July 21, 2019
Latest News

Avianca Brasil's bankruptcy creates challenges for airline industry

 An Avianca Brasil plane lands on March 11, 2019, at the airport in Rio de Janeiro, Brazil. EPA-EFE FILE/MARCELO SAYÃO

An Avianca Brasil plane lands on March 11, 2019, at the airport in Rio de Janeiro, Brazil. EPA-EFE FILE/MARCELO SAYÃO

By Nayara Batschke

Sao Paulo, Jul 8 (efe-epa).- Avianca Brasil's bankruptcy declaration last December has created challenges for Brazil's airline industry, which has some of the highest air traffic levels in the world, leaving just three main carriers, reducing competition and causing airfares to rise.

Avianca Brasil, previously known as OceanAir and a company that is independent from Avianca Holdings S.A., filed for bankruptcy protection after piling up debts totaling more than 1 billion reais ($260 million) and being hit with lawsuits by several creditors.

The company plans to sell some of its assets at auction on Wednesday.

"With the exit of a competitor, in this case Avianca, airfares rise and the three main remaining airlines can impose whatever rules they want," Fundacion Getulio Vargas economic research center professor Ulysses dos Reis told EFE.

During the first five months of 2019, according to National Civil Aviation Agency (ANAC) figures, Gol, Latam and Azul airlines handled more than 90 percent of departures on domestic flights, while Avianca handled 8 percent and other carriers handled less than 2 percent.

At the same time, airfares rose, on average, 14 percent in the wake of Avianca's decision to cancel thousands of flights starting in April, according to a survey conducted by online travel agencies.

The increase in the cost of airfares "is just the tip of the iceberg" because the lack of airline competition hurts the free market and has "a snowball effect across the entire economy of the country," affecting everything from the movement of qualified workers and products to remote markets to investment in infrastructure, Reis said.

Avianca Brasil's exit from the market comes at a time when the Sao Paulo-Rio de Janeiro route, the fourth-busiest airline route in the world, is celebrating its 60th anniversary amid a high degree of market concentration, with only Gol and Latam currently able to operate flights on the popular itinerary.

Brazil is a country with "continental dimensions" that has an "urgent need to integrate, to have knowledge flow from the poles to the periphery. The lack of options for mobility strangles development," Reis said.

Although the government has given foreign companies, such as Air Europa, authorization to enter the domestic market, "things will not change much without more investment and the break-up of the monopolies," the researcher said.

ANAC air services regulation superintendent Ricardo Bisinotto Catanant told EFE that the "abrupt exit" of Avianca Brasil from the market has caused a sudden drop in the supply of airline seats, affecting the prices and services offered by carriers.

Catanant, however, said that the free-market economic policies implemented by President Jair Bolsonaro's administration could "incentivize" and "promote" the entry of new companies into Brazil, "expanding competition" and balancing the market.

"(Spain-based) Air Europa was the first (foreign airline) to ask to enter the country and there are other groups interested. This makes for greater competition and we desire both competition and the entry of other companies," the ANAC official said.

The increase in airfares, however, has forced many Brazilians to shift to other modes of transportation, such as land-based transport.

Brazilian Land Passenger Transportation Business Association (ABRATI) representative Leticia Sampaio Kitagawa told EFE that the number of travelers switching from airlines to land-based transportation providers rose 12 percent between January and June, with passenger counts soaring up to 16 percent on some routes.

Airplanes, however, keep beating buses. In 2018, commercial airlines carried 93.6 million passengers on domestic routes, while buses transported 50 million. EFE


News history
British Airways suspends all flights to Cairo, citing security concerns

London, Jul 20 (efe-epa).- British Airways said Saturday that it has suspended all flights to Egypt's capital for seven days, citing unspecified security...

Kenya inaugurates Africa's largest wind farm

Loiyangalani, Kenya, Jul 19 (efe-epa).-Kenyan President Uhuru Kenyatta on Friday inaugurated Africa's largest wind farm, a 310-MW power station located in a...

Japan, South Korea trade fresh barbs over export curbs

Seoul, Jul 19 (efe-epa).- South Korea on Friday said Japan’s curbs on exports of high-tech materials critical for manufacturing of memory chips was in...

