Latam Airlines: In Search of New Options

2022. CLADEA BALAS Case Consortium at Harvard Business Publishing Education.

Francisco Sánchez M., Juan Pablo Torres C., José Márquez, y Karla Saavedra

Abstract:

Latam Airlines (henceforth, Latam) was born from the merger of the Chilean airline LAN, owned by the Cueto family, and the Brazilian airline TAM, owned by the Amaro group, in 2012, which consolidated it as the most important airline group in South America. The present case relates the financial problems that motivated Latam to sign a strategic agreement with Delta, which if materialized, would cause the Cueto family (Latam’s controlling group) to relinquish its ownership interest in the company.The agreement between Latam and Delta was announced on September 26, 2019 and established that Delta would acquire a 20% stake in the South American airline. A day later, Ignacio Cueto, the decision maker in the case, member of the controlling family and Chairman of Latam’s Board of Directors, reflected on the benefits and disadvantages of the strategic agreement with Delta in an interview with a Chilean media outlet. Cueto predicted that the agreement would offer solutions both to the expansion problem the company was facing and to the consequences that this problem had generated in the company’s financial position and performance. However, Ignacio was concerned about the changes that this alliance would cause in Latam’s management and ownership. He could not stop thinking about other alternatives for creating corporate value in the long term without giving up ownership interest in the company.

Palabras claves: Corporate governance, Corporate strategy, Financial analysis, Strategy, Value creation

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