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Market conditions drive international airlines away from Brazil, Airbus says

By Thomson Reuters Jun 17, 2024 | 4:41 PM

By Rodrigo Viga Gaier

RIO DE JANEIRO (Reuters) – Complicated market conditions have prevented foreign airlines from launching local operations in Brazil, planemaker Airbus’ head in the country told Reuters.

In 2018, rules which had limited the size of the stake a foreign investor could hold in an airline were overturned in a bid to open up competition among carriers in Latin America’s largest economy.

Still, market share in Brazil is dominated by just three companies: Azul, Gol and LATAM, the latter the result of a merger in the 2010s between local airline TAM with Chile’s LAN.

Airbus executive Gilberto Peralta said in an interview last week that the reluctance from international airlines to enter Brazil was mainly due to judicial uncertainty, citing a high number of legal actions taken by Brazilian customers against airlines, as well as high fuel prices.

“Capital barriers are gone, a foreigner could come and set up a company in Brazil, but they don’t… It’s a lot of trouble,” he said.

Brazil’s strong consumer protections make it easy for flyers to sue carriers for a range of issues, including delayed or canceled flights.

Late last year, airline lobby group IATA had urged state-run oil company Petrobras to reduce fuel costs, calling kerosene prices in the South American nation “excessively high.”

Petrobras said earlier this month that jet fuel prices in Brazil have already fallen 8.8% so far in 2024.

Airbus’ global production capacity currently stands between 60 and 65 aircraft per month, while the company aims to increase that figure to 75 planes per month by late-2025 or early 2026.

Most Airbus orders come from customers in Asia, the U.S. and Europe. In Brazil, orders from Azul and LATAM stand at more than 100 aircraft in the coming years.

Asked about the impacts of the quality crisis faced by fellow planemaker Boeing, which has generated delaysin aircraft deliveries, Peralta said he hopes for stabilization at the competitor.

“I’m sure they’ll fix it… that’s not good for the market, as it creates insecurity and generates concern among users,” he said.

($1 = 5.4236 reais)

(Reporting by Rodrigo Viga Gaier; Writing by Luana Maria Benedito; Editing by Marguerita Choy)