Brazilian Antitrust Authority Monitors Closer Ties Between Azul and Gol

Brazilian Antitrust Authority Monitors Closer Ties Between Azul and Gol
Photo: 31.05.2024 366

Technical team of CADE discusses flight-sharing agreement with airlines.

The technical team of the Administrative Council for Economic Defense (CADE) has been in contact with Azul and Gol, seeking information regarding the recently announced flight-sharing agreement, sources say. While the companies are not mandated to submit the agreement to CADE, the antitrust authority can review potential competitive issues, as it has done with similar agreements in the past.

According to a source, before making the announcement, the companies had already approached CADE to present the agreement. Being a “traditional” model without overlapping routes, it is likely that there will be no hurdles from the agency. However, if a merger is proposed, it will require submission to CADE.

Currently, the technical team within CADE’s General Superintendence (SG) is conducting a confidential review to determine if the companies need to formally submit the agreement for analysis. Based on this review, SG may either initiate a formal analysis and request further information from the companies or close the case.

Following SG’s decision, any CADE councilor could request an investigation, which would require agreement from the Tribunal and the technical team.

Within CADE, opinions are divided; some see the agreement as unproblematic due to the lack of overlapping routes, while others believe certain clauses, like the merging of loyalty programs, may require further clarification.

Eric Hadmann Jasper, an expert in economic law and partner at HD Advogados, noted that it is natural for CADE to seek clarifications from the companies given the operation’s significance in a strategic market.

Until mid-2017, such agreements had to be notified to CADE. The policy changed following the analysis of an agreement between Qatar Airways and Latam, where CADE concluded that typical flight-sharing agreements did not require notification.

Mr. Jasper explained that in the Qatar Airways-Latam case, the exemption was granted because the agreement did not involve payment, asset transfers, or changes in corporate structure, and the companies had the freedom to start or stop routes, set prices, and did not exchange sensitive commercial information.

In a recent case involving Latam’s purchase of VoePass (Passaredo) shares, the technical team noted that such agreements can benefit consumers and airlines, particularly when connecting companies operating complementary routes. However, they can also reduce competition, as airlines might lose interest in exploring new or low-demand market niches.

The SG pointed out that CADE’s primary concern in reviewing domestic airline cooperation is the potential for coordinated actions, such as setting flight frequencies and fares together.

CADE councilor Gustavo Augusto emphasized that there is no precedent for absolute exemption of flight-sharing agreements. He stressed the need to assess whether the agreement involves shared risk and suggested that it would be prudent for the companies to notify the operation. “If we determine that the operation should have been notified, the companies could face penalties.”

Gol stated that the sharing agreement is a standard commercial deal within the “normal course of business,” involving only non-overlapping domestic routes, and affirmed their readiness to respond to any inquiries. Azul also expressed willingness to provide any necessary clarifications to CADE.

The National Civil Aviation Agency (ANAC) commented that commercial cooperation agreements do not require its prior analysis and approval. However, as the sector’s regulator, ANAC will monitor the implementation to ensure passenger rights are protected and operations adhere to safety standards.

Source: Valor International


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