operations last year and plans to take between 20 percent and 30 percent of the Argentine market by the end of this year, compared with 12 percent at the end of 2005.

Cueto spoke to reporters after presenting LAN's new premium business class, with fully reclining seats, large individual TV screens and luxury service, which will be available on longer flights.

Cueto said LAN is the only airline in Latin America and one of only five in the world offering seats that convert fully into beds. He said LAN would spend USD$100 million over the next 2-1/2 years to refit its Boeing 767-300 fleet to accommodate the new premium business class and expected to recover the investment over four years.

He said LAN was joining other major world carriers in eliminating first class and focusing on only two classes: economy and premium business.

Cueto said the company was well equipped to face competition from smaller carriers in Chile.

LAN said earlier this month that fourth-quarter net profit rose 4.8 percent from a year earlier to USD$49.9 million, as a surcharge imposed on passengers and cargo offset higher fuel prices.

(Reuters)