LATAM Brazil’s CEO Confident The Airline Won’t Be Sold To Azul

LATAM Airlines Group is not interested in selling its Brazilian branch to local competitor Azul, Jerome Cadier, the Brazilian CEO, recently said. Instead, the company is focused on exiting successfully from its Chapter 11 bankruptcy process in the next few weeks. Let’s investigate further.

Boeing B767-316ER PT-MOF LATAM Brasil MMMX Aug 31 2021 AF 01
LATAM will not sell its Brazilian branch, the airline has said. Photo: Guillermo Quiroz Martínez via @gquimar.

Why is this rumor coming back?

In the last few months, there has been a constant rumor that Azul may want to buy LATAM’s branch in Brazil. And, like any good rumor, it just won’t be quiet. It keeps on coming back, again and again.

The story began in June 2020, when LATAM Brazil and Azul signed a domestic codeshare agreement, strengthening their collaboration. The arrangement lasted nearly a year, ending in May 2021.

Then, in July 2020, the Brazilian Equity Research team of Bradesco BBI Bank suggested that LATAM’s best option would be to sell its Brazilian branch to Azul Linhas Aereas.

Throughout the year, LATAM has publicly declined any interest in selling its Brazilian branch. In a statement sent to Simple Flying in May 2021, LATAM said,

“LATAM Group intends to compete in Brazil and other markets aggressively and doesn’t have the intention of selling or breaking apart its Brazilian, or any other, branch. LATAM Group has not received any acquisition proposal. The ending of the domestic codeshare by LATAM is not related to this topic.”

Azul A320
Azul’s management says that a merger with LATAM Brazil would have benefits. Photo: Vincenzo Pace | Simple Flying

So, why does it keep coming back?

Azul’s CEO, John Rodgerson, has recently given strength to the possibility of a buyout. Rogerson argued that the Brazilian government should look into the possibility of merging both carriers. He said,

“The deputies should look into this. If we see other countries worldwide, Air Canada has 70% of the Canadian market share; Avianca has 70% of the Colombian market; LAN has 85% of the Chilean market. We shouldn’t think of this as something harmful, and instead, we should look at the opportunities.”

If Azul and LATAM Brazil did merge, they would create a powerhouse in the Brazilian market. They would have a combined market share of 68%, according to the latest stats provided by the Civil Aviation Authorities.

Tam and Azul Airlines
The possibility of seeing a merger between Azul and LATAM Brazil is scarce. Photo: Getty Images

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So is there a possibility?

In an interview with the Brazilian newspaper O Globo, Jerome Cadier denied the rumors again. He said that Azul’s plan is to delay LATAM’s exit from its Chapter 11 process. LATAM will present its reorganization plan next week.

Cadier said that Azul’s management minimizes the difficulties and approval time that a merger such as LATAM-Azul would take.

Moreover, if LATAM were to approve the sale of its Brazilian branch, what message would that send to the airline’s creditors, he asked.

“Azul talks about synergies. But the analysts can’t find the value in these synergies. The merger wouldn’t benefit creditors nor stakeholders. The only winner would be the fares. The price of the average ticket would rise. The company (Azul) which already has a monopoly of routes (80% of Azul’s routes are uncontested) would have an even bigger monopoly and would charge higher fares,” Cadier said.

Finally, Cadier argued that Azul is scared of a LATAM comeback, so that’s why it is creating confusion with the merger talks.

Despite LATAM’s claims, do you think a merger of LATAM Brazil and Azul would be good? Let us know in the comments.

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