US Carriers vie for São Paulo Route Licences

The leading network carriers in the United States are fighting to secure lucrative new traffic rights to introduce flights to the Brazilian city of São Paulo.  This the first time in more than a decade that the US Department of Transportation (DOT) has had the opportunity to allocate additional frequencies to the key Brazilian destination after the US government successfully negotiated a more liberal air service agreement with Brazil, which is expected to result in the establishment of full Open Skies between the countries by 2015.

American Airlines set the ball rolling with its application to the US DOT late last week.  The carrier, already the largest carrier between the US and Brazil by seat capacity with a 34.7 per cent share in 2012, has requested rights to add a further daily service to São Paulo from Los Angeles in late 2013 and from Chicago in late 2014.  The carrier already serves a wide Brazilian network that also comprises flights from Miami to Belo Horizonte, Brasilia, Manaus, Recife, Rio de Janeiro, Salvador and São Paulo from New York JFK to Rio de Janeiro and from Dallas/Fort Worth to Rio de Janeiro and Sao Paulo.

"American is committed to expanding its presence throughout Brazil to match customer demand in this extremely important and growing market," said Chuck Schubert, vice president – network planning, American Airlines.  "With these additional frequencies, we will offer more options to travel between Brazil and the United States enabling our customers to connect through our growing global network."

“American is committed to expanding its presence throughout Brazil to match customer demand in this extremely important and growing market.  With these additional frequencies, we will offer more options to travel between Brazil and the United States enabling our customers to connect through our growing global network.”

Chuck Schubert
vice president – network planning, American Airlines

American’s partner to be, US Airways, has filed its own application with the US DOT for the rights to operate daily, year-round services between São Paulo and the airline's hubs in Charlotte, N.C., and Philadelphia. The carrier will commence flights between Charlotte and São Paulo on June 8, 2013 using frequencies leased from another carrier and US Airways says a formal award of traffic rights for Charlotte - São Paulo flights will ensure it avoids any service interruption due to the frequency lease terminating prior to the signing of any Open Skies agreement.

US Airways' proposed service between Philadelphia and São Paulo would be the airline's third daily flight to South America and would complement its existing service to São Paulo and Rio de Janeiro from its Charlotte hub.  "Brazil continues to be an important market for US Airways and we are committed to expanding our presence throughout the country," said Doug Parker, chairman and chief executive officer, US Airways.

"The additional frequencies will allow US Airways to continue offering business and leisure travelers an attractive option for travel between our largest hub in Charlotte and South America's most important business destination without interruption to the service.  Additionally, they will give customers throughout the Northeast a complementary, new option for travel to Brazil through our international gateway at Philadelphia," he added.

“Brazil continues to be an important market for US Airways and we are committed to expanding our presence throughout the country.  The additional frequencies will allow US Airways to continue offering business and leisure travelers an attractive option for travel.”

Doug Parker
chairman and chief executive officer, US Airways

According to US Airways, approval of its application will ensure more than 80 cities in the US have easy one-stop access to São Paulo via Charlotte and 75 communities easy one-stop access and 47 more a second, one-stop option to Brazil's largest city via Philadelphia, airports that respectively handle 36 million and 21 million passengers per year.

The engagement of American and US Airways means that fellow US majors Delta Air Lines and United Airlines are under pressure in this market.  Delta says it faces “serious challenges” competing against American on routes between the US and Brazil, a situation, which will only become worse following American’s merger with US Airways.  The carrier has applied for rights for additional daily services to São Paulo from both Atlanta and New York with effect from October 2013 and pleads with the US DOT to award it the 14 flight frequencies to readdress the balance, highlighting that American already has more than 50 per cent of frequencies on routes between the US and Brazil. 

"The new frequencies will help to advance tourism and commercial interests for both Brazil and the U.S. by creating jobs and boosting local economies," said Andrea Fischer Newman, senior vice president - Government Affairs, Delta Air Lines.  "It is crucial that the DOT grants these frequencies to Delta as it helps to level the playing field among airlines servicing Brazil."

The US major currently operates 35 non-stop weekly flights between Brazil and the US including links from Atlanta, Detroit and New York JFK to São Paulo, as well as from Atlanta to Rio de Janeiro and Brasilia.  In 2012 it had a 14.8 per cent share of the total seat capacity between the US and Brazil.

