Brazil moved one step closer to allowing foreign-controlled airlines to operate domestically in Brazil. The loosening of rules may be a boon to both airlines and consumers.
Current law places a 20% limit on foreign ownership of a Brazilian airline. The proposed law would scrap that ban. Immediately, foreign airlines (or any outside investor) could increase their stakes in Brazilian airlines. The law would also loosen rules that restrict domestic flights to Brazilian flag carriers. That could quickly lead to “foreign” airlines serving domestic routes, subject to slot restrictions and operating licenses. These are known as 9th Freedom routes.
Avianca Brasil was not the catalyst for this change in law, but provides an excellent case study for why lawmakers and former Brazilian President Michel Temer saw the need for this change. Operating in bankruptcy, Avianca Brasil has had all but six of its aircraft repossessed. Meanwhile, Azul, GOL, and Latam control over 90% of the domestic market.
> Read More: Avianca Brasil Files For Strategic Bankruptcy
Who Might Invest?
Gol is currently the largest domestic carrier in Brazil. Delta owns a 9.4% stake in the company that it could now up if this bill is signed into law. United Airlines own 8% of Azul and Qatar Airways owns 10% of LATAM.
Under the right circumstances, all three carriers—or a host of others wanting to add tag flights to their intercontinental service—might start operating in Brazil. You might recall that United used to operate a flight from Sao Paulo (GRU) to Rio de Janeiro (GIG), though it did not have the right to sell tickets exclusively between GRU and GIG.
Spanish carrier Air Europa may be the first carrier to invest. According to Reuters:
Spanish airline company Globalia, best known for its Air Europa brand, is “exploring” operating in Brazil, according to the agenda of a meeting to be held by ANAC [Brazil’s civil aviation regulator] on Wednesday. On Saturday, Brazil’s infrastructure minister said the company would create a subsidiary in Brazil.
It’s an exciting time for aviation in Brazil. I hope to see more foreign carriers operating within the borders of Brazil, creating more competition and better pricing for consumers. It would be nice to see the same thing in the USA!