MercoPress. South Atlantic News Agency

LAN-TAM deal approves first antitrust hurdle in Brazil; complaint in Chile

The operation could create one of the world’s largest airlines

The antitrust unit of Brazil's Finance ministry on Thursday recommended the approval of a plan by Chilean airline LAN to buy rival Brazilian rival TAM Linhas Aereas, saying the deal will not harm competition in the country's civil aviation market.

The ruling is the first of three antitrust decisions in Brazil for the transaction, which was announced a year ago. The other agencies that may pronounce in coming months are the Justice Ministry's antitrust unit and the country's antitrust council Cade.

However the deal is facing hurdles in Chile, where the tie-up is also under discussion.

A Chilean court on Wednesday said it would study a complaint by local airline PAL against Chilean flag carrier LAN planned takeover of Brazilian carrier TAM, but said it would not suspend an antitrust investigation in the meantime.

Chile's Constitutional Tribunal posted its finding on its website. Chilean anti-monopoly regulators are probing the deal after a consumer group in Chile questioned it.

The deal, which would create one of the world's biggest airlines, is widely expected to go through.

PAL is arguing that if the TDLC approves the transaction any mitigation measures will be taken from an out-of-court agreement LAN and TAM reached in January with Chile’s National Economic Prosecutor prior to the TDLC review.

The TDLC may disclose its ruling later this month, the tribunal said by e-mail.

In Brazil TAM posted a second-quarter profit, reversing a year-earlier loss, on greater-than-expected demand for air travel in Latin America’s largest economy. Net profit was 60.3 million Real (37 million dollars) compared with a loss of 174.8 million Real a year earlier. Net sales jumped 17% to 3.1 billion Real.

Demand for air travel in Brazil grew 21% in the first half of the year, exceeding TAM estimates, because of increasing numbers of business and leisure travellers, according to the statement. The company’s airplanes flew 74% full in the quarter, compared with 67% a year earlier.

TAM forecasts a 15% to 18% expansion in domestic flight demand through the end of the year, with total seat supply growing 10% to 13%. The company estimates a load factor, or percentage of seats taken, of 73% to 75% for the year.