The man picked to steer the airline that will result from a merger between LAN and TAM, Enrique Cueto, helped save Chile's flagship carrier from Bankruptcy in the 1990's by reducing costs.

Starting as head of a tiny cargo carrier, Cueto, LAN's chief executive since 1994, is renowned for running a tight operation that made LAN one of Latin America's most profitable airlines.

The record rally in bonds of Tam SA, Brazil's second-largest carrier, has made them too pricy for Barclays Plc following the $3.7 billion takeover offer from Chile's Lan Airlines SA.

Bond traders are betting that Lan, headquartered in Santiago, will guarantee all of Sao Paulo-based Tam's 10.8 billion reais ($6.1 billion) of obligations. Lan is rated BBB+ by Fitch Ratings, six levels higher than Tam's B+ ranking.

Juan Cruz, a Latin American corporate debt analyst at Barclays in New York said that, "The market is assuming the new entity will take on Tam's debt. I'm not so sure that's the plan or that the companies even know at this point."

The family controlled the airline in partnership with Chilean President Sebastian Pinera, who sold his 26 percent stake in the airline shortly after taking office this year. The conservative leader keeps close ties with the Cuetos, who increased their stake to 31.8 percent, now worth around $3

Billion, when Pinera sold his stake.

The Cuetos, who expect to hold between 24 and 25 percent in the new airline group, agreed to partnership terms that comply with Brazil's regulation that forbids foreigners from owning more than 20 percent of a domestic carrier.

The takeover "would be positive for Tam in that it would help the company improve some of the key drivers of the rating, including high debt, emerging partly from its aggressive fleet expansion plan and weak results" in the past two years, S&P said in a statement.