TAM Ropes In Wal-Mart, Ipiranga

Earlier this week, TAM S.A. (TAM - Analyst Report) formed a partnership with Ipiranga and Wal-Mart Store Inc. (WMT - Snapshot Report) for its loyalty program network Multiplus Fidelidade. Ipiranga and Wal-Mart have customer loyalty and affiliation programs called Km de Vantagens and Bomclube, respectively.

Other than availing flights and tour packages with TAM Viagens, the tourism provider for TAM Airlines, Multiplus Fidelidade members will now be able to accumulate points by purchasing products and services at Ipiranga gas stations and by shopping at Wal-Mart stores. Members would also be able to redeem prizes at these partners' sales outlets.

Km de Vantagens and Bomclube will raise the customer base of Multiplus Fidelidade from 6 million members to nearly 12 million. Management believes that Multiplus will prove to be an efficient tool for establishing customer loyalty and retaining consumers at favorable costs for all the partners.

TAM is making use of every method to ensure growth. Recently, it signed an agreement with Air Canada that will allow members of TAM Fidelidade and Air Canada’s Aeroplan programs to earn and redeem frequent flyer points/miles on flights operated by either company.

In May, TAM Viagens invested in updating its line of products and services in order to offer a more personalized service to its customers. However, growing competition in the Latin American airline industry and recent surge in oil price to $72 per barrel are matters of huge concern.

Nevertheless, recent recovery in the Brazilian real against US dollar will definitely reduce interest expenses and make international air travel cheaper for Latin Americans. Thus, we are Neutral on the stock.