Qantas pushes for Latam ties

Qantas is keen to strike a closer alliance with South American airline group Latam but concedes the latter's recent merger has been a distraction from meaningful talks between the two airlines.

Having launched an alliance with Emirates, Qantas management can now turn to forming closer deals with other airline partners including Latam and China Eastern. Qantas International chief executive Simon Hickey said management had been involved in talks with counterparts at Latam about the "next steps" from their existing code-share deal.

Latam was formed last year when Chile's LAN completed a takeover of Brazilian airline TAM to create Latin America's biggest airline group. The group still flies planes in TAM and LAN liveries.

While a deeper alliance could be closer than it seemed, Mr Hickey conceded the Latam merger had been a distraction for its management team from talks with Qantas.

"It distracts the very senior people that we need to talk to. We've got a very strong relationship there and we will talk over the next year or so," he said.

But he indicated it would be a challenge to convince regulators to approve a joint venture between Qantas and Latam because of their dominance on flights between Australia and South America.

"It would be great but we would have to work out what is the art of the possible. It's not just the regulator here but it's the regulator on both sides," he said.

Qantas has three 747 flights a week between Sydney and the Chilean capital Santiago, which is Latam's main hub. The Australian airline stopped flying to Buenos Aires in Argentina in late 2011.

LAN has daily services between Santiago and Sydney via Auckland.

The prospect of closer ties came as Singapore Airlines exercised anti-dilution rights to buy more shares in Virgin Australia in order to maintain its 10 per cent stake.

To fund its takeover of Skywest, Virgin had to issue stock to shareholders in the West Australian airline, which in turn diluted the stakes of its existing shareholders.

It has meant that the stakes in Virgin of both Air New Zealand and Etihad have fallen slightly to 19 per cent and 8.6 per cent respectively because the two airlines do not have anti-dilution rights.

Shares in Virgin and Qantas closed slightly higher at 43.5¢ and $1.775 respectively on Monday amid further signs of an easing of a capacity glut in the domestic market. The two airlines make the majority of their earnings from flying domestic routes.