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There are two important lessons for air travel investors right now.

Longer flights, underserved markets.

And if you want to summarize all that in one name, look at LATAM Airlines Group (LFL). This Chilean-based carrier, which trades as an ADR, has both of these key ingredients. They run long flights, and they have an under-served market, the growing number of Latin American businessmen traveling between South American destinations.

American carriers like Delta (DAL) can reach South America, and they make money on those flights. But they don't travel within the continent. The big money there is in corridors like Sao Paolo to Santiago, or Lima to Rio de Janeiro, growing economies that really require air travel, because of the spine of the Andes mountains.

If you want to know why bankrupt American Air is of any interest to the smaller US Airways (LCC), Latin America is the reason. The map of American routes to these markets neatly overlaps that of Delta, only with Miami as a base, which is potentially more profitable.

LATAM was created earlier this year through the merger Chile's LAN and Brazil's TAM, which is only clear after you look at the new company's logo. (Otherwise you might just see LAT and AM, but it's really LAT and AM.) The company was able to realize $400 million in cost savings from the merger, but more important it carries 42% of the intra-continental air traffic, and nearly one-third of the freight.

Yet the merger has not created a pop for investors. The stock is up just 23% for the year to date. But if you believe in earnings as a driver of stock prices, this one deserves a closer look.

Source: Where The Profits Are In Air Travel