British Airways parent IAG signs deal with Latam Airlines of Chile to expand into South America

International Airlines Group (IAG), the London-listed parent of British Airways and Spain's Iberia, has signed a deal with Latam Airlines of Chile. This will boost IAG's transatlantic network by linking up on flights between Europe and South America.

The deal involves an agreement between British Airways, Iberia and Latam to co-operate on services between the European Union and South America. Both IAG and Latam Airlines will increase the number of destinations they fly to "significantly" as the deal will see the carriers increase their existing codeshare deals, IAG explained.

Latam and IAG will offer more than 100 destinations across South America and 87 in Europe because of the partnership that is very similar to the one that British Airways struck with American Airlines five years ago, which gave IAG an advantage over its strong rival Virgin Atlantic on flights to the US.

IAG said apart from boosting its existing routes, the pair will launch new routes and offer customers combined fares. The deal will result in Latam and IAG controlling about 30% of the market between Europe and South America, according to Japanese financial company Nomura.

Willie Walsh, the chief executive at IAG, said: "This joint business would benefit customers by providing them with easier journeys to more destinations with better aligned schedules and increased frequencies. This would boost both tourism and business travel between South America and Europe."

The deal, which could take up to 18 months to close as it is subject to approvals from the South American competition regulators, does not come as a surprise as Walsh had been hinting for sometime that he wanted closer ties with the Chilean airline. There were speculations last year that IAG would acquire a stake in Latam, which is a group of carriers, formed in 2012 from the acquisition of Brazil's TAM by Chile's Lan Airlines.

Latam is part of the Oneworld alliance along with American Airlines and IAG.