Chile’s LAN is the most valuable airline in the west

High growth prospects in Latin America, the expected merger with TAM and efficient fuel use are among the reasons for the Chilean company’s strong positioning.

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It doesn’t have the most airplanes or passengers, but Chile’s LAN has a bigger enterprise value than any other airline outside of Asia, and the fourth biggest in the world.

The data put together by Bloomberg measured the market value of airline companies from around the world, taking into account the number and price of their shares, along with the projected value of the future cash flows and investors’ predictions.

Earlier this year LAN had a market value of US$9.2 billion, placing it above several well known industry competitors such as Delta Airlines and United Continental from the USA, and leading European airlines such as Lufthansa, International Airlines and Air France-KLM

A major reason for LAN’s positive outlook is the proposed merger with Brazilian airline TAM, which was given the green light by regulators last week. The deal will give the Chilean airline increased access to Sao Paulo Airport, one of the most popular air destinations in the region, according to CorpResearch analyst, Jorge Ríos.

Ríos added that LAN has also achieved high efficiency standards, particularly in relation to fuel consumption which usually accounts for a third of airline costs. While rises in the global oil price following recent conflicts in the Middle East and Africa have hit airline share prices around the world, LAN’s frugal business model means it has been left relatively unscathed.

And the future prospects for the Chilean airline are also promising. The relatively low penetration of air travel in South America opens up further growth opportunities for LAN, which has operations in Peru, Argentina, Ecuador and Colombia as well as Chile. The ratio of annual air trips to people in these countries is less than one, while in the USA and Great Britain it is higher than two.

The three airlines that topped the Bloomberg data were Air China, Singapore Airlines and China Southern Airlines, all from Asia.