Foreign airlines could boost competition in Brazil

Significance

In late May, Congress voted to allow foreign airlines to operate domestic flights. Previously, foreign participation in domestic airlines was limited to 20%, concentrating the market in the hands of a few companies, although Avianca Brasil’s operations have been suspended. President Jair Bolsonaro promulgated the law on June 17 but vetoed a section that would have imposed a free checked baggage allowance.

Impacts

• Domestic and potentially foreign operators will compete for Avianca Brasil’s assets.
• New fare rises are likely despite promises to the contrary.
• The economic slowdown may exacerbate pressures on domestic operators in the near term at least.