In 2020, the average ticket fare dropped 14.5 percent in Brazil, according to the Civil Aviation National Agency (ANAC, in Portuguese). The average price ticket was R$376.29, the lowest on record since the agency started tracking the airfares in 2002. Brazil has three main airlines that represent 99.4 percent of the air transport demand in the country. These are GOL Linhas Aereas, Azul Linhas Aereas, and LATAM Brazil. These three carriers registered a reduction in the average price ticket in 2020, said ANAC in a press release.
GOL’s drop was the most acute. The average fare for GOL’s was R$347.58, a 16.9 percent drop compared to 2019. LATAM’s airfare reduction was 13.4 percent. The average price ticket for LATAM was R$359.50. Finally, Azul’s fares performed better, with a 13.3 percent drop compared with the previous year.
Ironically enough, Brazil’s low-cost operator Azul had the most expensive fares in the country, averaging R$436.90.
Explaining Azul’s resilience
Last week, Azul published its fourth-quarter results. The airline founded by David Neeleman proved resilient with a 534 million reais net profit in the last three months of 2020. During its investors’ call, Azul’s management stated that the current crisis allowed the airline to increase its market share in cities where it is the only competitor.
Across its route map, Azul operates alone in eighty percent of the routes. This allowed the company to maintain flat its corporate fares. The average corporate fare decreased only two percent between January 2020 and January 2021, while GOL’s and LATAM’s dropped by between eleven and fifteen percent, said the airline.
ANAC also shed some light on the reasons that explain the drop in the air industry’s average fare. Between September and December 2020, the fuel price was on historically low levels, while the reais increased its power against the US dollar. In the final quarter of the year, the fuel price was 18.6 percent lower than the average, said ANAC.
Meanwhile, the US dollar exchange rate dropped from 5.63 reais in October to 5.15 reais in December. The exchange rate was 31.1 percent better than in the same period of 2019. “The exchange rate has a heavy influence on the prices of fuels, leasing, maintenance, and aircraft insurance. All of this together represent around fifty percent of every airline’s costs.
In 2020, domestic capacity decreased by 47 percent in Brazil due to the COVID-19 pandemic. Additionally, the Brazilian airlines saw a 52.5 percent drop in the number of passengers. This was the lowest number of travelers since 2006, said ANAC.
So far, Azul and LATAM have published their fourth-quarter financial results. GOL will do it on March 18.
Daniel Martínez Garbuno is a Mexican journalist. He has specialized in the air industry working mainly for A21, a Mexican media outlet focused entirely on the aviation world. He has also published on other sites like Simple Flying, Roads & Kingdoms, Proceso, El Economista, Buzos de la Noticia, Contenido, and Notimex.