Senate Authorizes Foreign Airlines to Operate Domestic Flights in Brazil

By Newsfeed/Reuters

RIO DE JANEIRO, BRAZIL – Brazil’s Senate on Wednesday passed legislation allowing foreign-controlled airlines to operate domestic flights, opening up Latin America’s largest air travel market after years of debate.

The measure passed in Brazil’s Senate on Wednesday following approval by the lower chamber on Tuesday.

Congress included a provision barring airlines from charging passengers for their first checked bag; however, the airline industry is asking President Bolsonaro to veto that clause before the bill becomes law.

The new rules could soon boost competition in Brazil’s increasingly concentrated airline market.

Lifting restrictions on foreign airline ownership in Brazil had been on the agenda for years before former President Michel Temer signed a Provisional Measure in December, which would have expired if it had not obtained congressional approval.

Foreign ownership was previously capped at 20 percent, but once signed into law by Bolsonaro it will be lifted to100 percent.

That may shake up Brazil’s air travel market, which is dominated by three airlines controlling 92 percent of domestic flights, according to National Civil Aviation Agency ANAC.

Foreign airlines will now be able to start domestic operations in Brazil and global players will be able to increase their stakes in local carriers.

Brazil’s three largest airlines – Gol Linhas Aereas Inteligentes, LATAM Airlines Group, and Azul SA – have already received minority investments from foreign carriers.

Currently, Delta Air Lines Inc. owns 9.4 percent of Gol, the leader in domestic flights in Brazil, and United Airlines owns 8 percent of third-place Azul. Qatar Airways owns 10 percent of LATAM, Brazil’s number 2 domestic airline.

Earlier on Wednesday, ANAC granted its first preliminary permit to a foreign airline to set up a domestic subsidiary, which went to Spain’s Air Europa.

The carrier’s interest had been announced on Saturday by Brazil’s Infrastructure Minister. It is the first investor to request a license to set up a 100 percent foreign-owned airline operating domestic flights within Brazil.

The company still needs to obtain an ANAC operator certificate before it can start flying.