Brazil’s perfect storm
Breaking with global best practice is hindering Brazil’s aviation potential and holding back economic development.
L
atin America is having a tough time of it. Even though the International Air Transport Association (IATA) is predicting the global industry will finish some $33 billion in profit in 2015, the region’s airlines will post a $300 million loss. Weak commodity prices, adverse currency fluctuations and an unfavourable business environment are all playing their part.
Overall, the future looks brighter, though not dazzling. New governments in Argentina and Venezuela provide a glimmer of hope in these countries. Additionally, Latin America is home to some strong airlines, which compete globally and have experienced double- digit growth in recent years.
These factors, combined with strong demand for regional links to the US – which is behind a 5.6% rise in capacity in 2015 and an anticipated 7.5% rise in
2016 – will at least allow Latin American carriers to escape from the red in the next 12 months and register a modest $400 million profit by end 2016. There is one dark cloud on the horizon that does not appear to be drifting away any time soon, however. Brazil, once a driver of the region’s economic performance, is now acting as an anchor. According to IATA, Brazilian carriers saw their costs rise 24% in 2015 compared with the previous year but revenues increased just 3.7%. Year- end figures for 2015 will confirm heavy losses for the country’s airlines, which stood at BRL3.7 billion for the first nine months of the year.
Aviation unfriendly Aviation’s ability to stimulate trade and prosperity is well documented. In Latin America, it supports 4.9 million
jobs and contributes $153 billion to GDP. Despite this – and despite being a vast country that relies heavily on air transport for internal connectivity – substantial changes are needed to Brazil’s aviation environment. “Brazil is engulfed in a perfect storm as airlines struggle under the burdens of a deepening recession, a deteriorating currency and government policies that impose crushing costs on the industry,” says Peter Cerda, IATA’s regional vice- president. “Due to the size of Brazil, its dire situation is impacting the entire Americas region. The government has not shown a strong commitment to develop and support aviation during these difficult times. The country is overly bureaucratic and a very difficult place to do business. It has become one of the most expensive countries for airlines to operate in.”
routesonline.com
Routes News 1, 2016
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