GOL Challenges LATAM-Azul Codeshare As Non-Competitive

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The Brazilian carrier GOL filed a complaint against the LATAM-Azul codeshare agreement. GOL said that its two competitors are concentrating the domestic capacity in five routes, making them non-competitive and hurting the Brazilian passengers.

Azul and TAM Getty
GOL Linhas Aereas is claiming the Azul-LATAM codeshare agreement is non-competitive. Photo: Getty Images.

What is GOL claiming?

The Brazilian newspaper UOL first reported on the subject. In mid-December, GOL asked the Administrative Council of Economic Defense (CADE, in Portuguese) to analyze and sanction the codeshare agreement of Azul and LATAM because of its anti-competitive nature.

GOL pointed out five domestic routes that LATAM and Azul have been operating jointly since October. These routes are:

  1. Belo Horizonte-Sao Paulo Guarulhos
  2. Belo Horizonte-Sao Paulo Congonhas
  3. Sao Paulo Guarulhos-Porto Alegre
  4. Brasilia-Recife
  5. Rio de Janeiro-Vitória

Azul and LATAM are operating these routes under a codeshare agreement. They can sell the route on flights operated either by one or the other carrier while splitting up the profits. The airlines claimed that this is a way to reduce expenses while increasing the number of passengers and revenues per flight.

GOL disagrees with that. It says the following, according to UOL:

“What we have, instead, is a relevant concentration of capacity operated in these routes, which allows the airlines to exercise their market power, affecting GOL (the only competitor in these routes), and mainly, the users of the air transport system.

Simple Flying contacted GOL Linhas Aereas regarding the subject. The airline declined to comment.

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GOL and Azul Getty
GOL feels Azul and LATAM are gaining unfair capacity on selected domestic routes. Photo: Getty Images.

The Azul-LATAM codeshare agreement

Azul and LATAM signed their new codeshare agreement in June 2020. Members of Azul described the deal as something unimaginable if COVID-19 hadn’t affected the airline industry.

Initially, the agreement included 50 non-overlapping domestic routes to and from several Brazilian cities. In 2019, both carriers had a total of 298 routes in Brazil and over 1,630 daily departures.

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Azul had the most significant number of departures and cities served. Meanwhile, LATAM had more presence in some important hubs like Sao Paulo, Rio de Janeiro, and Brasilia. John Rodgerson, Azul’s CEO, previously said the following:

“These agreements will provide unrivaled benefits for customers. With Azul’s highly connected network that serves many destinations in Brazil and LATAM’s hubs, our complimentary fleet types and networks will offer customers the widest range of travel options. In addition, both airlines have a history and passion for customer service, and we look forward to showcasing this together.”

Now, both carriers are operating overlapping routes, which directly affects GOL. According to GOL, Azul and LATAM went from having 62% of the seats in the route Sao Paulo Guarulhos-Belo Horizonte to have 77% after its agreement. In the route Brasilia-Recife, it went from 68% to 75%.

GOL Boeing 737-800 Getty
GOL is currently flying on domestic routes only. Photo: Getty Images.

What could we expect going forward?

Currently, CADE is analyzing the whole situation. We don’t expect the Council will impose sanctions on Azul and LATAM.

LATAM said the following to Simple Flying:

“LATAM Airlines Brazil informs that, since the beginning of the codeshare agreement, it has kept in touch and delivered information to the Cade. The company remains open to disclose additional information.”

Simple Flying also contacted Azul. At the time of publication, we haven’t received an answer. We’ll update you if that changes.

Do you think GOL has a case against Azul and LATAM’s codeshare agreement? Let us know in the comments.

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