Easter is a popular time for Brazilians to get out of the city, seek some relaxation further afield, or fly home to spend time with family. As such, it’s a busy time for the country’s airports and a profitable period for its airlines. This year, however, one carrier will be unable to take full advantage of the Easter rush. Avianca Brazil has been forced to cancel a total of 314 scheduled flights over the Easter holiday, with the company giving up a large chunk of its fleet due to a process of court-supervised reorganization, and more reductions are in sight.

</span></p> <p><span style="font-weight: 400;">Avianca Brazil is a subsidiary of the Synergy Group, the controlling shareholder of the original Avianca airline in Colombia and owner of a total of eight carriers across Latin America. </span></p> <p><span style="font-weight: 400;">Established in 2002 as OceanAir, Avianca Brazil has been operating under its current name since 2010. Currently, it is the fourth-largest player in Brazil&#8217;s air transport market, responsible for 12.2 percent of the domestic market share as of February this year, and 6 percent of international flights. Full market share statistics are available for download at </span><a href="http://www.anac.gov.br/assuntos/dados-e-estatisticas/mercado-do-transporte-aereo/demanda-e-oferta/fevereiro.zip"><span style="font-weight: 400;">this link</span></a><span style="font-weight: 400;">.</span></p> <h3>Avianca Brazil calls mayday</h3> <p><span style="font-weight: 400;">Avianca Brazil&#8217;s troubles began in 2018, as it felt the effects of </span><a href="https://brazilian.report/money/2019/01/18/weaker-currency-tourism-airlines/"><span style="font-weight: 400;">volatile kerosene prices</span></a><span style="font-weight: 400;"> which hit unprecedented highs in August of that year. By December, the company&#8217;s financial situation was so crippled that it was forced to file for court-supervised reorganization, a process which is one step away from bankruptcy. At the time, Avianca Brazil submitted a list of creditors which totaled debts of almost BRL 500 million.</span></p> <p><span style="font-weight: 400;">Since its plea for rescue, the carrier has been forced to hand back almost half of its 43-strong fleet it boasted at the time of filing for reorganization. Avianca Brazil currently has 24 planes, and the National Civil Aviation Agency (Anac) announced on Thursday that a further 18 aircraft would be given back on Monday, leaving a fleet of only six planes and causing severe doubts about the company&#8217;s chances of survival.</span></p> <p><span style="font-weight: 400;">Avianca Brazil is also frantically selling off assets, such as slots at some of the country&#8217;s busiest airports, which serve as licenses for airlines to take off and land. The divestment plan involves splitting the carrier up into seven &#8220;isolated productive units,&#8221; which will be smaller companies that hold slots at São Paulo&#8217;s Congonhas and Guarulhos airports, as well as Galeão International Airport in Rio de Janeiro. The auction of these units is scheduled for May 7.</span></p> <h3>A concentrated market</h3> <p><span style="font-weight: 400;">The outcome of Avianca&#8217;s auction—if the company survives until then—will have huge repercussions on Brazil&#8217;s air transport market. Azul Airlines announced this week that it would not take part in the auction, </span><a href="https://oglobo.globo.com/economia/azul-desiste-de-oferta-pela-avianca-brasil-acusa-rivais-de-protecionismo-23609238"><span style="font-weight: 400;">alleging</span></a><span style="font-weight: 400;"> that market leaders Gol and Latam are engaging in anticompetitive practices to extend their grip on the sector further.</span></p> <p><span style="font-weight: 400;">Before Avianca Brazil filed for court-supervised reorganization, the country&#8217;s passenger flight market was dominated by Gol and Latam, with Azul and Avianca serving as competitive outsiders, able to attract leisure tourists shopping around for favorable fares, but struggling to break into the field of business tourism.</span></p> <p><span style="font-weight: 400;">Azul had proposed the creation of one NewCo which would include all of Avianca&#8217;s slots in São Paulo and Rio de Janeiro airports, offering to purchase it for USD 105 million and giving the company a chance to compete with the market leaders. The airline claims, however, that creditors&#8217; decision to split Avianca into seven smaller units will only serve to increase the dominance of Gol and Latam, which have pledged to bid USD 70 million each for units A and B, which comprise several slots between Rio de Janeiro and São Paulo.</span></p> <p><span style="font-weight: 400;">The remaining units, which would then be left for Azul, do contain licenses for flights on the much coveted São Paulo-Rio route, but mainly at a frequency of only two or three times per week. Unsatisfied with the prospect of being left further behind Gol and Latam, Azul Airlines pulled out of the sale.</span></p> <p><span style="font-weight: 400;">At the time of Avianca Brazil filing for court-supervised reorganization, the International Air Transport Association </span><a href="https://www.infomoney.com.br/negocios/grandes-empresas/noticia/7810651/recuperacao-judicial-da-avianca-brasil-pode-ser-sinal-de-consolidacao-diz-iata"><span style="font-weight: 400;">warned</span></a><span style="font-weight: 400;"> of the risks of the Brazilian market becoming more concentrated as a result. Brazil&#8217;s antitrust agency Cade has also shown its concern with the sale of Avianca assets.</span></p> <p><span style="font-weight: 400;">While Azul complains of a missed opportunity for growth, experts have warned that regardless of whether Avianca Brazil makes it until the May 7 auction, the only loser in this story is the Brazilian consumer.

Read the full story NOW!

MoneyApr 19, 2019

Tags: - -

BY Euan Marshall

Euan Marshall is a Scottish journalist living in São Paulo. He is co-author of A to Zico: An Alphabet of Brazilian Football.