Trump nominates Eugene Scalia to replace scandal-ridden labor secretary

Washington DC, Jul 19 (efe-epa).- The president of the United States on Thursday nominated a right-wing corporate lawyer to be the new secretary of labor...

Microsoft's cloud business drives record sales

By Asa Fitch and Dan Gallagher

China reaffirms zero tolerance to corruption in New Silk Roads initiative

Beijing, Jul 18 (efe-epa).- China’s top anti-graft watchdog on Thursday reaffirmed its pledge of zero tolerance to corrupt practices in the country’s...

KLM diktat to cover up while breastfeeding in flights causes global outrage

The Hague, Netherlands, Jul 18 (efe-epa).- Dutch airline KLM is facing a storm of criticism for asking mothers to cover up while breastfeeding their babies...

Australian MasterChef star fined for underpaying his employees

Sydney, Australia, Jul 18 (efe-epa).- A high-profile chef who serves as a judge on the Australian version of the popular television show MasterChef and is...

Japan's trade surplus fell by 19 percent in June

Tokyo, Jul 18 (efe-epa).- Japan recorded a trade surplus of 589.5 billion yen ($5.5 billion) in June, a figure that is 19 percent lower than the one...

US-China trade war threatens economic growth in LatAm

Guayaquil, Ecuador, Jul 17 (efe-epa).- The already flagging economies of Latin America could be hurt by the ongoing trade war between the United States and...

Japan's curbs can damage global tech industry, South Korea says

Seoul, Jul 17 (efe-epa).- South Korea on Wednesday said Japan’s curbs on exports of high-tech materials critical for manufacturing of memory chips could...

Amazon faces EU antitrust probe for third-party retailer data use

Brussels, Jul 17 (efe-epa).- The European Commission on Wednesday opened a formal investigation into US tech giant Amazon to see whether its use of...

Paraguay taxi drivers again at war with Uber

Asuncion, Jul 16 (efe-epa).- Hundreds of taxi drivers suspended their service this Tuesday to again drive through the streets of Asuncion with a long...

Mercosur seeks to build on EU trade deal with new agreements

Santa Fe, Argentina, Jul 16 (efe-epa).- South American economic bloc Mercosur is seeking to build on a trade agreement reached with the European Union and...

US Treasury Secretary Steven Mnuchin

Washington DC, USA, Jul 16 (efe-epa).- Social media behemoth Facebook will not offer its Libra cryptocurrency services until it had been proven to meet the...

737 MAX woes hobble budget carrier Ryanair

By Oliver Griffin

Energy company says faulty cable was behind power outage in New York

New York City, USA, Jul 15 (efe-epa).- United States energy company Con Edison, which is responsible for the power outage that affected over 73,000...

Mercosur looking to expedite enactment of pact with EU

Santa Fe, Argentina, Jul 15 (efe-epa).- Officials from Mercosur member-states Argentina, Brazil, Paraguay and Uruguay said here Monday that they will urge...

Billionaire Buffett's real estate unit joins forces with Spain's LARVIA

New York, Jul 15 (efe-epa).- Berkshire Hathaway HomeServices, the real estate unit of billionaire Warren Buffett's Berkshire Hathaway Inc. conglomerate,...

Trump says tariffs taking a toll on China's economy

Washington, Jul 15 (efe-epa).- President Donald Trump said Monday that the tariffs imposed by his administration were taking a toll on China's economy,...

Huawei plans layoffs in US as blacklisting takes a toll

By Dan Strumpf

South Korea, Israel to push for early FTA deal

Seoul, Jul 15 (efe-epa).- The leaders of South Korea and Israel on Monday agreed to accelerate negotiations to reach a free trade agreement.

China's GDP grew 6.3 percent in 1st half of 2019, 27-year low in 2nd quarter

Beijing, Jul 15 (efe-epa).- China's gross domestic product grew by 6.3 percent during the first half of 2019, 0.5 percentage points less than in the same...

Former FARC rebels turn to coffee growing in Colombia

By Claudia Polanco Yermanos

I agree Welcome to news4europe.eu. We use cookies to improve your online experience. Find out more.