“Open Skies” lead to an increase of flights between Brazil and US
The transportation of passengers and cargo between Brazil and the United States is set to rise by an average of 6.5% per year as of 2015, when the last stage of the “open skies” agreement between the two countries moves into effect. The expectation is that of the Director of the Federal Aviation Administration (FAA), Michael Huerta, the leading executive of the US version of Brazil’s National Civil Aviation Agency (ANAC).
The “Open Skies” agreement has been implemented in five stages with a view to expanding frequency and route options, increasing connectivity and encouraging bilateral trade.
The first stage started in October 2011, when ANAC authorized 14 more flights to be operated by Brazilian airlines to US airports. In return, US companies were granted more flights linking the US to Brazil.
Another three stages were implemented in 2012, 2013 and this year, always based in reciprocity. . In 2015, new routes and an increase in the frequency of flights may well be established regardless of the distribution quotas. Negotiations will take place between the interested airline company and the airport operator, depending upon the availability of slots.
According to ANAC data, Delta, United and American Airlines operate 187 weekly flights between Brazil and the US.. This is almost double the current number of flights being offered by Brazilian companies to US airports.
The expansion of 6.5% per year planned by the FAA to meet the demand for connections between Brazil and the US is greater than the 2.2% per year that the organization expects to see in the growth of the domestic US market. As a result, Brazilian executives believe that the US airline companies will start to be more aggressive once the Open Skies agreement is in effect.
Eduardo Sanovicz, President of the Brazilian Association of Domestic Airline Companies (Abear), has said that Brazilian companies need to have the same conditions as their US counterparts in order to compete. His observation stems from the Brazilian tax system which results in fuel costs representing 40% of the total costs for Brazilian airline companies, whilst for those based in the US it is 29%.
US airline companies transport almost 900 million passengers per year and have an operating revenue of US$200 billion in 2013. The four Brazilian companies operating flights to the US – TAM, Gol, Azul and Avianca – transport 100 million passengers per year and bill less than US$ 12 billion.
ANAC has recently authorized 15 additional weekly flights between Brazil and the US, 14 to TAM and one to GOL.
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