Azul Doesn’t Think Antitrust Would Block A LATAM Acquisition

Azul Linhas Aereas believes the antitrust authorities in Brazil could be very favorable towards consolidation in the country; therefore, the carrier hasn’t given up on its plans to acquire LATAM Airlines Group, John Rodgerson, Azul’s CEO, said yesterday. Is the airline really pursuing LATAM’s acquisition? Here’s the latest.

Azul A320
Azul is planning to acquire LATAM Airlines Group. Photo: Vincenzo Pace | Simple Flying

Azul’s remarks on LATAM

LATAM Airlines Group is currently working towards filing its Reorganization Plan under the Chapter 11 bankruptcy in the United States. It has until November 26 to file it, according to its latest reports.

Unlike its Chapter 11 peers (Avianca and Aeromexico), LATAM hasn’t been able to present its Reorganization Plan, which is not uncommon. Nonetheless, Azul’s management has been very bullish regarding this situation.

Azul’s management has been sending messages saying it wants to acquire LATAM Airlines Group. During Azul’s investors call, John Rodgerson said,

“I think the macro situation promotes consolidation. Obviously, LATAM has a process we need to respect, but we haven’t given up on it. We think it is in the best interest of creditors and best interest of our shareholders.”

LATAM has repeatedly said that it will not put on sale any branch of the company, nor 100% of it. The South American giant has carriers in Chile, Brazil, Ecuador, and Peru.

Tam and Azul Airlines
LATAM and Azul are the two biggest carriers in South America. Photo: Getty Images

How would antitrust authorities approve a merger?

If Azul were to persuade LATAM’s stakeholders with an acquisition plan, the road towards a merger between both carriers would be extremely tricky. In the past, antitrust authorities in Chile stopped LATAM from launching a Joint Venture Agreement with American Airlines, for example.

But Azul management believes the COVID-19 crisis led to a different scenario, one in which consolidation is not off the table.

First of all, the airlines in South America didn’t receive subsidies from their governments to face the crisis, while carriers elsewhere did. This zero-subsidy situation has put Latin American carriers in a disadvantageous position against other operators.

Moreover, the Brazilian market is 100% open. “So a subsidized US carrier can start an airline in Brazil. A European subsidized carrier can start an airline in Brazil,” said Rodgerson.

He added,

“When you think about the support that all other countries gave to their airlines versus the financial support that Brazilian airlines simply didn’t receive, you can see the case why antitrust should be very favorable to consolidation in Brazil and the rest of Latin America.”

LATAM is currently working on filing its Reorganization Plan. Photo: Getty Images.

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Could it actually happen?

That’s the million-dollar question. Several analysts have stated that Azul may just be burdening LATAM’s recovery by making these claims. After all, LATAM is Latin America’s biggest carrier by fleet, number of flights, and capacity available. Azul is the second carrier in the region, even though it only operates in Brazil.

Currently, LATAM has exclusivity to file its Reorganization Plan. Nevertheless, that exclusivity period ends on November 26, and Azul Linhas Aereas is already looking at that date.

Rodgerson has stated before that LATAM is not reaching an agreement with its creditors; that’s why it is requesting extensions of the exclusivity period. He added,

“But we certainly haven’t given up on it because we think there’s more to come as the exclusivity period expires in the next couple of weeks. And so you’ll hear more from us at that time.”

Do you think Azul could actually buy LATAM? Let us know in the comments below.