Q&A: competition law and state aid for the aviation sector in Argentina

Competition law

Do sector-specific or general competition rules apply to aviation?

There are no sector-specific competition rules applicable to aviation; general competition rules apply. Law No. 27.442 (the Antitrust Law) establishes a procedure to avoid unfair competition based upon the abuse of a dominant position.

Is there a sector-specific regulator, or are competition rules applied by the general competition authority?

The competition rules are applied by the National Antitrust Commission (CNDC), which is the competition authority. The CNDC must request the opinion of the National Civil Aviation Agency (ANAC) in aviation-related matters.

How is the relevant market for the purposes of a competition assessment in the aviation sector defined by the competition authorities?

The competition authorities have not defined the relevant market in the aviation sector. However, Law No. 27.442 defines the characteristics of the dominant position of an offeror of services with the intention of preventing offerors from unilaterally determining fares or avoiding competition; the relevant market may be defined as that in which one or more airlines, regardless of country, effectively exercise traffic rights between two countries.

How have the competition authorities regulated code-sharing and air-carrier joint ventures?

The ANAC approves code-sharing agreed by carriers according to Executive Decree 1401/98, which included code-sharing agreements under the umbrella of article 110 of the Argentine Aeronautical Code (AAC). Any such agreement is published in the Official Gazette. Air carriers can undertake joint-venture agreements that must also be approved by the ANAC.

What are the main standards for assessing the competitive effect of a transaction?

The main objective of the Antitrust Law is to protect the general economic interest (consumers and other competitors) and competition in the markets. Law No. 27.442 introduces a preventive control that aims to avoid the abnormal operation of the market. A commercial operation is considered to be detrimental to the general public when a bidder gains control of the market. Law No. 27.442 is aimed at preventing the irreversible effects that an economic concentration of corporations might have on competition and the results that such a concentration might produce.

What types of remedies have been imposed to remedy concerns identified by the competition authorities?

Mergers and acquisitions must be notified to the CNDC. For mergers or acquisitions worth more than 5,529,000 Argentine pesos, previous authorisation from the CNDC must be requested and obtained. A few years ago, the CNDC rejected a vertical integration between an airport concessionaire and an airline. The CNDC in this case evaluated the airport concessionaire’s power to govern the regulation of fares. The negative evaluation of the effects of vertical integration was based on the existence of incentives that the airport operator (integrated vertically) could have used to expand its market power to domestic air transport. Law No. 27.442 establishes fines in case of its violation, which may be appealed to the judicial courts.

Financial support and state aid

Are there sector-specific rules regulating direct or indirect financial support to companies by the government or government-controlled agencies or companies (state aid) in the aviation sector? Is state aid regulated generally?

There are sector-specific rules regulating direct or indirect financial support to individual companies by the government in the aviation sector, and they are contemplated in section 138 of the Argentine Aeronautical Code (AAC), section 6 of Law No. 19.030 and Executive Decree 1012/2006.

Also, there are several state aid regulations that support the aviation sector in matters of fuel and fares (ST Resolutions 360/2007, 257/2008 and 315/2008, which set forth a compensation regime for domestic scheduled flights’ fuel price).

What are the main principles of the state aid rules applicable to the aviation sector?

Section 138 of the AAC states that the federal government may subsidise air transport services on routes of public interest.

This means that the state may grant subsidies at its discretion for commercial transport or aerial work when the route to be subsidised or the aerial work activity is declared of public interest.

Section 6 of Law No. 19.030 also establishes that the state will distribute financial aid to compensate for financial loss originating from the application of promotional fares in scheduled air transport services to remote destinations that have been declared to be of general interest of the state, where the service is not cost-effective.

Are there exemptions from the state aid rules or situations in which they do not apply?

Provided certain preconditions are met, the government may grant subsidies to the best of its judgement. There are no general exemptions or other limitations contemplated by the applicable regulations exonerating government debt to allow for the privatisation of a state-owned company.

Nevertheless, when Aerolíneas Argentinas SE, a state-owned company, was privatised as Aerolíneas Argentinas SA (AR), a private corporation, it was exonerated by the government of all liabilities (Executive Decrees Nos. 1591/89, 461/90, 575/90, 1024/90, 1354/90, 2201/90 and 2438/90).

At present, AR is again a state-owned company. Law No. 26.466 of 2008 stated that the stocks of AR and its subsidiaries and affiliate companies are of ‘public interest’ and the stock has been expropriated in accordance with the Expropriation Law (Law No. 21.499).

Law No. 26.466 also states that the executive power shall provide the mechanism to cover the financial needs of AR, and it shall prepare AR business, strategic and operative plans.

Must clearance from the competition authorities be obtained before state aid may be granted? What are the main procedural steps for doing so?

Clearance does not need to be obtained from the National Antitrust Commission before state aid can be granted.

If no clearance is obtained, what procedures apply to recover unlawfully granted state aid?

In all cases where state aid is unlawfully granted, administrative and criminal procedures to recover illegally spent public funds apply.

The Criminal Code contemplates the following measures: section 260 establishes that a government employee who gives funds or effects a different destination from that which the law sets forth will be punished; and section 248 establishes that a government employee who violates the constitution, federal or local laws or does not carry out laws that he or she is obliged to fulfil will be punished.

A motion to vacate the administrative decision must be filed in court to recover funds from the beneficiary.