Rival Latin American carriers LAN Airlines and TAM Linhas Aereas say they are still processing the implications of a decision by a Chilean competition court to attach nearly a dozen structural and behavioural conditions to the companies′ proposed merger.

In a split decision, Chile′s National Competition Tribunal yesterday approved the proposed US$3.7 billion deal but not without demanding that the airlines take multiple steps to ensure the market for flights between Chile and Brazil remains competitive.

The conditions include asking the airlines to hand over four daily slots in the Guarulhos airport in São Paulo to another airline or airlines wanting to expand services between São Paulo and Santiago.

Guarulhos is the largest airport in Brazil by passenger volume and one of the largest airports in Latin America.

The companies are also required to renounce one of two airline alliances before completing the merger, according to the tribunal′s decision. This includes giving up current code sharing agreements and other types of cooperation that took place within the alliances.

Santiago-based LAN is a member of the Oneworld alliance. TAM, the largest airline in both Brazil and Latin America, is a member of the Star Alliance.

One tribunal member voted to block the deal outright, saying the merger of LAN with its closest competitor would create a dominant player in the Latin American market and potentially harm customers.

The airlines say approval from the tribunal represents one more step towards closing the deal, which was announced in August 2010.

′The antitrust court′s resolution is complex and considers a series of mitigating measures,′ the companies say in a statement. ′Therefore, both companies are currently analysing in depth the implications and impact of the measures imposed by the court.′

The deal is also awaiting antitrust approval from Brazil′s Council for Economic Defence.

If approved, the deal would create the second-largest publicly traded airline in the world, according to data reported by Reuters. Company executives have said they expect the deal to close by the end of the year.

A source familiar with the matter says the tribunal′s investigation helped to clarify who could bring a merger challenge before the court. The deal came under investigation in January after a consumer advocacy group complained that the merger would harm competition.

Chile′s National Prosecutor′s Office had reached an agreement with LAN and TAM to clear the merger with conditions, but submitted its proposal to the tribunal after the consumer group had asked the court to challenge the deal.

The source says that now, it will be up to the companies and the consumer group to decide whether to challenge the tribunal′s decision at the country′s Supreme Court. The tribunal′s mitigation measures were ′very aggressive,′ the source says, ′and it will be interesting to see how this will be resolved.′

Counsel to TAM

General counsel to TAM - Luiz Claudio Aguiar

US

Clifford Chance LLP

Partners Anthony Oldfield and Sarah Jones and associates Anand Saha and Kristyn Walker

Brazil

Machado Meyer Sendacz e Opice Advogados

Partners Antonio Corrêa Meyer, Carlos José Rolim de Mello, Raquel Novais and Fernando Tonnani and associates Fabio Falkenburger and Paula Magalhães

Chile

Cariola, Diez, Pérez-Cotapos & Cía Ltda

Partners Francisco Illanes and Peter Deutsch

Counsel to TAM′s shareholders

Turci Advogados

Partners Flávia Turci and associates Carlos Fujita and Ana Matsuda

Counsel to LAN

General counsel - Cristián Toro

US

Sullivan & Cromwell LLP

Partners Sergio Galvis, Duncan McCurrach and Juan Rodriguez and associates Carlos Pelaez, Felipe Capella, Rachael Dugan

Brazil

Pinheiro Neto Advogados

Partner Alexandre Bertoldi and associates Vânia Marques Ribeiro Moyano and Roberta Stettinger Bilotti Demange

Chile

Claro y Cía

Partners José Maria Eyzaguirre and Felipe Larraín

(Latin Lawyer 23.09.2011)

(Notícia na Íntegra)