The CADE will assess challenge on the 11th as U.S. carriers plan to invest $100m each.
Brazil’s antitrust authority CADE will review next Wednesday (11) an appeal filed by consumer advocacy group IPSConsumo that raises competition concerns over United Airlines’s planned investment in Azul. The case is on the agenda for the tribunal’s session scheduled to begin at 10 a.m.
Reporting commissioner Diogo Thomson de Andrade formally approved late Friday the group’s request to join the case as an interested third party. The CADE’s chairman, Gustavo Augusto Freitas de Lima, had granted the institute provisional standing in late January.
United Airlines and American Airlines have agreed to invest $100 million each in the Brazilian carrier. The funding is part of Azul’s restructuring process in the United States under Chapter 11 bankruptcy protection. However, the company’s strategy is to present American’s investment only after the CADE reaches a decision on United’s transaction, according to sources.
If the appeal is accepted, the tribunal will conduct a more in-depth review of the case, a process that can take up to 330 days.
Behind the scenes, the choice of Andrade as reporting commissioner for the appeal may work against Azul, according to people familiar with the matter. Based on his track record, as well as that of commissioners Camila Cabral Pires Alves and Victor Oliveira Fernandes, they are seen as more likely to admit the appeal and push for a deeper examination of the case.
For the appeal to move forward, it must secure a majority vote among the commissioners. Still, the reporting commissioner plays a key role in shaping the process and putting forward a recommendation for the panel to vote on.
Chapter 11 proceedings
The uncertainty comes at a sensitive time for Azul, which is undergoing a court-supervised restructuring in the United States under Chapter 11. The airline aims to exit the process by the end of February.
On December 30, the CADE’s General Superintendence issued a favorable opinion on United’s investment. Later that same day, however, IPSConsumo formally challenged the deal and requested to be admitted as an interested third party.
In its filing, IPSConsumo argued that United’s minority stake in Azul’s controlling group, alongside its position in holding company Abra, could enable the exchange of competitively sensitive information. The ownership structure could create a network of competitors potentially capable of coordinated action, involving United, Azul, Gol, Copa, Avianca, and, in the near future, American Airlines.
The group also said the transaction would involve changes to Azul’s bylaws, including the creation of a new strategic committee that would grant United special powers to influence Azul’s operational decisions and elevate the U.S. carrier to the status of a “strategic partner.”
Azul and United did not respond to requests for comment by the time of publication.
Source: Valor International
