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First Approval for LAN-TAM merger

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The approval of Chilean airline LAN S.A’s plan to buy rival Brazilian carrier TAM Linhas Aereas , for forming LATAM, one of the world’s major airlines, has been recommended by the antitrust unit of Brazil's finance ministry.

This approval is the first of its three antitrust decisions in Brazil for the LAN-TAM merger deal, announced a year ago. The deal has been facing hurdles in Chile for quite sometime, and the tie-up is still under discussion.

The deal was questioned by local airlines and consumer groups, and was probed by Chilean anti-monopoly regulators on the ground that the merger will create one of the world's biggest airlines called LATAM, thereby instigating a loss of market share by smaller airlines in Brazil.

However, the antitrust unit, after studying the complaints by local airline PAL against the planned takeover, has given the verdict that the deal will not effect competition in the country's civil aviation market.

On this backdrop, TAM expects final approval for the deal by the Brazilian regulators, by the first quarter of 2012. LAN also expects Chile's antitrust regulators to approve its multibillion-dollar takeover of TAM in August.

Of late, TAM reported a net income of R$60.3 million (US$37.9 million) in the quarter, up from a loss of R$174.8 million (US$98.2 million) in the year-ago quarter, based on higher load factor in domestic and international market as well as rising passenger demand.

TAM S.A., operating through its subsidiaries TAM Linhas Aéreas and TAM Mercosur, is a renowned air transportation service provider, both in the domestic and international markets. TAM competes directly with its peers, such as AMR Corporation and GOL Linhas A (GOL - Free Report) .

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