By Brazil Stock Guide – Brazil’s antitrust regulator is reviewing allegations of premature coordination involving Azul SA (AZUL4 BZ), American Airlines Group Inc. (AAL US) and United Airlines Holdings Inc. (UAL US), according to an official filing published Thursday (5).
The complaint was forwarded to the Superintendence-General of the Administrative Council for Economic Defense, known as Cade, after a petition filed by the Instituto de Pesquisas e Estudos da Sociedade e Consumo (IPSConsumo). The group asked regulators to open an administrative procedure to investigate a potential breach of competition rules.
The case was referred by Cade board member Diogo Thomson de Andrade, who previously served as rapporteur for a transaction involving United Airlines’ capital increase in Azul. The regulator approved that deal last month.
In a decision published in Brazil’s Official Gazette, Andrade said the petition presents indications of premature coordination between companies that may have occurred before receiving regulatory clearance.
“The allegations brought by IPSConsumo report indications of premature integration of activities and the exercise of material influence between economic agents without prior notification and approval from this authority,” Andrade wrote in the order, adding that the matter falls under the investigative authority of Cade’s Superintendence-General.
The review comes as Azul undergoes financial restructuring in the United States under Chapter 11 bankruptcy protection.
On Tuesday (11) in February, Cade’s tribunal unanimously approved United Airlines’ increased minority stake in the Brazilian carrier as part of that process. Following the transaction, United’s ownership in Azul rose from 2.02% to roughly 8%.
About a week later, on Tuesday (18), Azul said it had finalized amendments to equity investment agreements with both United Airlines and American Airlines.
According to a filing sent to Brazil’s securities regulator, Comissão de Valores Mobiliários (CVM), each U.S. airline committed to invest $100 million in Azul, for a combined $200 million.
The investments are designed to support Azul’s capitalization as it exits Chapter 11 and form part of the company’s reorganization plan approved by the U.S. Bankruptcy Court for the Southern District of New York.