Foreign Carriers Can Now Operate Domestic Flights In Brazil

Foreign carriers can now operate domestic flights in Brazil thanks to a new law signed by Brazilian President Jair Bolsonaro. But don’t count on free checked baggage.

I wrote about the proposed law last month, noting that it would not only invite any airline to operate within Brazil, subject to slot controls, but also lift the 20% cap on foreign ownership of Brazilian airlines.

In his final days in office, President Michel Temer issued a pair of executive orders 1.) lifting the cap on foreign ownership and 2.) allowing “foreign” carriers to operate domestically in Brazil. Both policy changes went into effect immediately, but required approval by the National Congress of Brazil within 120 days or would become void.

The Chamber of Deputies (lower house) and later the Senate (upper house) did approve both measures, though added an extra provision that would require complimentary checked baggage on all domestic flights (with a greater limit on aircraft with more than 31 seats).

Brazil’s president has line-item veto power. That means s/he can veto an entire law or only certain parts of it. Acting upon input from the airline industry and CADE, Brazil’s antitrust regulator, Bolsonaro vetoed the section requiring complimentary checked baggage. But the rest of the law now goes into permanent effect.

CONCLUSION

Azul, Gol, and LATAM currently dominate 90% of the domestic market. While it is unlikely we will see many carriers immediately jump in, Air Europa is widely-considered the most likely entrant to the domestic Brazilian market. I personally doubt we’ll see any major carrier operate a network of domestic flights within Brazil, but it would not surprise me to see tag flights between big cities like Sao Paulo and Rio with the “Ninth Freedom” ability to sell seats on the domestic sector alone.