February 28, 2021

The dismantling of Avianca Brasil, a challenge for the airline industry

With Avianca Brasil in bankruptcy since December, the Brazilian aviation sector, one of the countries with the most air traffic in the world, now has only three major airlines, a shortage in competition that has led to an increase in price of the tickets.

Avianca Brasil, formerly called OceanAir and which is an independent company of Avianca Holdings SA, has accepted the bankruptcy law and has accumulated debts of more than 1,000 million reais (260 million dollars), which led to several lawsuits in the courts and they took her to carry out an auction of part of her assets, scheduled for next Wednesday.

"With the departure of a concurrent, in that case Avianca, the prices of the tickets go up and the three main remaining airlines can impose the rules they want," the professor of the Getúlio Vargas Foundation, Ulysses dos Reis, told Efe. .

Data from the National Agency of Civil Aviation (Anac) show that, in the first five months of 2019, Gol, Latam and Azul were responsible for more than 90% of shipments on domestic flights, while Avianca responded by 8% and , the other airlines, for less than 2%.

Also, the average price of air tickets increased 14% since Avianca canceled thousands of flights since April, according to a survey conducted by online ticket sales portals.

Reis stressed that the increase in tariffs "is only the tip of the iceberg", because the lack of competition harms the free market and has "a cascading effect on the entire economy of the country," from the movement of skilled workers and products to areas remote to the lack of investment in infrastructure.

The departure of Avianca Brasil from the aviation board also occurs at a time when the São Paulo and Rio de Janeiro route, the fourth with the most movement in the world, completes 60 years, in the midst of an unprecedented concentration in the market, since only Gol and Latam can currently operate on the airlift.

Brazil is a country of "continental dimensions" that has the "urge to integrate, that knowledge flows from the poles to the periphery." The lack of supply in mobility makes that development is strangled, "said Reis.

Despite permission from the Brazilian authorities for the entry of foreign companies into the local capital market, such as Air Europa, "little will change if there are no more investments and the bankruptcy of the monopolies."

In the same line, the Superintendent of Air Services Monitoring of the Anac air regulator, Ricardo Bisinotto Catanant, told Efe that the "abrupt departure" of Avianca Brasil has caused a sudden decrease in the supply, which, consequently, has impacted the prices and services offered by companies.

However, Catanant assessed that the neoliberal policies implemented by the Government of Jair Bolsonaro could "encourage" and "encourage" the entry of new companies in Brazil and, thus, "amplify the competition" and regulate the market.

"The (Spanish) Air Europa was the first (foreign airline) that requested to enter the country and there are other interested groups, which allows greater competition and both the attendance and entry of other companies are desired by us," said the superintendent .

But the rise in ticket prices meant that many Brazilians migrated from the air to other types of transport, such as land transport.

According to the counselor of the Brazilian Association of Land Transport Companies of Passengers (Abrati), Leticia Sampaio Kitagawa, the number of travelers that replaced air by land increased by 12% between January and June 2019 and, in some specific routes, that increase was up to 16%.

However, the plane continues to win the bus: in 2018, 93.6 million passengers occupied the seats of the aircraft to move within the country, compared to 50 million passengers who opted for buses in the same period.

Nayara Batschke

(tagsToTranslate) dismantling (t) Avianca (t) Brazil (t) desafio (t) sector

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