"Delta has a strong commitment to the Latin American market and we want to increase options of travel to and from Sao Paulo, Brazil's largest and most important market for business travelers," said Nicolas Ferri, vice president - Latin America and the Caribbean, Delta Air Lines.  "Our expanded service means more options for customers flying between these key business markets, and new flights to our hub in Atlanta mean greater access to our industry-leading domestic network."

“Delta has a strong commitment to the Latin American market and we want to increase options of travel to and from Sao Paulo, Brazil's largest and most important market for business travelers.  Our expanded service means more options for customers flying between these key business markets, and new flights to our hub in Atlanta mean greater access to our industry-leading domestic network.”

Nicolas Ferri
vice president - Latin America and the Caribbean, Delta Air Lines

In the past couple of years Delta actually influenced its own development and reduced its competitiveness in the market between the US and Brazil.  In 2010 it agreed a slot swap with US Airways which resulted in seven weekly slots at Washington Reagan National Airport being transferred to US Airways to facilitate the launch of a new route to São Paulo.  The subsequent confirmation of American and US Airways planned merger means this deal has put Delta at a further disadvantage.

Delta has now requested approval to continue its current daily non-stop service between its hub in Detroit and São Paulo - its right to operate this flight will transfer to US Airways in 2015 as part of the previously approved slot transaction that allowed Delta to expand at LaGuardia Airport in New York.  The carrier has also requested an additional seven slots to introduce a further weekly link to São Paulo from Detroit from 2014.

In its DOT application Delta says that if its proposal is successful it would look to introduce the additional frequencies between Atlanta and São Paulo from December 2013 utilising a Boeing 767-300ER equipped with 35 Business, 32 Economy Comfort and 143 Economy class seats on the route.  It claims that via its Atlanta hub it can connect São Paulo to more than 150 cities across the US with more than 1,000 peak-day departures.  It also says it can offer more access to 24 destinations in Brazil which represent 99 per cent of domestic demand points – more than any other US airline – thanks to its strategic alliance with local carrier GOL Linhas Aereas.

United Airline has yet to confirm its own intent but is expected to make a formal US DOT application in the coming days.  It currently offers flights between São Paulo and its Newark Liberty International, Houston Intercontinental and Washington Dulles hubs as well as non-stop links to Rio de Janeiro from Houston.

In the table below we highlight which airlines have been the principal players in the market between the US and Brazil since the turn of the Millennium, ranked by total seat availability between January 2000 and December 2012.  We also include each airlines market share during selective years during the period.  The analysis shows what a dominant role American Airlines had in this market with a 32.3 per cent share of the total capacity between the US and Brazil since the start of 2000, that is almost eight million seats.

AVAILABLE SEAT CAPACITY BETWEEN US AND BRAZIL (non-stop weekly flights; 2000 – 2012)

Rank

Airline

Seats (2012)

2012

2011

2009

2006

2003

2000

Total (2000 – 2012)

1

American Airlines (AA)

956,861

34.7 %

33.8 %

33.2 %

34.3 %

31.2 %

24.7 %

32.3 %

2

TAM Airlines (JJ)

835,051

30.3 %

29.9 %

29.1 %

16.8 %

5.1 %

9.1 %

19.1 %

3

United Airlines (UA)

438,261

15.9 %

8.9 %

9.0 %

9.5 %

16.2 %

14.3 %

12.1 %

4

Delta Air Lines (DL)

408,012

14.8 %

14.7 %

14.4 %

14.6 %

6.7 %

4.3 %

12.0 %

5

Varig (RG)

-

-

-

-

9.6 %

22.8 %

21.5 %

9.4 %

6

Continental Airlines (CO)

-

-

8.1 %

8.7 %

9.2 %

9.5 %

11.4 %

8.2 %

7

Japan Airlines (JL)

-

-

-

3.5 %

4.4 %

6.7 %

5.3 %

3.6 %

8

Korean Air (KE)

40,140

1.5 %

1.6 %

1.9 %

-

-

2.2 %

1.1 %

9

US Airways (US)

78,228

2.8 %

3.0 %

0.2 %

-

-

-

0.9 %

10

TransBrasil (TR)

-

-

-

-

-

-

4.3 %

0.6 %


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