LATAM and Azul announce end of the codeshare agreement

Brazilian mainline carriers had started deal last year due to the drop in demand caused by the pandemic

LATAM Brasil and Azul announced on Monday the end of the codeshare agreement on flights that has been in force since last year. The deal will still be valid until August, according to the companies, who gave different reasons for the decision.

LATAM claims that the agreement did not work as expected, with only 2% of passengers coming from the competitor. Azul in turn stated that it sees signs of consolidation in the air travel market in Brazil, which would have motivated the rival’s withdrawal.

“This codeshare agreement was an alternative identified by the two companies to face the drop in sales and the reduction of air networks during the height of the pandemic. With the prospect of improvement, there is no more sense. In addition, both the expansion and the volume of passengers that benefit from this agreement fell short of LATAM’s initial expectations during the year 2021,” said Jerome Cadier, LATAM CEO in Brazil.

“Codeshare with LATAM was an alternative in our response to the pandemic. We also realized that industry consolidation would be important for post-pandemic recovery and Azul is a key part of such initiatives. At the end of the first quarter of this year, we hired financial advisers and are actively studying consolidation opportunities. We believe that the closure of codeshare by LATAM is a reaction to the consolidation process,” said John Rodgerson, Azul’s CEO.

Air travel in Brazil is recovering in 2021 (AeroportoBSB)

The Brazilian media, however, claims that the disagreement occurred after attempts to acquire LATAM’s Brazilian operation by Azul.

Since the announcement of the agreement, there have been rumors in the market about proposals made by Azul to take over LATAM Brasil, TAM’s successor after the merger with LAN Chile.

Cadier, for his part, made optimistic predictions about the carrier, which is expected to reach 90% of the pre-pandemic air network by December 2021. The airline also announced the hiring of 750 crew members and is adding seven Airbus A320s to the domestic fleet.

Last year, citing the Covid-19 crisis, LATAM dismissed 2,700 crew members, claiming that their salaries were well above the market average.

Currently, Azul, owned by businessman David Neeleman, has a 37.5% share of the domestic market, followed by Gol (30%) and LATAM (27%).

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