Brazil’s competition watchdog approves Azul-Trip merger

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The Brazilian competition watchdog CADE has approved the merger between Azul and Trip and classified it as "pro-competitive", the highest qualification a merger proposal can obtain.

CADE considers the year-old merger propospal positive for competition because it creates an airline big enough "to compete with current market leaders TAM and Gol".

CADE imposed only two minor conditions on the merger, aimed at reinforcing the actual independence from the TAM-Gol duopoly, which has reigned Brazil's domestic market for years with a combined market share of close to 90%.

These conditions will oblige the combined carrier, which will operate under the Azul brand, to drop all codeshare connections with TAM gradually before the end of 2014.

These codeshare agreements were signed by Trip before the merger and CADE now allows the airline to honour them until the renewal date of the contracts.

On the other hand, Azul must operate a minimum of 85% of the slots it owns at highly congested Rio de Janeiro Santos Dumont downtown airport, as CADE considers that the pro-competition aspect of the merger can only be achieved if Azul becomes a credible alternative to TAM and GOL at airports with high demand, but where infrastructure constraints hampering free competition.

Brazil's civil aviation authority (ANAC) also recently forced the implementation of a new slot distribution scheme at Sao Paulo's Congonhas downtown airport, which is Brazil's busiest domestic airport.

Under the new scheme, Azul will be allowed to operate for the first time at the airport, so far dominated nearly exclusively by TAM and GOL.