Air Service Development in Brazil as it prepares to host the Olympic Games and more.

With the FIFA World Cup and the Olympic Games just around the corner, Brazil is embarking on three years of excitement. This is one of the most important eras in the country’s history, which should see it establishing itself as a major power on the global economic stage. In terms of aviation, the good times have already begun.

With record levels of air seat capacity, more Brazilians than ever before are opting to take to the skies instead of travelling the long and winding roads of the vast South American country. The growth in air passenger numbers, along with the emergence of a more competitive yet streamlined airline industry, as well as a lucrative airport concession programme, is propelling the modernisation of Brazil’s aviation industry. 

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The airport concession scheme has seen state airport administrators Infraero take a minority stake in some of the country’s principal gateways, opening these up to private investment for up to 30 years. Airports including Natal, Brasilia, São Paulo’s Guarulhos and Viracopos-Campinas have already been snapped up by concessionaires. Meanwhile, Rio de Janeiro’s Galeao and Belo Horizonte’s Confins will be in the hands of new concessionaires within the next 12 to 18 months as the opening of the formal bidding process on these two airports approaches.

Some commentators have pointed out that the Brazilian government has done rather well out of its concessionary operator deals, with the auctions for the first wave of airport concessions generating well over 300% above the initial asking prices. Questions have been asked about whether the winners of the concessions will ever really see a substantial return on their investments over the 30-year term. Despite these question marks, Brazil will benefit from private sector involvement in its aviation industry, which will help to fast-track the transformation of its major airports at a time when the world’s eyes are watching the country’s every move.

At the end of the last decade, Brazil experienced staggering economic growth, mainly due to a surge in the mining industry and demand from booming Asian markets. This growth propelled Brazil into the top seven of the economic global ‘league table’ and created a new middle class of over 25 million people, who sparked a rise in demand for air travel. 

Low-cost carrier Azul was one airline born during this period of incredible growth and the carrier has since played a key role in the transformation of the country’s aviation industry. Azul has also found itself, along with the rest of the Brazilian aviation industry, the focus of investors from all over the world. 

In 2008, the Brazilian airline industry was dominated by TAM and GOL, which between them offered 85% of the entire seat capacity of domestic commercial air travel in Brazil. 

Many other airlines existed, such as Air Minas, TAF and Total, but none of these were any real threat to the GOL-TAM monopoly. 

By 2013, the landscape had changed dramatically. Indeed, seat capacity has grown by over 60% and there are now just five airlines in the market. Of these five carriers, four dominate, between them providing 97% of domestic seat capacity share.

Azul, which was established by former JetBlue founder David Neeleman, has adopted a unique approach by creating a base at the alternative São Paulo airport, São Paulo Campinas Viracopos International. Here the airline has succeeded in not only attracting leisure travellers from the city of São Paulo and the interior state of the same name, but has also managed to entice many corporate travellers, thanks to the airline’s attractive fare structure, reliability, service offering, high frequencies to key regional markets and an onboard product that includes live TV. This, together with its efficient EMB-190 and 195 aircraft, has seen Azul’s presence in the market grow considerably, particularly following its merger with former competitor TRIP Linhas Aereas.

While Azul is riding high on its success of recent years, its home base VCP airport is now in the hands of a new team that has ambitious plans that could change the entire airport landscape for the low-cost carrier. The development plans could also impact the gateway’s position as one of the leading Latin American airports for air cargo. In late 2012, a consortium called Aeroportos Brasil Viracopos (ABV), made up of UTC Participações SA, TPI – Triunfo Participações e Investimentos SA and Egis Airport Operation, won the bid for a 30-year concession of Viracopos-Campinas.

A brand new passenger terminal is currently being built at the airport, which has a master plan that includes a projection of more than 80 million passengers per year by 2042, with a four-runway operation. This would position it as the largest airport in Latin America for both international passengers and cargo – a major transformation for the gateway airport. Currently, from a passenger perspective, the airport is dominated by LCC Azul, with just one international service provided by TAP from Lisbon, three times a week (increasing to weekly, once the new terminal is complete).

This article was originally written by David Appleby, Director LATAM & Caribbean, Routes published in October on Routes News

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