LAN Airlines (Chile) Airbus A340-313X CC-CQC (msn 363) (80 Years) SCL (Alvaro Romero), originally uploaded by Airliners Gallery.

LAN Airlines (Santiago) has issued the following statement concerning the proposed merger with TAM:

“After thorough analysis of the content and implications of the resolution of the Tribunal de Defensa de la Libre Competencia de Chile (TDLC), Chile’s antitrust court, regarding the merger process between LAN Airlines S.A. and TAM S.A., the Boards of Directors of both companies have confirmed their decision to move forward with the transaction.

LAN and TAM believe the mitigation measures imposed by the TDLC do not significantly impact the synergies generated by the transaction and do not modify in any material respect the companies’ joint strategic development plans. From the analysis, the estimated impact on the expected synergies would not exceed US$10 million per year, reducing by such amount the total previously announced synergies of US$400 million.

The mitigation measures considered in the judgment by the TDLC are broadly in line with the measures that LAN and TAM were prepared to accept in January 2011 in the out-of-court settlement negotiated with the Fiscalía Nacional Económica (FNE), Chile’s antitrust authority. Nevertheless, on October 3, LAN and TAM presented an appeal before the Supreme Court objecting three of the mitigation measures which the companies deem to be unconstitutional and disproportionately severe.

The three measures being appealed are:

1.- the seventh condition, which establishes the obligation to submit for approval ex – ante certain code share agreements that LATAM Group may have reached with airlines outside of its chosen alliance. This is unnecessary considering the existence of an alternative measure, which requires the company to inform the FNE of all such agreements so that it may analyze and determine if they are detrimental to the competitive environment;

2.- the eight condition, which establishes the obligation to give up four fifth freedom rights to Lima, Peru. This condition goes against a 2009 ruling of the Supreme Court, which overturned a previous ruling of the TDLC which attempted to impose measures that would have had the same impact; and

3.- the fourteenth condition, which provides excessive intrusive powers to the FNE and to the consultant that the TDLC requires the company to hire to collaborate in the surveillance process. The company considers that the proposed “unrestricted, total, permanent and continuous” access that this consultant would have, both in and outside of Chile, to LATAM Group’s data bases, systems, accounting, installations, offices, call centers and others, is unlimited and differs from what is provided for by law since it lacks previous judicial controls and is therefore illegal in that it affects constitutional rights.

In its appeals before the Supreme Court, it is highlighted that the seventh and fourteenth measures have legitimate legal and constitutional alternatives which are in accordance with the underlying spirit of the measures proposed by the TDLC.

LAN and TAM confirm their commitment to implement the merger in the shortest possible timeframe, which they expect to be towards the end of the first quarter 2012. It is important to highlight that LAN and TAM plan to move forward, in parallel with the Supreme Court appeal process, with the various regulatory and corporate authorizations that are still required to complete the transaction.”

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Copyright Photo: Alvaro Romero. Please click on the photo for additional information.