The air passenger traffic industry in Brazil stands at around $ 20 billion a year and over 20 million air passengers going on trips every year across large distances in the Brazilian territory. In fact, this bonanza is due primarily to the growth of the middle class in Brazil where 20% of the population or roughly 40 million Brazilians were lifted out of poverty since the first presidential term of Luiz Inácio Lula da Silva. As a consequence, the poverty rate has been reduced from 40% in 2003 to 20% nowadays and projected to decrease even further thanks to policies taken by the government to tackle sluggish economic growth, dependence on the export of marketable commodities, inequality and lack of upward social mobility. Accordingly, the economic strategy the Brazilian government is currently undertaking will allow the Latin American nation to keep on achieving progress under a market economy through the use of techniques such as implementation of a progressive tax system, hefty deficit government spending, attraction of foreign direct investments, improved access to private education, improved public education and the promotion of key industries like manufacturing and services. By the same token, these features translate into increased domestic consumer spending and hence lucrative opportunities to meet growing demand in industries such as air passenger traffic.
Moreover, the air passenger traffic sector in Brazil is projected by some aggressive analysts to accrue exponential growth within a decade long horizon. Consequently, the industry is in the middle of consolidation right now and therefore, the market is entering a defining period for serious players to grab market share by doing things such as increasing destinations, expanding their fleets, enhancing marketing strategies like frequent flyer reward programs, maintenance of aircraft, logistics, safety and training of personnel because the fray is competitive. In fact, with economic output approaching $ 2 trillion a year today, the air passenger traffic industry in Brazil remains at a paltry 1% of GDP. However, with millions of Brazilians joining the middle class ranks every year, their increasing purchasing power translates into growing leisure activities such as travelling in a country that happens to be the fifth biggest in the world by land area, containing an impressive 3,266,584 square miles of territory, with a population concentrated along the seaboard in the Atlantic Ocean and in remote locations inland such as Manaus which is a city deep inside the Amazon Rainforest. As of now, with a population reaching 200 million, at least more than 20 million Brazilians are scheduling plane trips in Brazil every year.
Furthermore, at this point I think is helpful like previous studies I’ve done in the past to highlight the main players today in Brazil who strategically have positioned themselves in the industry there. These players are the following:
LATAM Airlines Group S.A.: single largest airline group in Latin America after the merger of Lan Airlines S.A. of Chile and TAM Linhas Aéreas S.A. of Brazil back in 2012. The group makes close to $ 10 billion a year in sales, has a fleet of some 320 aircraft and transports over 60 million air passengers a year, close to half of them in Brazil alone. The company operates under the brand “TAM” in Brazil and has a 30% market share there today. Moreover, although widely-held as a stock and trading in three countries including Chile, Brazil and here in the US as an ADR on the NYSE under the ticker symbol (LFL), the company is controlled by Spanish-Chilean Juan Cueto Sierra, Chilean salmon mogul Ramón Eblen Kadis, Holding Bethia S.A., Qatar Airways Company Q.S.C.S. and the Amaro family of Brazil.
Gol Linhas Aéreas Inteligentes S.A.: after buying distressed VRG Linhas Aéreas S.A. back in 2009, operating under the brand “Varig”, and then purchasing Webjet Linhas Aéreas S.A. in 2011, this booming Brazilian airline group competes neck and neck with LATAM holding 30% of the Brazilian market. The Group has a sizable fleet of some 140 jets operating under the brands “Gol” and “Varig” while making around $ 5 billion a year in sales. In addition, the publicly-traded company trades in Brazil and here in the US as an ADR on the NYSE under the ticker symbol (GOL). Moreover, the company is controlled by the Constantino brothers of Brazil.
Azul Linhas Aéreas Brasileiras S.A.: expanding newcomer airline group belonging to American-Brazilian David Neeleman as well as Julio Bozano holding a minority economic interest in it after having provided part of the seed capital enabling its launch. Furthermore, although looking at the feasibility of becoming public, the growing airline group remains private with a fleet containing approximately 70 aircraft and sales reaching close to $ 3 billion a year after purchasing competitor TRIP Linhas Aéreas S.A. back in 2012. The company holds about 20% of the Brazilian market.
Avianca Holdings S.A.: massive airline group currently operating under several brands including “Avianca” of Colombia and “TACA” of El Salvador and that recently went public in Latin America as well as here in the US after trading as an ADR on the NYSE under the ticker symbol (AVH). The airline group originated in Brazil when Germán Efromovich launched OceanAir Linhas Aéreas S.A. back in the early years of the current century while operating under the brands “OceanAir Táxi Aéreas” and “Senior Táxi Aéreas” there covering domestic routes only. Today, the airline group has consolidated sales expected to surpass $ 5 billion this year and includes a wide portfolio of cargo arlines, passenger airlines, helicopter taxi services and aircraft maintenance operators in countries like Colombia and Brazil while containing a sizable fleet of about 160 aircraft. Currently, having a total of 11 passenger airline wholly-owned subsidiaries scattered throughout Latin America as well as holding control of the Mexican low-cost passenger airline known as Volaris S.A.B. de C.V., the company is rebranding all its planes with the “Avianca” name which is the brand name of the second oldest airline in the world and flag carrier of Colombia. Moreover, the company has around 15% of the Brazilian market.