LanChile under scrutiny as rival falls by wayside

Chilean authorities said on Saturday
>they would closely monitor Lan Chile (NYSE:LFL – news), the country’s
>largest airline, to ensure it does not abuse its new status as the sole
>domestic carrier.
>
>
>Lan’s only rival in the local passenger market, Peru’s Aero Continente,
>halted its operations in Chile on Thursday on orders from a Chilean judge
>who is investigating charges of laundering drug money. Aero Continente has denied the charges.
>
>Francisco Fernandez, Chile’s attorney-general for economic affairs, said
>his office would “watch how this carrier (Lan) behaves” and ensure “that
>customers are not harmed in terms of increased fares and other benefits.”
>
>Lan’s shares in the Santiago Stock Exchange rose more than 7 percent on
>Thursday and Friday. But the company denied that it would engage in
>monopolistic practices.
>
>“We have no plans to raise fares. On the contrary, what we are trying to
>do is stimulate the market so that it grows,” Luis Ernesto Videla, Lan’s
>Chief Executive Officer, told Chilean television late Friday.
>
>The firm’s newfound advantage in the local market may be short-lived. Two
>Chilean investors said late Friday they planned to set up a new company to
>compete with Lan starting in November.
>
>Lan is one of the most profitable airlines in Latin America, posting net
>earnings of $48.4 million last year while other regional giants like
>Brazil’s Varig and Argentinas Aerolineas struggle under losses.
>
>Aero Continente, which has a 60 percent share of the Peruvian market, also
>has routes to the United States, Ecuador, Colombia, Venezuela, Panama,
>Bolivia and Argentina.
Reuters