Following Brazil’s lower chamber approval, the Senate has passed legislation which will allow foreign-controlled airlines to operate domestic flights within the country, which is Latin America’s largest sir-travel market. However, as Congress has added a codicil whereby airlines are now banned from charging passengers for their first checked bag, this now means that President Jair Bolsonaro’s signature will be required before the legislation becomes law.
The checked-bag restriction has not been welcomed by airlines or the Latin American and Caribbean Air Transport Association transport group as this may restrict opportunities for low-cost airlines and may ultimately see higher fares being charged.
According to Reuters, Brazil’s air travel regulator ANAC has already granted its first preliminary permit to a foreign airline, Spain’s Air Europa, to explore setting up a domestic subsidiary. The carrier’s interest was announced last Saturday by Brazil’s infrastructure minister.
Previously, any stake by a foreign owner in a Brazilian airline had been capped at 20%. This new legislation will now see that ceiling totally removed. Certainly there will now be a shake-up of the previously dominated domestic market where the top-three Brazilian carriers, Gol Linhas Aereas Inteligentes, LATAM Airlines Group and Azul SA, hold a 92% share and all of which have minority investments from foreign carriers: Delta Air Lines Inc owns 9.4% of Gol, the leader in domestic flights in Brazil and United Airlines owns 8% of third-place Azul. Qatar Airways owns 10% of LATAM, Brazil’s No. 2 domestic airline.
Currently, Brazil’s fourth largest carrier, Avianca Brasil, is going through a bankruptcy reorganization, whereby it is now selling off its most profitable domestic routes. This could be extremely beneficial to any foreign investor looking to get a head start in the domestic Brazilian market.
