Brazil loses cheaper flights to Europe – 01/20/2024 – Market

Even with the arrival of new “low cost” airlines in recent years, Brazil has seen this segment, which promises tickets at cheaper prices than tickets offered by traditional airlines, lose routes to Europe and concentrate even more on Latin America .

According to Anac (National Civil Aviation Agency), only five airlines operate flights considered “low cost” in the country — all are brands of international origin.

Air Europa is the only one in this segment that offers routes to the European continent. There are two routes that connect Guarulhos and Salvador to Adolfo Suárez international airport, in Madrid.

The other four companies are Arajet, recently arrived in the Brazilian market, Flybondi, JetSmart and Sky Airline. Together, they operate flights to Argentina, Chile, Uruguay, Peru and the Dominican Republic.

Later this year, Anac plans to begin operating four Sky Airline routes: Confins (Minas Gerais) to Santiago, Brasília to Santiago, Rio de Janeiro to Lima and Rio de Janeiro to Montevideo.

During the pandemic, this segment suffered some losses. One of them was the interruption of the operations of the German Condor in the country. According to Anac records, the company’s operations in the country began at the end of March 2018 and lasted until November of the following year.

The routes operated by Condor, also considered “low cost” by the municipality, connected the Recife and Fortaleza terminals to airports in Germany, in Frankfurt and Munich.

Condor’s departure reflects the current scenario in the Brazilian Northeast. The main airports in this region (Fortaleza, Recife and Salvador) still have a low number of international routes after the blow suffered by the pandemic, and the recovery is slower than in the terminals in the center-south of the country.

Norwegian was another low-cost airline that decided to leave Brazil. According to Anac, the Norwegian company stopped traveling between Galeão, in Rio de Janeiro, and Gatwick airport, in London, also during the pandemic.

The movement at the airports in the capital of Rio de Janeiro gained attention from the federal government in recent months, and a plan to rebalance between the flows of Santos Dumont and Galeão was put into practice.

Experts say, however, that the city has been losing tourists due to economic and public safety problems.

For economist Claudio Frischtak, from Inter.B Consultoria, Brazil is currently experiencing a scenario with several factors that make it difficult for low-cost airlines to arrive.

The obstacles, according to him, range from macroeconomic problems, such as high interest rates, to obstacles such as tax complexity and legal uncertainty reported by the sector.

“It’s a perfect storm. For companies that are not ‘low cost’ operating here, it is already a very difficult environment, because of these conditions. There was a pandemic shock, an inflationary outbreak that led to the increase in interest rates. The cost of capital has increased, and companies are very sensitive to this”, he states.

Frischtak says that, in Brazil, the fear of political interference in regulatory agencies also keeps companies from the segment and other investments in infrastructure, in general, away.

Professor at IDP (Brazilian Institute of Education, Development and Research) José Roberto Afonso states that, in addition to the high level of legal compensation charged to companies, the sector has been suffering from the value of aviation kerosene, QAV. According to him, this makes it difficult to optimize costs and, consequently, affects the offer of tickets at lower prices.

From 2023 until October, the price of aviation fuel was R$4.14 per liter.

There is no well-defined consensus on what can characterize an airline as “low cost”, an English term used by the sector for companies that operate at low operating costs and, therefore, offer cheaper tickets.

Although Anac has its list for this segment, the agency states that civil aviation regulations do not provide for such classification, as it is a term created by the market.

In the municipality’s understanding, companies that separate, in sales, the main service — that is, air passenger transport — from accessory services, such as food and baggage check-in, which are charged separately, are considered “low cost”.

Such restrictions allow these companies to reduce the ticket price. Some sector representatives also take into account factors such as the type of fleet when classifying a company as “low cost”.

Dany Oliveira, general director of IATA (International Air Transport Association) in Brazil, states that the Brazilian air market is deficient compared to other countries, due to costs such as fuel and legalization. Therefore, he says, companies of this type are testing the Brazilian market with few flights.

“A ‘low cost’ business needs to have a business model that will work with volume, because its margin is very small. The company tries to minimize its cost as much as possible. This way, it is able to offer this differentiated product, cheaper for passengers .”

The newest company in the segment to begin operating in Brazil, the Dominican Arajet told Sheet that Brazil was the market that had the best performance for the company in the last months of 2023.

The company, which operates the route between Santo Domingo and São Paulo, stated that, by June, the seats available weekly for the route will increase from 560 to 980 seats.

However, when asked about the possibility of creating new routes to other Brazilian cities, the company said that this is a long-term strategic option.

Potential new routes are in the process of being analyzed, according to the company, which prefers to be called a “low-price airline” rather than “low cost”, despite Anac considering it a low-cost company.