SANTIAGO Chile's LAN Airlines LAN.SN promised on Thursday to guarantee lower fares and more competition on key routes shared with Brazil's TAM TAMM4.SA to win approval for a proposed merger as a regulatory probe neared an end.
LAN laid out the concessions, which are expected to have a limited impact on its bottom line, in oral arguments before Chile's antitrust tribunal, defending the creation of Latin America's largest carrier from a consumer group's challenge.
The probe has pushed back the effective date of any merger from the third quarter to early next year, but most analysts agree the tribunal is likely to approve the deal with some competitive guarantees before the end of July.
Mauricio Amaro, a member of TAM's controlling family, told reporters at the hearing that he expects final approval from Brazilian regulators soon.
"The process is going well in Brazil," Amaro said. "We expect approval by the end of July."
Brazil's civil aviation authority approved the planned merger in March.
"We definitely expect the approval to trigger a jump in share prices," said Santander GBM analyst Carmen Concha, adding that any concessions would have a minor impact on the $400 million in annual cost savings that LAN and TAM forecast within three years.
Concha said the best way for investors to bet on the deal's upside is with TAM stock TAM.N, which traded in New York at a 0.76 to 1 discount compared to LAN stock (LFL.N) on Thursday. If the deal passes, LAN will swap 0.9 shares per TAM share. (Reporting by Brad Haynes and Felipe Iturrieta. Editing by Simon Gardner and Robert MacMillan)