Brazil Airlines’ International Expansion

By Ben Tavener, Senior Contributing Reporter

RIO DE JANEIRO, BRAZIL – A number of announcements by Brazilian airlines in past weeks have shown the industry is set for yet more expansion plans in terms of international flights, with more Brazilians visited the U.S. and Europe than ever before. TAM and GOL, Brazil’s two biggest airlines, have both revealed their intention for more international services after submitting the plans to the National Civil Aviation Agency, ANAC.

Last week, TAM was given the green light for twenty new international frequencies from Brazil: fifteen extra a week to the U.S., three to Germany, and two to France.

The airline – Latin America’s biggest – must now finalize the flights with the authorities. However, the company is not commenting on the new services as its merger deal with Chile’s LAN Airlines has not yet been completed.

The news comes after GOL president Constantino de Oliveira Junior announced in March that the popular low-cost Brazilian airline was planning to start flights to Miami in the second half of 2012.

Ahead of this move, GOL more recently also announced it will operate a new weekend flight to Miami from São Paulo exclusively for customers of its frequent- flyer program “Smiles” – with flights offered for 40,000 air miles starting on July 7th.

“The new operation is an excellent opportunity for Brazilians wanting to travel to the U.S. using air miles in high season,” said Smiles director Flávio Vargas, adding that the move reinforces the company’s commitment to customers and international tourism.

The move to re-enter the American market was likely prompted by the 3.9 percent stake U.S. airline Delta bought in the company last year. But it is not only South American airlines that are planning to capitalize on the growing Latin American air and tourism industries.

American Airlines (AA) is filing for an extra seventeen weekly frequencies between the U.S. and Brazil to start later this year, to add capacity to its New York (JFK) – São Paulo service, and also develop routes between Rio, Recife and Salvador and Miami.

“Brazil is a very important and growing market for American Airlines,” said Virasb Vahidi, AA’s Chief Commercial Officer. “We plan to [give] our customers even more travel options to Brazil.”

Steve Rimmer, partner at financial experts KPMG in Rio de Janeiro, believes “Brazil has certainly arrived on the radar screen of many overseas companies, across all sectors,” as far as Brazil’s airline industry is concerned and that “interest in investing in or trading with Brazil continues to be strong, with interest (and executives) coming from North America, Europe and Asia.”

With ever more passengers heading for Brazil, the government is more aware than ever of the need for improvements to the country’s airport infrastructure and officials are said to be drawing up contingency plans to deal with the influx expected during the upcoming Rio +20 summit – and also for the World Cup in 2014 and the Olympics in 2016.

An announcement is also expected soon over the government’s plans to privatize Galeão (Rio) and Confins (Belo Horizonte) international airports, with priority being given to choosing a bidder who is believed will best manage the increase in passengers. This follows the auctioning of Guarulhos (São Paulo), Brasília and Viracopos (Campinas) airports.

The expansion plans are good for Brazilian business and if, as industry experts have hinted, the LATAM merger between Brazil’s TAM and Chile’s LAN – including LAN’s operations in countries such as Peru and Ecuador – is finally approved in June this year, it will create Latin America’s biggest airline group, one of the biggest global carriers.

LATAM has been valued at US$14.5 billion, and would represent six percent of all global traffic, flying to 115 destinations in 23 countries with a 40,000-strong workforce, although the companies are expected to maintain separate brands, at least initially.