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No end in sight to sky-high South America airfares: LAN-TAM Merger Approved

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Brazilian regulators today granted final approval for the long-proposed merger of the country's national carrier TAM with Chilean carrier LAN, according to Bloomberg. While there are some upsides to the closure of the deal -- namely for the new company, which will overtake Singapore Airlines as the world's second-largest carrier by revenue, after Air China -- the impact on travelers will almost certainly be negative.

As I mentioned in a recent post on my website, which discussed cost effective ways of traveling through South America, inter-South American fares have been sky high as long as anyone can remember.

I was considering, for example, hopping a quick flight from the Brazil-Argentina border city of Foz do Iguaçu to São Paulo, in lieu of a 17-hour bus ride. Until I took note of the far, that is, a cool R$789.50, or about $426. Price sample fares on LAN's or TAM's website for more laughs.

Of course the new merged entity, which will go by the name "LATAM," is but endemic of the larger problem in South America, which is that there is no competition among carriers. There is no equivalent to RyanAir, AirAsia or even Southwest Airlines in South America, just a handful of mostly awful national carriers whose anemic fleets cannot meet the vast demands of one of the world's fastest-growing economic and population regions. This merger will only further constrict the short supply at the root of such high fares.

It isn't going to be a completely easy street for the new carrier, however. One major issue it needs to tie up is to which airline alliance it will belong. At the moment, LAN belongs to oneworld, which includes British Airways, Japan Airlines and recently-bankrupt American Airlines. TAM, on the other hand, is a member of Star Alliance, a confederation of powerful carriers like Lufthansa, Singapore Airlines and United, which has just completed a merger with Continental.

A temporary, Chilean government-mandated cap on Santiago-São Paulo fares will caust some Brazilian and Chilean passengers to breathe a small sigh of relief, but overall it seems like the only people to profit from this deal will be the new company's shareholders.

Stay tuned to the Austin International Travel Examiner for more on this story as it develops. For South American destination guides, travel photos and practical advice, head on over to Leave Your Daily Hell.

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