LAN Airlines of Chile has completed its takeover of rival TAM of Brazil, creating the second largest airline in the world.

Shareholders in both carriers agreed to complete the creation of LATAM, as the new carrier will be known, earlier, after two years of intensive talks.

TAM has seen profits weaken in recent years, despite strong economic growth in Brazil, as low-cost carriers entered the South American market.

A wave of consolidation around the world in the aviation market has also made the option more attractive for the carriers.

LATAM will be based in Santiago.

The new company is likely to employ the larger financial resources of LAN to grow the TAM offering on domestic routes in Brazil.

LATAM will have a market capitalisation of roughly $13 billion, second only to Air China on this measure.