Brazilian airline Azul does not foresee any obstacles related to competition law violations in its codeshare agreement with Gol | WSAU News/Talk 550 AM · 99.9 FM

Gabriela Araujo

SAO PAULO (Reuters) – Brazilian airlines Azul and Gol have informed local antitrust watchdog CADE of their new codeshare agreement and do not expect any obstacles to be imposed, Azul’s chief executive told Reuters.

The carriers, each with about 30% of the domestic market share, announced a deal last week covering all domestic routes operated by one but not the other, along with their frequent flyer programs.

The move reignited speculation about a potential airline merger that would require antitrust approval.

Azul said in a securities filing on Tuesday after an interview with Reuters that it was in talks with Abra Group, Gola’s parent company, to “explore opportunities.”

Codeshare agreements, which allow airlines to sell seats on each other’s flights, do not require a green light from Brazil’s antitrust laws, but some have expressed concern about market concentration and suggested the regulator should look into the matter anyway.

“We went to CADE to explain what we’re doing, and if they decide to look into it, that’s fine,” Azul CEO John Rodgerson said. “There are no overlapping routes, no pricing coordination. So we don’t see any problems.”

Rodgerson noted that Azul entered into a similar deal with rival carrier LATAM in 2020 as the Covid-19 pandemic hit the air travel industry. That deal fell apart the following year when Azul tried unsuccessfully to connect with a Chilean carrier.

Azula’s new codeshare agreement with Golem comes after the latter filed for bankruptcy protection in the United States in January over heavy debt and delayed deliveries from aircraft maker Boeing.

However, Rodgerson said the companies had already been in talks for some sort of agreement given their complementary networks. Gol focuses on large cities such as Sao Paulo, Rio de Janeiro and Brasilia, while Azul has a more distributed network.

“We operate in about 100 cities where Gol doesn’t do this, so everything will be much easier from now on,” he said.

Analysts estimate that Azul flies alone on over 80% of its routes.

Brazilian airlines have been in high demand this year. In March, Azul raised its core earnings estimates, also citing rising fuel prices and an increase in production capacity.

The carrier expects to add two to three planes per month from June to the end of the year, mostly Embraers, and is confident that demand will be good.

(Reporting by Gabriel Araujo; Editing by Brad Haynes and Josie Kao)