Historically a heavily concentrated environment, the Brazilian aviation market has suffered a setback this year with the crisis of Avianca, which is currently in administration. Only three major airlines are left in Brazil: Latam, Gol, and Azul. The former two control alone 75 percent of the market.

In recent years, the Brazilian

government has taken steps to try and <a href="https://brazilian.report/newsletters/daily-briefing/2019/04/05/the-future-of-avianca-airlines-in-brazil/">attract new airlines and increase competition</a> in the sector. Of these measures, specialists believe the most important is the permission for companies to charge fees for checked luggage.</p> <p>Until 2017, airlines were obliged to transport one piece of luggage weighing up to 23 kilograms without charging any baggage fees. That year, the National Civil Aviation Agency (<a href="https://www1.folha.uol.com.br/mercado/2019/09/anac-ganha-poder-de-vetar-plano-de-recuperacao-judicial-de-concessionaria-de-viracopos.shtml">Anac</a>)—the regulatory agency linked to the Infrastructure Ministry—reduced this free allowance to a 10 kilos piece of hand luggage. For bags heavier than the cut-off point, the luggage must be checked and airlines may charge for the service.</p> <div class="flourish-embed" data-src="visualisation/459248"></div><script src="https://public.flourish.studio/resources/embed.js"></script> <h2>No savings</h2> <p>The measure has always been heavily criticized by Brazilians, who have never felt the change reflected in the price of airfares. According to the Brazilian Institute of Geography and Statistics (IBGE), the average price of plane tickets in Brazil rose 3.09 percent in 2017, 16.92 percent in 2018, and 40.9 percent between January and August of this year.  This year&#8217;s increases have largely been caused by the drop in flights after the Avianca crisis.</p> <p>In other words, Brazilian passengers are paying more to fly, and must pay extra if they want to take over 10 kilos of luggage.</p> <p>The discontent of Brazilian passengers has reached Congress, which recently authorized foreign groups to control airlines in the country, another measure seen as fundamental to allow more competition in the sector.</p> <p>Alongside this authorization, however, members of Congress re-established the rule in force before 2017 and ensured Brazilian passengers the right to travel with luggage up to 23 kilos without paying, for domestic flights.</p> <p>President Jair Bolsonaro, who signaled that he would uphold Congress&#8217; decision, ended up being convinced to veto the change. However, Mr. Bolsonaro&#8217;s veto still needs to be analyzed by Congress—and they could suspend it.</p> <p>The Brazilian Airline Association (Abear) criticized Congress&#8217; decision and stated it &#8220;removes consumers&#8217; alternative to choose more accessible fares&#8221; and &#8220;once again excludes Brazil from international practices.”</p> <h2>Step backward</h2> <p>According to the Brazilian government, the return of the restriction on baggage fees could make efforts to open the market up to new companies useless. After baggage fees were announced, four new airlines announced international flights in Brazil: Chilean firms JetSmart and Sky Airlines, Norwegian Airlines, and Argentinian airline Flybondi.</p> <p>Furthermore, Spanish group Globalia has announced plans to offer domestic flights in Brazil, being the first country controlled by foreign capital to receive this authorization. JetSmart has also shown an interest in operating flights within the country.</p> <p>One government official told <strong>The Brazilian Report </strong>that there is a fear of Congress suspending Jair Bolsonaro&#8217;s veto and upholding the prohibition of luggage fees.</p> <p>According to the official, suspending the veto could cause Globalia and JetSmart to rethink their strategy of investing in Brazil, and the country would take &#8220;a step backward&#8221; in the process of opening up the aviation sector.</p> <p>It is as of yet unclear when Congress will analyze Mr. Bolsonaro&#8217;s veto.

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PowerSep 19, 2019

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