Airlines are reinventing themselves in Brazil after the crisis that left them on the ground.
Smaller in size, with partnerships between rivals and awaiting financial support from the government, the airlines are beginning to normalize their activities in Brazil and estimate that by the end of this year they will be operating at 70% of the pre-pandemic level, ahead of the rest of the American countries.
“In July the demand recovered 22% compared to June and the expectation, according to what the companies plan, is that by the end of this year we will be operating at 70% of what it was in 2019 and that by the end of 2021 we will resume the pre-pandemic levels at least in domestic flights,” Dany Oliveira, director for Brazil of the International Air Transport Association (IATA), told Efe.
The recovery in Brazil is expected to be faster than in the Americas in general. According to IATA, after an expected 55% drop in passenger numbers this year, the region’s airlines will only recover pre-pandemic levels in 2023 on domestic flights and in 2024 on international ones.
The agency maintains its forecast that Brazil, a country with continental dimensions, may become one of the largest aviation markets in the world and go from the 120 million passengers with which it ended 2019 to some 420 million in 2039.
According to data provided by the Brazilian Association of Air Companies (ABEAR), the worst figures in the sector were those of April, when passenger demand fell by 93.09% compared to the same month in 2019 for domestic flights and 98.7% for international ones, although the situation has been gradually improving.
BRAZIL ALREADY OFFERS 700 DAILY FLIGHTS ON 231 ROUTES
Brazil currently records some 700 takeoffs per day of planes on domestic flights, a third of what was predicted for the period before the crisis, according to ABEAR.
According to the National Civil Aviation Agency (ANAC), the number of domestic routes available rose from 125 in April to 231 in July, a figure still far from the 411 that Brazilian airlines offered in July last year.
“Brazil’s advantage is that, despite restricting international flights, it did not close its airports during the pandemic like other countries, in addition to having quickly and adequately adopted security protocols for air transport,” IATA Vice President for the Americas Peter Cerdá told Efe.
The executive admits that the recovery will depend on the forces that airlines have left after the crisis and the new business models they adopt to recover. “What is certain is that the size of the airlines will be smaller, that demand will be lower and that there will be new rules of the game,” he explained.
With their planes on the ground, the airlines had losses in the second quarter in the millions. Gol’s were 1,997 million reais (about $356.6 million) and Azul’s were 2,940 million reais (about $525 million).
The Brazilian development bank (BNDES) is in negotiations with the three big ones (Azul, Gol and the Brazilian subsidiary of Latam) to grant them a credit that will avoid what happened in Avianca Brazil, declared bankrupt last year.
The loan with very advantageous conditions would serve them as working capital to guarantee the return of their operations, but the negotiations have been delayed with no end in sight.
Awaiting official assistance, the companies adopted strategies to reduce costs and adjust to the new reality.
CUTS IN GOL, BLUE AND LATAM
Gol and Azul signed collective agreements with the unions in which they established a reduction in salaries and working hours of about 20% until December 2021.
After failing to reach a similar agreement, Latam Brazil announced the dismissal of 2,700 employees, including pilots, co-pilots and flight attendants, who represent 40% of its workers.
With no help from the government or agreement with the union, Latam Brazil was included last month in the process by which the Latam group took advantage of the bankruptcy law in the US to try to renegotiate its debts for some 18 billion dollars.
In an unprecedented strategy to survive, rivals Latam and Azul launched an agreement on August 12 and put on sale tickets for shared flights on 64 routes.
For the president of the National Airline Union, Ondino Dutra, the key to the market will be the size with which Latam returns after negotiating with its creditors in the US. Latam was the largest airline in the country but Gol was the leader in domestic flights.
“Currently Azul leads the market with 40% of domestic flights, followed by Gol with 34% and Latam with 25%. But if Latam decides to regain its leadership, it will have to hire pilots again and re-establish its routes,” said the union leader.
Líder en noticias de aviación