Latin American Network Airlines (LAN) operates three distinct business models successfully: 1) a full-service international passenger model with two classes, 2) a cargo business model transporting high-value goods, and 3) a no-frills passenger model. This allows LAN to make more efficient use of assets, reduce costs, diversify revenues, and increase barriers to entry for competitors. However, operating multiple models also introduces complexity, requiring broader skills across sales, marketing, operations, and employee training.

2.  Introduction
 How LAN’s Three Models Interrelate
 The Challenge of Managing Multiple Models
 Distinguishing Complements From Substitutes

3. Trying to operate more than one business model at a time
• To expand new market
• To make more efficient use of fixed asset and resources
• To Develop new income
Direct-Sell
2 Business model
- DVD by mail
- Streaming video services
Flourishes by running 3 distinctly
different operation at the same time

4. Latin American Network Airlines

5. Latin American Network Airlines

6. Full service international
passenger-airline business model
Cargo-Business Model
No-frills passenger model

7. • Full service international passenger-airline
Two classes
• Coach Class
 Hot meals & beverages
 Multilingual personal-entertainment
• Business Class
 Fully flat beds
Boeing 787 Dreamliner

8. • Cargo business model
Premium Service
• Transports high-value products
 Salmon from Chile
 Asparagus from Peru
 Computer, Mobile phones from U.S.
• Revenue 2011 Q2: 31% of total revenue

9. • No-frills passenger model
Set out in 2007
Lower-cost Lower-overhead
No Kitchen
No meal & beverage
E-Ticket

10. • Maximal use of physical assets
 Increased utilization of as costly as asset as aircraft
 Change from parking to delivery time
• Reduction of the break-even load factor(BELF)
 Combining cargo and passenger operation
• Diversification of revenues and profits
 Minimize risks
• Reduce threat of entry by other airlines
 Increased the number of routes
• One-stop shop for cargo in Latin America

12. “Why doesn’t every airline do what LAN does ?”
History of LAN :
• 1994 Chilean privatized LAN -> Cueto Family
• Begun Cargo business with Fast air since 1970’s
• Combine Cargo and Passenger service
Profit potential of LAN international’s route
• Wide body air craft
• Reputation and reliability

13. • Additional complexity
• Complex logistic system that coordinate with cargo and
passengers.
• Additional criterion to passenger fares.
• Gives priority to carrying passengers.
• Broader organizational skills
• Require different sale, marketing, technical skills.
• Extensively training its flight and maintenance crew

14. • Greater flexibility employee
• Pilot fly even on two hours notice, more fly.
• Instituting a performance-related pay and bonus.
• Additional investments
• Invest in warehouse for each country.
• Regulatory constraint prevent non-national company.
• Create series of separate company : LAN
Peru, Ecuador, Colombia, Argentina.
• Alliance in Mexico and several country.

16. Advantages using more than one business model
• Decreasing the break-even load factor
• Combining cargo and passengers
• Flying to more places
• Better services to passengers and increase customers
• Using grow revenue provided by cargo operation
• Increase barriers to entry
• Flying to more places make other airline harder to enter and grow

17. Advantages using more than one business model
• Increases barriers to imitation
• Optimizing the use of aircraft and network of route
• Increases switching costs
• Leading passenger airline connecting from Latin America
• One-stop shop for cargo in the region

18. THANK YOU