Brazil’s Administrative Council for Economic Defense (CADE) has raised several antitrust concerns about the proposed transatlantic joint-venture between LATAM Airlines Group and the IAG International Airlines Group.
Under the deal announced in January, Iberia and British Airways were to have gained access to LATAM’s extensive North and South American networks while LATAM would have, in turn, gained access to eighty-seven destinations served by British Airways and Iberia. As a corollary to this, both sides would have coordinated schedules and prices.
In an official statement issued this week, the watchdog said its concerns centred on the Brazil-Europe market – São Paulo Guarulhos-London and São Paulo Guarulhos-Madrid Barajas in particular.
“…the parties involved in the agreement are the only ones that operate non-stop flights on the São Paulo – London route,” the CADE’s General Superintendence unit said. “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%.”
The CADE says competition from other airlines and even from new entrants, would be insufficient to placate it concerns given the two carrier groups’ dominance in either market.
“The General Superintendence concluded that the merger, as it was submitted, has the potential to cause harmful effects on competition.”
LATAM and IAG are expected to make concessions in order to gain regulatory approval.