Regulatory changes attracted at least seven low-cost airlines to Brazil

The weight of aviation kerosene taxes and the bureaucracy needed to authorize the operations of foreign companies in the country, however, remain obstacles for the sector

Entry of low-cost airlines promises to reshape the sector in Brazil
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According to the Valor Econômico newspaper, there are at least seven low-cost foreign airlines operating or interested in operating in Brazil. Two recent regulatory changes have helped draw the attention of these companies to the country. 

The first was the passing of a provisory measure in Brazil’s Congress, which became law this year, that eliminated the 20% limit for foreign capital on airlines in the country. The second was the publication of Resolution 400 of the National Civil Aviation Agency (ANAC), in March 2017, which ended the free baggage allowance of up to 23 kilos–a rule that, although valid, is still under discussion in Congress.

Chilean Sky Airline was the first low-cost foreigner to request authorization from Anac to fly in Brazil. After that, four other companies followed suit: Norwegian, Flybondi, Virgin Atlantic and JetSmart. In addition to these companies, according to Valor Econômico, two others have officially announced their willingness to come to Brazil: Air China and Gulf Air.

As LABS showed in September, the entry of these airlines could increase competition and give Latin American consumers more options when it comes to international flights. In the domestic market, however, the issue is more complex. The weight of aviation kerosene taxes and bureaucracy in the authorization of operations by foreign companies in the country is still high and hampers a broadening of the sector.

Eduardo Sanovicz, president of the Brazilian Association of Airlines (Abear), which represents the companies Gol, Latam, Latam Cargo, Avianca Brazil, Boeing, MAP, Passaredo and Twoflex, told Valor that he has been negotiating with the states for  the reduction of ICMS tax rates on aviation fuel, as a way to lower costs in the industry.

Currently, the rates charged on aviation fuel in the different states range from 3% to 25%. “The cost of fuel in Brazil is up to 40% more expensive than in the United States due to taxation,” Sanovicz told Valor.

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