TBY talks to, Hernán Pasman, CEO of LAN Colombia, on the company's motivations for entering the country, future routes and expansions, and investment plans.

Hernán Pasman
Hernán Pasman is an Industrial Engineer from the Instituto Tecnológico de Buenos Aires and has an MBA from the Kellogg Graduate School of Management at Northwestern University. He started his career in 1995 in a company linked to Motorola and Telefónica Argentina. He was later an Associate of Citicorp Equity Investments, and for four years, Project Manager of McKinsey & Company. In 2007, he became COO of LAN Argentina. He has been CEO of LAN Colombia since 2010.

Why did you choose to start operating in Colombia?

LAN has been in Colombia since December 2010. For the first six months, our focus was mainly operational. It was getting all the operations up to LAN standards in terms of safety, security, maintenance, and operations. In those six months, we obtained the IOSA certification, which is an international operations safety audit. Most of the large airlines have this certification, and LAN acquired it in the first six months; it was a record, even within LAN. We also improved service, especially for on-time performance. We measured how many flights we had arriving on time versus our promises in the itinerary. We went from the 45% that AIRES had to 80% in two months. AIRES used to fly its airplanes for 13 hours a day, but we dropped that to nine hours a day. We used the planes less and used buffers within the itinerary so that if there were a contingency in the morning, we could recover operations by 11.00 am, for example. Planes on the ground are not generating revenue; however, that is money that we are investing for the sake of service. Generally, on-time performance in the US is about 75%. Colombia was similar, but we raised it to 80% to begin with; now it is 85%, and we are aiming for 90%. LAN is always aiming for a 90% on-time rate in all the countries it operates in, including Argentina, Ecuador, Chile, Peru, and now, after the merger with TAM, also in Brazil.

What are you doing to target and attract the corporate segment?

We are being very aggressive commercially, offering discounts to large companies that have a lot of business customers and trips throughout the year. We have a commercial strategy for that, and we have two business models: long- and short-haul operations. What the passengers expect on a short-haul flight is different from what they expect on a long-haul flight. That is why we are obsessed with on-time performance. Everyone expects to leave on time and arrive on time.

What are the most important routes right now, and are you planning to increase the frequency of any flights?

Our strategy right now is more about increasing frequencies to the places we fly rather than opening new routes. In fact, in the domestic market, we have taken out some routes. AIRES used to fly to 24 places within Colombia. In Peru and Argentina, we fly to 12 destinations. In Chile, we fly to 13. We don't fly to Armenia or Manizales in Colombia anymore. We fly to Pereira instead. Weather-wise, it's much easier to fly into Pereira than operate in Armenia and Manizales. There were too many weather delays on those routes, and we were competing with Avianca's much bigger planes. Our operating costs were higher than Avianca's, meaning it had a competitive advantage. Bogotá-Medellín is the most popular route, then Bogotá-Cali, Bogotá-Barranquilla, and Bogotá-Cartagena. For Bogotá-Medellín, we have nine flights per day.

“Our strategy right now is more about increasing frequencies to the places we fly rather than opening new routes."

Where do you fly internationally?

We fly to Miami, Lima, Ecuador, Santiago, and Buenos Aires via Lima. We are considering opening new flights to increase our penetration in Brazil, and we fly to São Paolo from Colombia. We are also looking into the EU and other markets in the US as well. The growth we have in Colombia is aggressive, not only within Colombia, but also in the international market. However, we won't be opening anything new in the next six months.

What were your expectations for 2013?

We are still investing. Over the past 18 months we have invested around $600 million. In comparison, the new international airport was around $1 billion. As a sole company, we have been investing around 60% of what the new airport cost. We have invested in infrastructure, people, systems, and planes.