Brazilian authorities are optimistic about low-cost carriers' prospects in South America's most populous country as regulatory changes and lower taxes have an impact on air travel in what is currently one of the most underserved nations in terms of aviation connectivity.
By the end of 2019, Brazil expects to count 120 million air passengers, with that number rising to 200 million by 2025, Brazilian secretary of aviation infrastructure Ronei Glanzmann says at the ALTA Airline Leaders Forum in the country's capital Brasilia. Currently, about 120 Brazilian cities are being served, with a target of 140 by the end of this year and 200 cities by 2025, he says.
Glanzmann adds that the Brazilian government's priorities include attracting more low-cost and ultra-low-cost airlines to the country, with a particular focus on domestic discounters. Such airlines can help advance what he sees as "a revolution in terms of air travel demand".
"There is a lot of room for growth in the Brazilian market," Glanzmann says. "Brazil is practically a continent in itself, and we need to get to all corners of the country."
Per-capita flights in Brazil are still only about one-fifth of that in Europe or the USA.
Low-cost carrier arrivals in Brazil by airlines from Argentina, Chile and the UK have already brought down fares by an average of 23%, says Eduardo Sanovicz, president of the Brazilian airline association ABEAR.
But the costs of operating in Brazil make success anything but certain for a new ULCC operating within the country, he adds.
Although 17 of Brazil’s 27 states recently slashed aviation fuel taxes, fuel expenses still account for roughly one-third of Brazilian airlines' operating expenses. By comparison, fuel expenses, on average, account for 20-22% of the operating costs of airlines globally, he states.
"A company [that starts] flying in Brazil will pay the same costs we have," Sanovicz says. "They have to hire crews, pay taxes, they face the same regulations and will have similar fuel expenses.
"It is possible that in the near future we will have an ULCC in Brazil. But what will be the ultimate outcome? That is the question," he adds.
Additional reporting by Jon Hemmerdinger
