During the 2014 presidential campaign, which would result in the re-election of Dilma Rousseff, former President Lula participated in his successor’s advertisement extolling what he considered (and still should consider) to be a great achievement of the PT era: Brazilians began to fly more.
Lula, properly advised by his marketers, said that flying “was no longer a privilege of the few and became a right of all”. It is true that many Brazilians flew for the first time in that period. PT surfed in an economy stabilized by the Real Plan, forced banks to pour credit into the market and the consumption boom that would yield millions and millions of votes materialized.
Soon came debt, delinquency rates increased and potential passengers were losing income and employment.
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Adjustments in domestic accounts have resulted in falling demand for flights across Brazil. Take for example the Brasilia Airport, one of the country’s main hubs. Since the terminal was granted to the private sector in 2012, this year’s month of August was the worst in numbers compared to the same periods of previous years: slightly over 1.2 million passengers have passed through the airport, compared to 1.6 million registered in the best August of this period, in 2015.
While the industry’s overall data points to a roller coaster of so many ups and downs, there is a cooling demand for airline tickets. According to the most up-to-date statistics from the Brazilian Association of Airlines (Abear, acronym in Portuguese), the supply of domestic operations performed in the first eight months of 2019 was 2.21% lower than in the same time span last year. Since April, the offer of flights has been falling month by month. Reducing the number of flights has been one of the airlines’ strategies in seeking to adapt to market swings.
A number of factors, besides the insistently stagnant economy, explains the current moment of domestic aviation in Brazil. Specifically, it is related to the end of Avianca’s operations, starting in April, and the consequent resettlement of the sector due to the departure of an important player. The new rising of the Dollar against the Real is still weighing, as aviation costs are strongly impacted by the US currency.
Given this scenario and with the market still quite concentrated, airfares, of course, have skyrocketed in recent years. According to the IPCA, Brazil’s official inflation index, the average ticket value increased 16.92% last year, and they had already risen, on average, by 3.10% the previous year.
Although prices are being curbed throughout this year, the figures are not comparable to recent periods, when round-trip tickets between cities such as Brasilia and Sao Paulo or Rio de Janeiro were offered, during rare promotions, for less than $ 200.
The approval by the Brazilian Parliament last May of a measure that allows the share capital of Brazilian-based airlines to be foreign can and should force a drop in prices. But if, in fact, truly low-cost companies land in Brazil, as the government has been claiming. For now, there is nothing confirmed involving domestic flights.
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Business owner Carlos Vieira, who chaired the Brazilian Association of Travel Agencies in Brazil’s Federal District (Abav-DF), told this column that he notices a significant decrease in travel frequency in Brazil. “We feel some slight improvement, but no one will travel to celebrate unemployment,” he said.
Currently, according to the Brazilian Institute of Geography and Statistics (IBGE), there are 12.8 million unemployed in the country.
Traveling is part of the Brazilian menu; it is the number 1 item on the leisure agenda. But it is also the first thing to be cut when the financial situation tightens.Carlos Vieira, who chaired the Brazilian Association of Travel Agencies in Brazil’s Federal District (Abav-DF).
Ticket prices, according to Vieira, have made it difficult for the market to react, especially given the new extra costs for passengers with baggage handling and seat scheduling. “With current fare levels, it’s complicated. Who used to travel four or five times a year now is making one or two trips at most. Price remains a determining factor for sales volume”, he said.
The next 12 months will most likely be decisive for aviation in Brazil. One thing is already clear: celebrating full airports politically does not create a solid and sustainable growing market. The chicken flight has not yet become a cruise flight.
Translated by Jennifer Ann Koppe