Brazil moved one step closer to allowing foreign-controlled airlines to operate domestically in Brazil. The loosening of rules may be a boon to both airlines and consumers.
Current law places a 20% limit on foreign ownership of a Brazilian airline. The proposed law would scrap that ban. Immediately, foreign airlines (or any outside investor) could increase their stakes in Brazilian airlines. The law would also loosen rules that restrict domestic flights to Brazilian flag carriers. That could quickly lead to “foreign” airlines serving domestic routes, subject to slot restrictions and operating licenses. These are known as 9th Freedom routes.
Avianca Brasil was not the catalyst for this change in law, but provides an excellent case study for why lawmakers and former Brazilian President Michel Temer saw the need for this change. Operating in bankruptcy, Avianca Brasil has had all but six of its aircraft repossessed. Meanwhile, Azul, GOL, and Latam control over 90% of the domestic market.
> Read More: Avianca Brasil Files For Strategic Bankruptcy
Who Might Invest?
Gol is currently the largest domestic carrier in Brazil. Delta owns a 9.4% stake in the company that it could now up if this bill is signed into law. United Airlines own 8% of Azul and Qatar Airways owns 10% of LATAM.
Under the right circumstances, all three carriers—or a host of others wanting to add tag flights to their intercontinental service—might start operating in Brazil. You might recall that United used to operate a flight from Sao Paulo (GRU) to Rio de Janeiro (GIG), though it did not have the right to sell tickets exclusively between GRU and GIG.
Spanish carrier Air Europa may be the first carrier to invest. According to Reuters:
Spanish airline company Globalia, best known for its Air Europa brand, is “exploring” operating in Brazil, according to the agenda of a meeting to be held by ANAC [Brazil’s civil aviation regulator] on Wednesday. On Saturday, Brazil’s infrastructure minister said the company would create a subsidiary in Brazil.
CONCLUSION
It’s an exciting time for aviation in Brazil. I hope to see more foreign carriers operating within the borders of Brazil, creating more competition and better pricing for consumers. It would be nice to see the same thing in the USA!
This are great news. Brazil is a huge country and would definitely benefit from more airline competition domestically as well as more flights from other countries to more Brazilian cities.
It could be a good way to utilize aircraft that currently sit on the ground in Brazil for 12+ hours. Most North American airlines operate flights in that then sit waiting for the return that evening. Many people will not fly an Intercontinental flight in the daytime and that makes for poor aircraft utilization. Increased competition might bring some price relief to Brazil domestic flights which are usually expensive when compared to American or European short hauls.
Politicians always like to speak to the possibilities, but the fun is always in the details.
I split my time between Brazil and the U.S. so fly there and within quite a bit. One of the main reasons Avianca was not able to survive is that four airlines flying domestically is not sustainable in Brazil. Most of the nation’s wealth is in S.P. State and the Rio area and with four airlines serving all the major metro areas with numerous flights the country, at this point, does not have enough of its population that can afford to fly. If that changes, sure..if more of a middle class develops. For now I think you are seeing flights in Brazil at the max it can handle for traffic. The biggest potential intl. growth for carriers is connecting the NE (ie. Fortaleza) to cities in Florida as Gol WAS doing but got shut down with the MAX fiasco.
As far as fares, I do not find them to be as expensive as Europe or the U.S. Many flights to cities three hours away are around $300.00 r/t. I would put that on par with the U.S. and perhaps a bit cheaper. Rio to S.P can be as low as $50 one way on many flights…. a far cry from the price of shuttle flights between LGA and DCA.
I think what United, American, and Delta are eyeing is not to run their own flights there as some seem to think in the comments but to invest and align more with one of the carriers there. The obvious and already sort of there now is American/LATAM, United/Azul and Delta/GOL. I am sure those relationships will, in time, become stronger. I expect Azul to also ref up U.S. flights, perhaps even from GRU which would be wonderful. They took over a few of Avianca Brasil’s A330’s so they must be ramping up for more offerings.
The US should allow cabotage to any country with an industrialized economy, reciprocal rights, and a decent market. That means that Australia, Canada, UK, and the EU should be allowed and maybe Singapore if the US has open skies from SIN to anywhere in the world.
There was something in the news recently about how UNITED May takeover Avianca…and by extension AviancaBrasil…
So they may already have a leg up in this market
Nice choice of photo, Matthew 😉
Copacabana is a beach like none other …
SK, that is not Copacabana, that is Leblon Beach, right besides Ipanema Beach
True, Leo – I should say the beaches in Rio are like none other . . .
Interesting, but… how to deal with jet fuel prices in Brazil? It is, probably, one of the most expensive prices in the world! Eager to see the developments in this area on the next days!