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LANCHILE REACHES FOR THE SKIES

In the lobby of LanChile's new headquarters, right across from the single runway of Santiago airport, there is a large model of the Airbus A319. Hardly any of the visitors and employees who hurry past it every day know that this model will not actually form a part of the new fleet. But either way a mood of enthusiasm has taken hold, for there is not long to go now before the first Airbus A340 arrives at the end of September, to be followed in October by the first A320. This is the start of a comprehensive fleet modernisation programme which by 2003 will have turned LanChile from a Boeing-only operator to an "all-Airbus airline".

LanChile has ordered twenty A320's as part of a major contract totalling 98 firm orders and 89 options involving the TACA Group from El Salvador and the Brazilian TAM as well as LanChile, which together is the second biggest order Airbus has ever received. By contrast, the seven A340's were ordered by the Chileans off their own bat.

As of 1 July 2000, LanChile is the smallest airline to have joined the oneworld Alliance - exciting times for a company which in only a few years has made the transition from flag carrier with a modest reputation to a privatised company that has made profits every year since 1994 and offers one of the best services to be found internationally.

This has been achieved despite difficult conditions: Chile is geographically isolated and Santiago is not suited to being a hub due to its outlying location. Moreover, South America is lacking the tradition of a culture of perfection and service which has propelled Asian airlines to the top. "In Chile we are not as professional as in Europe, we don't have a culture in safety matters, service and knowledge of languages, culture, wines and food," says Chief Executive Officer Enrique Cueto modestly. "That is an area where we need to be educated."

But despite this he has still set the company some exacting objectives. "On the service side we aim to be one of the ten best companies in the world within five years. We want anyone flying to South America to automatically think of LanChile," says Cueto. Already today, LanChile is one of the fastest growing companies in the continent. The fact that so many companies in neighbouring countries have had adverse headlines makes the task all the easier. After Viasa and Aeroperu, Aerolineas Argentinas is now on the point of bankruptcy, while the situation is hardly any better among some Brazilian carriers such as VASP.

Given the weakness of the competition, the outlook for the Chilean airline is good: in Peru they have a 49% holding in the newly founded LanPeru and offer daily flights to the USA from Lima, which has a far more central location than Santiago. "Argentina is also high on our list," says Lan manager Pedro Margozzini, "We are looking closely at Argentina and it is entirely feasible that we might set up a new company there, in which we would have a 49% stake."

LanChile's own position in the international air transport scene has changed dramatically. There is an open skies agreement with the USA, "which is both a challenge and an opportunity for us at the same time," says Margozzini. While LanChile has had a code share alliance with American Airlines for some time and also gained entry to the oneworld Alliance through its US partner, United and Continental Airlines also fly to Chile, and Delta Air Lines will be starting up its own service to Chile in November. LanChile only flies a single route to Europe, although it is one of the most important and operates daily: Santiago - Sao Paulo - Madrid - Frankfurt.

But both in the Spanish and German markets, which are primarily characterised by tourists and "ethnic traffic", LanChile has a major disadvantage, the stopover in São Paulo. Air France and Lufthansa fly from Europe to Santiago with only one stop, while oneworld partner Iberia flies a non-stop A340 service from Madrid. Hence LanChile's plans to use its new A340's immediately on the European route and to cut out the intermediate stop in Brazil, which would cut a minimum of two hours from what is currently a 19-hour journey from Frankfurt. "Up to now we have had few opportunities in the business travel markets in Germany and Spain. But that is going to change now," says Margozzini.

LanChile is well-equipped: its First Class (with five seats which pull out into flat beds) and Business Class (with 1.42m between seats the most spacious business cabin flying to South America) accommodation was recently upgraded and attains a high level of comfort and service. The new longhaul Airbuses will also be used for daily non-stop Santiago to New York connections.

The situation in the domestic Chilean market is curious: in June 1997, LanChile took over its main competitor Ladeco, yet this subsidiary still flies today under its own name. This will continue to be the case in the future as well, and some of the new A320's will fly in Ladeco's colours. The reason is not that Ladeco's products are cheaper but the name has been retained for sentimental reasons. Margozzini explains, "The Chileans like Ladeco, which has a better image than Lan as regards service and friendliness. That is why we are keeping the name, even though the product is identical." Its only remaining domestic rival is now Avant Airlines, which flies with eight Boeing 737 at lower prices than Lan/Ladeco, but also with full service.

From page 42 of FLUG REVUE 9/2000