In recent years, both Brazilians and foreigners traveling around Brazil have rejoiced in the emergence of a number of top-notch, budget airlines such as Trip, Webjet, Azul, and Avianca (formerly Ocean Air). Giving the two dominant giants of the Brazilian skies – TAM and Gol – a run for their money, these efficient start-ups have played a major role in opening up new routes and, more importantly, in making prices much more competitive to the increasingly large number of passengers who are taking to the Brazilian skies.
In the last few months, however, several acquisitions have taken place that threaten to clip the wings of these upstarts and bring the current competitiveness of the Brazilian civil aviation market crashing back down to earth.
First, in April, came the news that Brazil’s largest airline, TAM, intended to purchase 30 percent of Trip, a small regional airline. While Trip only possesses a mere 3 percent share of the national market, it boasts a whopping 72 percent share in terms of regional routes. This is significant when one considers that, due to a rise in disposable income, Brazilians from the country’s smaller towns and Interior are flying more than ever before. Moreover, Brazil’s major air hubs – namely Rio, São Paulo, and Brasília – are unable to keep up with increased passenger traffic.
Such factors make TAM’s purchase of Trip highly strategic. Not only will the airline gain precious new hubs – Trip’s main hubs are in regional capitals such as Salvador, Belo Horizonte, Cuiabá, Campo Grande, and Manaus – but it also will be able to fill up its planes with new passengers from the Interior (who, through code-sharing, will be able to effortlessly hop on a TAM-operated national or international flight).The upshot is that once the purchase is finalized, Gol (which is already leader in two of country’s ten main domestic routes) will have almost single-handedly control Brazil’s most traveled air routes.
Now, hot on the heels of this acquisition, TAM’s biggest rival, Gol – (which, in 2007, swallowed up Brazil’s once glorious Number 1 airline, Varig ) – has gone on the offensive by announcing its acquisition of the budget airline Webjet. Like Trip, Webjet controls a very small portion of the national market. However, Webjet’s trump card is that it is the leading carrier in six of the ten main domestic routes in terms of number of passengers transported. The upshot is that once the purchase is finalized, Gol (which is already leader in two of country’s ten main domestic routes) will have almost single-handedly control Brazil’s most traveled air routes.
Webjet isn’t going to disappear all at once. In fact, for some time, passengers will be able to continue flying on the green-tailed aircrafts while benefiting from code-sharing between Webjet and Gol. However, the long-range plan is for Gol to completely obliterate the Webjet brand, by updating its fleet and taking over its routes.
In truth, all this merger madness sounds a little ominous. Although both TAM and Gol claim that their consolidation of a market – they presently dominate close to 90 percent – won’t lead to increased fares, various industry experts, including Tony Gálvez and Rodrigo Purisch, authors of the insightful D Airfare blog (whose focus is on air travel to and within Brazil) beg to differ. In a recent post, they argue that such mergers represent “ a serious setback to the development of an open civil aviation market in Brazil.” Ultimately, only time will tell, but the way things are going, passengers searching for competitive airfares could be in for a bumpy ride.