Airfare Regulations Relaxed

By Marcela Canavarro, Contributing Reporter

RIO DE JANEIRO – Brazil’s national airlines were once renowned for charging prohibitively high prices for the average person’s budget but have been dropping slowly in recent years. Thankfully, that trend looks set to continue under new regulations planned for the industry.

The introduction of the “low cost, low fare” concept by Gol helped to change the Brazilian air travel sector dramatically, bringing in hitherto unseen competition and driving down prices. This coupled with a removal of the old protectionist policy of the Brazilian government designed to help the national carriers like Varig in the face of overseas competition, meaning that the old ‘minimum charge’ for tickets is being slowly phased out.

Doctor José do Nascimento was born in Recife, Pernambuco State capital in the Northeast of Brazil, and moved to Rio 30 years ago. A flight from Rio to Recife takes nearly 3 hours.

“We used to finance our tickets to pay them off over six months to visit my family 8 years ago. I remember we had to pay R$800 for one-way ticket to Recife in the high season. I just bought a ticket to fly next November and paid R$159” said Nascimento who will be able to travel with his wife and sons to a niece’s wedding in Recife for a fraction of the price a few years ago.

This has also been put into effect in the international flights market where the ‘lowest price’ permitted has been slashed by 20% by the aviation authority as of April this year, and is set to drop by 50% in June and finally 80% in October. The ultimate goal is to wipe out the old law altogether, opening up an entirely free market on flights to the rest of the world by 2010.

According to the old system, a round-trip ticket from Brazil to the US had to cost at least US$708. The price can drop now to US$566 after a 20% discount. Consumers who used to pay at least US$869 to fly to Paris can now find tickets for US$695, the lowest tariff allowed since April.

“The effective price reduction depends on competition and will naturally be stronger where it is greater. We think destinations such as the United States and some parts of Europe will decrease prices in the short-term” Marcelo Guaranys of the aviation authority told Agência Brasil. The same movement also decreased prices for flights to the rest of South America last year.

The Government is also planning to switch some airports’ administration to the private sector, in the hope of streamlining the business and attracting higher profile clients, again benefitting the entire infrastructure of the aviation industry. The first airports under private concession would be Galeão (Rio de Janeiro) and Viracopos (Campinas, in state of Sao Paulo).

As prices for airline tickets have decreased in Brazil the aerial sector has seen new players taking more  important roles. Three of the most important national airlines in the 80’s are no longer: TransBrasil and Vasp went bust and Varig has been operating a heavily reduced schedule after financial troubles since the 90s.

TAM started to operate nationally in 1996, and Gol introduced the “low cost, low fare” model in Brazil 8 years ago. Recently, WebJet opened routes to 10 state capitals and Oceanair and the American company JetBlue (operating by the name of “Azul” in Brazil) are both assuming greater market shares in one of the biggest shake ups in the industry since its beginnings.