Chile's Supreme Court has struck down proposed joint ventures by LATAM Airlines with Oneworld partners American Airlines and IAG, siding with appeals filed against the deals last year by Chilean tourism and consumer organisations.
Four judges behind the court's decision say that the proposed joint ventures will result in the airlines acquiring a market position that would be "difficult to challenge" in an industry that already has high barriers to entry.
The court's move to prohibit the proposed deals covers only the passenger air transportation market, leaving LATAM free to form cargo agreements with American and IAG, say the judges in their written decision.
LATAM president Ignacio Cueto says in a statement that the airline is "surprised" by the ruling, calling it a "setback" for the country. The carrier's executives had previously said they expected the deals to be upheld by the court, following the last-minute appeal against the joint venture by a Chilean tourism association and consumer rights body.
Prior to the appeal, the joint ventures were cleared by Chile's anti-trust tribunal and had also secured approvals from Brazil, Colombia and Uruguay.
Cueto says the court's decision sets a bad precedent for the development of commercial aviation in Chile, whose airline industry is widely regarded as being the most developed in Latin America.
The airline is evaluating implementing the joint ventures in other countries where the deals were approved, says Cueto.
First announced in January 2016, the proposed LATAM-American joint venture was to cover routes to Brazil, Chile, Colombia, Paraguay, Peru and Uruguay. The joint venture with IAG covers routes to Argentina, Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru and Uruguay.
An American spokesperson tells FlightGlobal that the US carrier has not had the opportunity to review the court's decision, but is "disappointed" by the ruling. The Fort Worth-based airline says it will continue to seek anti-trust immunity approval for the deal in the USA.
"We believe our joint business would have brought tremendous benefits to Chile, as we expect it will in Brazil, Colombia, and other South American countries that have already approved the agreement without conditions. We expect to continue to pursue our application in the USA," says American's spokesperson.