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General Superintendence concludes the report about the operation between Latam, Iberia and British Airways

Aviation

CADE's Tribunal will be responsible for the final decision
by Assessoria de Comunicação Social published: Nov 07, 2016 05:41 PM last modified: Nov 08, 2016 10:57 AM

In a decision published in the Official Gazette on November 7, the General Superintendence of the Administrative Council of Economic Defense - CADE submitted to its Tribunal the analysis of the Joint Business Agreement set between Tam and the Latam Group, on one side, and Iberia and British Airways (members of the IAG Group), on the other, involving passengers and cargo air transport routes between Europe and South America (Merger 08700.004211 / 2016-10).

The General Superintendence concluded that, although it does not involve an assets transaction, the proposed merger would enable intensive cooperation between the parties, especially regarding the arrangement of flight schedules, pricing, revenue management, marketing and sales.

After analyzing the information obtained from the Parties (Latam and IAG) and other airlines, as well as from data provided by the National Civil Aviation Agency  (ANAC, for its acronym in Portuguese), the General Superintendence understood that the merger in question, as it was submitted, has the potential to generate competition concerns in the passengers’ air transport market between Brazil and Europe, especially in the São Paulo - London and São Paulo – Madrid air routes. 

According to the report, the parties involved in the agreement are the only ones that operate non-stop flights on the São Paulo – London route. Even when considering connecting flights as substitutes for non-stop flights, the companies would still hold a market share of 70% to 80% in that route. With regards to the São Paulo – Madrid route, the companies would have a strong position in non-stop flights, with a market share ranging between 50% and 60%. According to the General Superintendence, the entry of new players on these routes in the short and medium term would be unlikely, and the remaining competition in these  routes proved to be insufficient to solve the concerns raised during the merger analysis.

The General Superintendence concluded that the merger, as it was submitted, has the potential to cause harmful effects on competition. These anticompetitive potential prompted the General Superintendence to challenge the operation, forwarding it to CADE’s Tribunal, which will be responsible for the final decision on the approval, rejection or adoption of any remedies that remove the identified anticompetitive concerns. The Tribunal's decision can be applied unilaterally or by agreement with the parties.

The merger was notified on June 6, 2016 and the legal deadline for CADE’s final decision is 240 days, extendable for additional 90 days.