Brazil’s Domestic Air Travel May Register R$7.3 Billion Deficit

By Lise Alves, Senior Contributing Reporter

SÃO PAULO, BRAZIL – The devaluation of the Brazilian real currency, the increase in costs and the significant retraction in corporate air travel due to the economic crisis, will lead domestic air travel to register a deficit of over R$7.3 billion in 2015 according to Brazilian Association of Airline Companies (ABEAR). This result would be the worst result in the history of the sector.

“The incentives for consumption are not sufficient to maintain the growth seen at the beginning of the year and this compromises our goals,” says Eduardo Sanovicz, president of ABEAR. “This scenario puts at risk a decade of advancement,” adds Sanovicz noting that during the past ten years domestic air travel has jumped from thirty million to one hundred million passengers per year.

According to the ABEAR official the appreciation of the U.S. dollar by more than 55 percent and the increase in costs by 24 percent has significantly affected the sector’s revenues. Nearly sixty percent of aviation costs are pegged to the U.S. currency, according to ABEAR.

Last week the ABEAR executive along with representatives from Brazil’s four largest national airlines (TAM, Gol, Azul and Avianca) met with Finance Minister Joaquim Levy to ask the Brazilian government to revise its policies on kerosene fuel prices. According to Sanovicz aviation kerosene today is fifty percent higher in Brazil than the average international price.

For next year, if the foreign exchange rate remains above a rate of R$4 to US$1, ABEAR forecasts a deficit of over R$12.2 billion. “If this situation is not faced with maturity, the population will return to using buses (for long-distance travel),” said Sanovicz.