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ly domestic routes. The infrastructure minister promised to do
uble the number of passengers in Brazil’s skies. A monopoly on jet fuel by government-controlled Petrobras (PETR4.SA) is set to end. An $18 fee charged on every international flight ticket was scrapped. But many industry veterans say that the new promises and recent reforms are not enough, and the country remains an unattractive money pit littered with barriers. “It won’t happen under the current conditions, Peter Cerda, vice president for the Americas at industry group IATA, told Reuters. “You can have infrastructure. You can be the largest market in the continent. But if you’re costly, (new airlines) aren’t going to come. Brazil transported 118 million passengers in 2018, 20% more than Mexico, Latin America’s No. 2 market. However, experts say airlines in Brazil struggle with sky high fuel taxes, labor costs and legal liabilities - as well as lac不如抛五买四八打一生肖 k of access to the coveted Congonhas airport in Sao Paulo, where the landing slots are fully booked. Brazil’s domestic market is controlled by just three airlines who domin
ate Congonhas’ schedule, meaning a new competitor would have to find its footing elsewhere, a hard pill to swallow. Those already operating in the country are not particularly profitable. Brazilian carriers lost 10.5 billion reais ($2.62 billion) in the last five years, according to L.E.K, a consulting firm, while local executives do not strike an encouraging tone. Brazil has historically housed two or three domestic carriers but recently had four, until Avianca Brasil folded in May. Eleven airlines - including former flag carrier Varig - have failed in Brazil so far this century. “So, is it the case that only incompetent people are in charge in our industry?, asked sarcastically Paulo Kakinoff, chief executive of Gol Linhas Aereas Inteligentes (GOLL4.SA), describing the failure rate as “terrifying. Gol, Brazil’s largest domestic airline, has lost 9 billion reais since 2008. The market’s No. 2 carrier, LATAM Airlines Group (LTM.SN), lost 440 million reais in Brazil in 2018. To be sure, Brazil has made significant free-market reforms aimed at lowering costs. It has cleared the way for foreigners to establish domestic airlines in Brazil, although only one airline group has publicly expressed interest: Spain’s Globalia. Brazil is also privatizing many airports and most of its states have lowered their jet fuel taxes. “Welcome to the land of freedom, welcome to Brazil, said Jose Ricardo Botelho, the director of the airlines regulator, on Sunday at a conference held by a regional industry group. LOW COSTS
WELCOME Brazil has set its sights on attracting so-called ultra low cost airlines, which can disrupt the market. The country’s Civil Aviation Secretary, Ronei Glanzmann, told Reuters this week that he has been courting Norwegian Air Shuttle (NWC.OL), Indigo Partners’ JetSMART, Mexico’s Volaris (VOLARA.MX) and Chile’s Sky Airline. He also met with JetBlue Airways Corp (JBLU.O). Glanzmann said he was “very optimistic but acknowledged that so
far no commitments had been made. Brazilian President Jair Bolsonaro said on Twitter on Wednesday that low-cost carriers would arrive “soon... lowering prices on domestic flights. Brazil has already lured some ultra low cost airlines to fly internationally, including Norwegian, Sky Airline and JetSMART. But international routes are exempted from jet fuel taxes, unlike domestic flights, and cheaper operational costs in the destinatio
ns abroad help keep costs below those for serving Brazil exclusively. Fares in Brazil are at historic lows, averaging $100 each way in 2018. Gol averaged $88. But expenses are high, preventing the efficiencies that allow carriers like Ireland’s Ryanair Holdings (RYA.I) to turn a profit. “The difference is that Ryanair can make money at $88 a ticket and Gol cannot, said Carlos Ozores, from consulting firm ICF. Gol does not think fares can fall much more. “I don’t think that sustainably a competitor could produce much lower costs than ours, Kakinoff said on a conference call with investors on Thursday. In 2018, airlines in Latin America lost $1.70 for each passenger they transported, according to L.E.K, making it the worst
rline region in the world. Compare that with the most profitable region: North America, at $14.70 per passenger. Slideshow (2 Images)Losing $5.20 per passenger, the worst performing market of all those surveyed was Brazil. This year, ALTA forecasts that airlines in Latin America on average will make $0.50 per passenger. “Our profits won’t even pay for the coffee that we serve on board, even if we serve it without milk, said Pedro Heilbron, chief executive of Panama’s Copa Airlines (CPA.N).