Legal problems for Duty Free World as LATAM terminates inflight contract

During the early part of last week, leading newspapers in Chile, Peru and Colombia reported that South America’s largest air carrier, LATAM Airlines, has unilaterally cancelled the airline’s duty free inflight concession, managed by Miami-based Duty Free World. TMI has tried unsuccessfully to contact both parties for confirmation, but we now believe that the story has developed further.

Reports on Thursday last week in the Chilean financial press stated that LATAM has instigated legal proceedings against Duty Free World for non-fulfilment of the most recent concession contract that both parties signed in January 2015. TMI understands that LATAM is demanding payment of $8.1m in unpaid commissions and has threatened to embargo Duty Free World’s assets to guarantee payment.

Duty Free World won the LATAM concession in 2013, shortly after the merger of Chilean airline Lan with Brazilian competitor TAM in 2012. DFW had operated the TAM concession prior to the merger.

Initial reports said that LATAM is to abandon duty free sales onboard, but reportedly talks are already underway to replace Duty Free World. Senior management in Chile have been disappointed with the trajectory of sales over the last few years and have been upset at out of stock situations within many of the key categories, according to sources close to the airline in the Chilean capital, Santiago.

The same source said that a decision would be made shortly and indicated that the new concessionaire would be either a Panama-based duty free operator or a European inflight specialist.

John Gallagher