The Competition Tribunal ruled in favor of the National Economic Prosecutor’s Office, in a lawsuit against Junta de Aeronáutica Civil (JAC), and ordered the modification of the Bases of the latter’s Tendering Process that assigned seven restricted, direct air frequencies between the cities of Santiago and Lima. This, with the objective of facilitating the entrance of a new operator in said route, which can be able to defy the incumbent airline, and introduce competitive pressure that can translate into lower prices to consumers and into a better quality of service.
The modifications will imply that JAC will have to make sure that, in a first round of the tender of frequencies in the Santiago-Lima route, no airline must be assigned more than 75% of the total frequencies in said route, counting both available and previously assigned frequencies. If there are not enough bidders, the authority can do a second round, in which no limitation will apply.
The Tribunal also considered that the rules contained in Supreme Decree 102, of 1981 have to be substantially modified, so that new assigning mechanisms of restricted international airline routes are established, ones that consider the creation of better competitive conditions in the air transport market in each route, and not only consider the best monetary offer. This, given the fact that there is no effective competition in the airline industry in Chile, and given the presence of a dominant actor, issues that are analyzed in the ruling, both in general and in the Santiago-Lima market.
Lastly, besides solving the immediate conflict, the Competition Tribunal declared that it had reached conviction in that the way to promote and truly safeguard competition in the Chilean airline industry in general, and in the Santiago-Lima route in particular, consists in introducing the suggested competition considerations diligently in the norms that apply to assigning international restricted airline frequencies. This, notwithstanding the fact that, from the Tribunal’s point of view, the ideal and definitive solution to these competition problems consists in achieving “open skies” in as many routes as possible. This, ever since in a small economy like Chile, and particularly in an industry with high concentration indexes and relevant barriers to entry, opening to international competition is the most effective way to achieve more competitive markets in an economic regime with minimal intervention from aerial activity authorities. Therefore, the ruling contains a series of recommendations to the government in this direction.