Brazil Is Trying To Attract Low Cost Carriers

Brazil’s airspace is looking for more competition. Earlier this week, the Minister of Infrastructure in Brazil said that the country was opening up and looking to attract low-cost airlines.

Brazil is trying to attract more low-cost airlines like JetSMART. Photo: Sky CoreSCL via Wikimedia Commons

A turning point in Brazilian aviation

The ALTA Airline Leaders Forum proves to have been a big turning point for the Brazilian aviation industry. A number of changes were announced at the event which happened on 28th October 2019 in Brazil. They include scrapping an international flight fee as well as investing more in the regional aviation industry and ensuring more passengers flying within Brazil.

The reason behind it all? Promoting tourism.

The Brazilian government is now looking to attract more airlines to Brazil and, in particular, is focusing on the low-cost market. It’s doing that by trying to encourage both domestic and international airlines. But how?

The international market

Let’s start with that international flight fee. Back in the 1990s, Brazil introduced the $18 fee for international fares. The fee was used as a revenue generator. But it’s now hindering the low-cost market since it takes a considerable chunk out of an airline’s profits. It could be the reason why airlines have not previously been so eager to invest in Brazil.

Speaking on Monday, the Minister of Infrastructure, Mr Tarciso Freitas said:

“It makes no sense to create the conditions for companies to sell $50 tickets if we have this fee.”

That’s Brazil’s gameplan right now: making better conditions for new airlines. The fee has now been scrapped. It means that non-domestic flights into the country will have cheaper operating costs than we’ve previously seen. It’s a win for Virgin Atlantic who will start operating flights to Sao Paulo in 2020. But, cheaper operating costs could also be one factor that takes airlines like TAP over the finish line in terms of creating routes to Brazil.

Virgin Atlantic is investing in Brazil with flights next year. Photo: Joao Carlos Medau via Wikimedia Commons

Encouraging inter-Brazilian travel

Brazil already has low-cost international airlines operating services in the country, like Norweigan Air and South America’s JetSMART. But it’s also looking at domestic airlines too.

According to Reuters, Brazil is making changes to allow foreign investors to set up domestic airlines. Unlike international airlines that aren’t subject to fuel taxes, domestic airlines are. It’s one of the reasons why operating domestic airlines within Brazil are not that profitable.

But that’s set to change too. Brazil is now encouraging many of its states to change. It wants lower fuel taxes to create a more attractive market. However, it’s not going to completely get rid of them.

That should cut the slack for some airlines, but will it be enough to encourage low-cost airlines to invest in the region?

Overcrowding in Brazil’s big cities

However, despite all these changes, there is one large problem which the Brazilian government has yet to resolve. If that’s even possible. That problem is slots at one of its major cities. Reuters reports that there are no free landing spots available at Congonhas Airport in Sao Paulo. There are three domestic airlines in Brazil which dominate all the slots in the airport. These include MAP and Passaredo. It means that new airlines wishing to set up in Brazil will need to go elsewhere.

Passaredo is one of the airlines occupying space as Congonhas Airport. Photo: contraexemplo via Wikimedia Commons

But perhaps the recent changes that Freitas announced this week are enough to keep airlines interested, even if their chosen airport base is unavailable.

According to AIN Online, Mr Tarciso Freitas said that the government would now be heavily investing in airport infrastructure. It also set a goal for increasing the number of cities that fly to the country and the number of passengers carried.

Do you think Brazil’s offer is attractive enough for low-cost airlines?

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Henrique Abreu Braga

Best improvements we’ve been seeing in the industry for the last 50 years. Until date, there are 5 new low-cost airlines operating in the country this year. More important than scrapping the international flight fee, however, is allowing companies to sell tickets with or without checked baggage, which allows low-cost companies to offer lower fares. This was actually forbidden until last year but the previous government scrapped this obligation. Needless to say that the two companies that control 80% of the Brazilian Market (Gol and LATAM) protested. Also, they were against distributing the slots at Congonhas airport to companies that… Read more »