Plus3 Chile

A presentation by:

Caitlin MagleyBenjamin ZeldesJessica KaschakTimothy Kraus

Plus3 Chile

Capital – Santiago Population – 16.2 Million

6.3 Million in Santiago Is a market-oriented economy

based mostly in foreign trade. Attracts much foreign investment

mostly in gas, water, electricity and mining.

Unemployment has been declining over the past three years.

GDP = $234.4 Billion USD 18% of the population is below

the poverty line (vs. US’ 12%)

Plus3 Chile

Chile accounts for 1/3 of the world’s copper production

It also the world’s fifth largest exporter of wine Exports: US 15.6%, Japan 10.5%, China 8.6%,

Netherlands 6.7%, South Korea 5.9%, Italy 4.9%, Brazil 4.8%, France 4.2% (2006)

Copper, fruit, fish products, paper and pulp, chemicals, wine.

Imports: US 15.6%, Argentina 12.6%, Brazil 11.8%, China 9.7% (2006)

Petroleum and petroleum products, chemicals, electrical and telecommunications equipment, industrial machinery, vehicles, natural gas

Plus3 Chile

Chile is an extremely isolated country with a very tight-knit business community. Produces a need for fast-paced, reliable

transportation and cargo services internationally. As the South American economy has rapidly

grown over the past decades, so too has LAN airlines and the need for more air traffic.

Firms such as Airbus and Boeing have continuously developed and improved upon Airplane design, manufacturing, and components.

Plus3 Chile

LAN Airlines primarily serves one major industry: Scheduled Passenger Air Transportation

“Product Line” – Flights Product Category – Coach/Economy, Business, First

Classes Also serves Cargo Industry

Accounts for about 40% of current income, but LAN is trying to depend less upon the cargo industry.

Major Competitors: Air France-KLM Delta Airlines Gol Linhas Aéreas Inteligentes

Plus3 Chile

Continuously increasing oil prices combined with a highly competitive market forces the airline industry players to keep prices as low as possible while trying to earn profits.

Dynamics of international airports causes ground crews and flight crews to maintain a strict schedule industry wide.

Web sites such as hotwire.com, orbitz.com, and priceline.com offer discounted seats on select airlines. Allows for increased traffic, full planes, and

therefore higher profit.

Plus3 Chile

In a global environment, the Airline industry provides a “golden mix” of both business and engineering aspects.

Is interesting to see how airlines are able to make profits (business) and also reduce their carbon footprint (engineering) in such a highly competitive environment.

People will constantly need to travel, especially in modern times for leisure and business.

Plus3 Chile

Based in Santiago, Chile Main Hub at Comodoro Arturo Merino Benítez

International Airport Employs just over 15,000 Annual Sales of just over $3 Billion Is the main passenger airline in South

America Is one of the major cargo carriers in South

America as well

Plus3 Chile

1929 - Linea Aeropostal Santiago-Arica created to transport passengers along peruvian border.

1932 – Becomes government controlled airline under name: Linea Aerea Nacional (LAN Chile). Carries 5000+ passengers

1935-1960 – Service increases and many domestic routes added. 27,000 passenger journeys recorded.

1960-1970 – International service increases greatly. With increased competition, LAN Chile begins to suffer and eventually is

forced to shut down as a result of bankruptcy in 1984. A new LAN Chile is started and is 98.7% owned and controlled by the Chilean government. LAN Chile regains 50% of the domestic market share.

1989 – LAN Chile is privatized with 51% sold to SAS airlines. 1995 – The Cueto Family purchases a controlling interest of LAN Airlines,

fully privatizing the firm. 1997 – The company reorganizes and offers $100 million in depository

shares on the NYSE. Also forms an alliance with American Airlines for their Frequent Flier program.

2000 - LAN Chile operates as the largest domestic and international passenger/cargo air carrier in Chile and a leading airline firm in Latin America.

2001 - Net income plunges nearly 78% to $10.8 million on sales of $1.42 billion. The firm downsizes its cargo fleet, believing that smaller, newer planes will allow it to offer more reliable and frequent service

Plus3 Chile

LAN Airlines went public November 7th, 1997 at an opening price of 2.75 USD. Its stock is currently priced at $14.40 (as of April 9th 2008)

Plus3 Chile

All LAN Airlines planes are jet propeled Air is compressed in engine a,

combustion reaction creates heat and gas, the high pressure gas is then expelled out the back of the engine at high speed

The wing provides lift by creating an area of low pressure above and high pressure below

Plus3 Chile

Planes Boeing Airbus

Jet Fuel Similar to Kerosene Made up of many (as many as 11) different

Hydrocarbons

Plus3 Chile

LAN has taken steps to reduce its carbon footprint More efficient planes (Airbus A320)

are being purchased as a part of LAN’s Fleet Renewal Program to reduce carbon emissions by 10% A320s also reduce noise pollution Winglet tip extensions

Numerous reforestation projects near its main airports

The airline industry is attempting to use biofuels in airplanes

Plus3 Chile

Must meet international safety regulations LAN is dedicated to continuously inspecting

and maintaining their fleet in accordance with these regulations

Employ skilled mechanics, engineers, and pilots to ensure safety and on time arrivals and departures

LAN has recently signed mutual support contracts with several other airlines, such as Lufthansa and Mexicana airlines

Plus3 Chile

The majority of pilots are graduates with 4 year degrees with a variety of majors. An engineering degree is certainly not required.

Engineers are more often utilized on the ground than as flight crew. Engineers are more involved in service and maintenance of the planes.

There are a variety of other non-technical employees in fields such as customer service and management

Plus3 Chile

With rapidly increasing costs, how does LAN Airlines compensate and is still able to earn positive operating income?

What routes is LAN currently expanding into and what are some future markets the firm is exploring? (What is the next step?)

How else is LAN working to reduce carbon emissions?

What kind of ground support structure does LAN employ? Ground Workers? Mechanical Engineers? (i.e. how does a degree in engineering fit in at LAN airlines?)

Plus3 Chile

How is international studies worked into your business curriculum here in Chile?

Do you mainly study Chilean business or international business?

Is it common for students to hold internships here, and if so, what type?

What types of engineering co-op opportunities and programs are available to students? Do you do many on-site visits to companies?

What do you do in your free time? Have you traveled outside of Chile?